Americans Cast Eyes on Vietnam for Investment

Jerome A. Cohen has devoted most of his life to China. During the past two decades, he has worked as one of the handful of elite lawyers specializing in helping U.S. businesses begin selling, investing or trading inside the Middle Kingdom.

Now Cohen has turned to a new interest: Vietnam.

Three times since the beginning of this year, Cohen has traveled to Hanoi, Ho Chi Minh City (Saigon) and elsewhere in Vietnam, preparing for the day when the United States normalizes relations with its former enemy and allows American companies to operate there.

Cohen is an example of what might be called “China Beach fever”--the increasing eagerness of U.S. companies to launch businesses, particularly tourist facilities, in Vietnam, a nation that millions of Americans have known only as a war zone.

U.S. business interests are beginning to turn into a significant political factor, a lobby seeking to propel the Bush Administration to change its policies toward Vietnam. Representatives of U.S. banks, businesses and law firms have been visiting Administration officials to remind them of Vietnam’s commercial possibilities.

“The potential for Vietnam is enormous,” said Richard Hartman, Sheraton Corp.’s senior vice president for Asia and the Pacific. “There are a lot of places where tourist facilities can be built. Vietnam would have a special advantage for tourism, because it’s well known in the United States.”

Vietnamese officials have been encouraging foreign companies to think of the money that they could make there some day. Last week, for example, Vietnamese Foreign Minister Nguyen Co Thach spent two days in Geneva talking about investment possibilities with about 60 foreign businessmen.

Since the end of the Vietnam War, the U.S. government has prohibited American companies from trading or investing in Vietnam. It is one of the countries covered by the Trading With the Enemy Act, which prohibits U.S. firms from doing business with any nation considered an enemy of the United States.

Downplay Importance

Bush Administration officials have repeatedly said this policy will not change until Vietnam withdraws all its troops from neighboring Cambodia and helps to bring about a political settlement in that country.

Vietnam has promised to pull out its remaining troops by the end of this month. However, a 19-nation peace conference in Paris, aimed at bringing about an end to the civil war in Cambodia, broke up without success last month. Assistant Secretary of State Richard H. Solomon, who represented the United States at the conference, has blamed its failure on the inflexibility of Vietnam and the Vietnam-backed Hun Sen government in Cambodia.

Asked recently whether the United States was planning to normalize diplomatic relations with Vietnam or even to upgrade its official contacts with Vietnamese officials after Vietnamese troops left Cambodia, one senior Administration official replied, “No . . . way.”

U.S. officials, seeking to minimize the importance of Vietnam for American businesses, point out that the nation’s extraordinary poverty and lack of infrastructure make quick profits there unlikely.

Cohen argues, however, that Vietnam should not be so lightly dismissed.

Labor Costs

“You have a country now of 68 million people and a growing population,” he said. “They’re engaged in commercial reforms that are making them more attractive to foreign companies. I think this process could begin with tourism and hotels. There are also prospects for exports of minerals, aquatic products, textiles and other goods.”

Vietnam also has some of the lowest labor costs in the world, a factor that might eventually induce foreign companies to start manufacturing ventures there.

Cohen points out, however, that foreign manufacturers initially believed that they could pay low wages in China. Their expectations were dashed when the Chinese government began charging foreign joint ventures eight or 10 times as much for labor as the workers themselves were paid.

“If they (the Vietnamese) choose to follow the Chinese model, they’ll hike the price of labor up and lose their advantage,” said Cohen, who began his career as a specialist on Chinese law at Harvard University.

Some American companies have begun to complain that the U.S. trade embargo against Vietnam puts them at an unfair disadvantage compared to businesses from other countries. Under the Trading With the Enemy Act, representatives of U.S. firms may travel to Vietnam and talk about the prospects for business but must be careful not to enter into negotiations or do anything else that could be interpreted as starting up operations in Vietnam.

‘Never-Never Land’

“Any non-American company is in there (in Vietnam) with both feet,” said Sheraton’s Hartman. He said some of Sheraton’s competitors, such as the Peninsula Hotel Group in Hong Kong, are already beginning to start up operations in Vietnam.

Cohen said his American law firm--Paul, Weiss, Rifkind, Wharton & Garrison, which is based in New York and has an office in Hong Kong--had been obligated to turn some work over to Hong Kong or British-owned law firms.

“It’s a never-never land,” he said. “Under the trade embargo, as an American law firm, we can’t help the companies that can consummate deals with Vietnam, but we can help the companies that can’t consummate deals.”

The United States has sought to dissuade other countries from becoming too active in pursuing business deals with Hanoi. At one point, U.S. officials let South Korea know that they were unhappy that major Korean firms such as Samsung Corp. were moving into Vietnam.

Some congressmen have voiced the fear that Japanese companies may rush into Vietnam and get an edge on their American competitors. Japanese government officials insist that they, like the United States, will wait for a Cambodian settlement before they give the green light to trade and investment with Hanoi.

Despite the U.S. government’s efforts to hold the line in its policy toward Vietnam, officials acknowledge that commercial interest in the country is growing.

“I think it’s fair to say that more people are going there,” one State Department official said. “Business people are trying to get in on the ground floor.”

Many Indochina experts take it for granted that the United States will normalize relations with Vietnam in the next few years and that lifting the trade ban will be one step in this process.

China Comparison

Cohen has been urging the U.S. government to lift the restrictions on Vietnam imposed by the Trading With the Enemy Act. He compares his efforts in Vietnam to his eventually successful campaign in the 1960s to persuade the United States to dismantle its trade embargo against China.

Still, he acknowledges that the situations are not identical.

“China (then) had 800 million people,” he said. “It was glamorous. Vietnam has no Great Wall, no Chairman Mao. Vietnam’s just another good-sized country, (a population) on the order of France or Britain or South Korea. Vietnam doesn’t have the same magic with the American people that China had.”