COLUMN ONE : Vietnam Opens for Business : Hanoi is reaching out to rejoin the world economy. Many foreigners see investment opportunities, but Americans are falling behind because of a U.S. trade embargo.

From the rooftop bar of the Rex Hotel, where war correspondents once watched mortar shells singe the sky, the view is dominated now by billboards pitching products from Sony, JVC and Daewoo.

In Ho Chi Minh City, bicycles and pedicabs are giving way to Toyota vans and Honda motorbikes. In Hanoi, the Vietnam Telecom Co. sells telephones made by Funai of Japan, Samsung of South Korea, Libercon of Hong Kong and Fernsprech of Germany.

When Vietnam recently announced the discovery of a new oil field, six foreign firms swooped in to check it out.

Fifteen years after the last U.S. helicopter abandoned Saigon, the socialist country is reaching out to rejoin the international economy. The new war raging in Vietnam today is over burgeoning business opportunities: contracts to buy Vietnam’s bountiful natural resources, hire its cheap labor, modernize its decrepit telecommunications, banking and transportation systems.

The biggest boosters envision the nation as the linchpin of an Indochina economic empire spanning Vietnam, Cambodia and Laos. As the nations of Asia, led by Japan, begin to trade and invest with each other more than the United States, a Mekong River grouping would further the trend toward regional manufacturing zones: the ethnic Chinese triangle of Hong Kong, Taiwan and China and the emerging alliance among Indonesia, Malaysia and Singapore.

But in the battle for Vietnam, Americans have been disarmed by a 15-year trade embargo against the socialist nation--the legacy of a war in which more than 58,000 Americans died and more than 200,000 were wounded. Under the embargo, Americans can’t do business with Vietnam, but they can talk about doing it someday.

As other nations scramble to secure a head start in what many view as Asia’s biggest sleeping dragon, there is a growing perception that Americans are falling badly behind.

“The Americans are already too late. They’re going to be completely flattened by the Japanese,” said Christopher Reid, an executive salesman with a British tobacco company. “They’ve lost their foothold in Vietnam. They’re 10 years behind.”

Since Vietnam launched its own version of perestroika in December, 1986, international investors have begun to eye it as one of Asia’s most tantalizing new trade zones. Vietnam’s oil, minerals and marine life remain largely untapped. Its 66 million people boast an 87% literacy rate, a Confucian work ethic and labor rates cheaper than China’s.

Although it remains undemocratic and staunchly Communist, Vietnam, under the leadership of Party General Secretary Nguyen Van Linh, has liberalized the economy. A new foreign investment law allows full repatriation of profits, protection against nationalization of assets and capital and 100% ownership of enterprises. The changes helped lure 6,000 foreign business people to Vietnam last year, half of them from Japan.

Despite major shortcomings in its foreign investment climate, U.S. competitors are snapping up the best deals. Consider:

* Mobil discovered Vietnam’s oil fields in 1974, but the British, French, Australians, Canadians and others have tied down exploration rights. On Nov. 19, Enterprise Oil of Britain struck oil near the southern coastal town of Vung Tau in the first such discovery since Hanoi began authorizing exploration contracts with Western firms in May, 1988.

* AT&T; may be the world’s largest telecommunications company, but Australia’s national telephone firm, OTC, won the $60-million contract last summer to link Vietnam to the outside world through satellite ground stations. Alcatel of France and Siemens of Germany are putting in new telephone exchanges and microwave links.

* Citibank has talked to Vietnam about potential opportunities, but Banque Francaise du Commerce Exterieur has actually snared them. The French bank has negotiated an exclusive deal to operate the Visa credit card system in Vietnam.

Raymond Eaton, an Australian executive of a Bangkok-based trading company, gives this advice to foreigners: “Grab every viable opportunity and do your very utmost to capitalize on the total inability of American companies to compete against you. This is a golden opportunity.”

In Saigon, as locals still call the southern city now named Ho Chi Minh City, the capitalist spirit that flowered before the war has survived. The bustling Cho Ben Thanh market sells smuggled foreign goods, including Crest toothpaste and Coca-Cola, while an entire street nearby hawks used Honda motorbikes spirited in through Cambodia.

Young girls peddle postcards and men proffer pedicab rides, using discounts as lures to land the deal. Bookstands now display such titles as “Guide Book for Foreign Tourists and Business People” alongside homilies from Ho Chi Minh.

“The government of Vietnam wants to develop broad trade and business contacts with all countries without discrimination against political systems,” said Tran Xuan Phoi, general director of the Ministry of Commerce.

So far, the vision of prosperity is far from reality. Vietnam suffers from a critical lack of foreign currency. Many factories are running below capacity because they cannot consistently buy raw materials. And much of the precious hard currency is being sucked into the black market for imported consumer goods, causing the government to slap bans on foreign cigarettes and certain vehicles.

“Our biggest problem is collecting money,” said an executive for a major multinational firm in Ho Chi Minh City. His firm is still owed $200 million for goods purchased by Vietnam in the mid-1980s.

Other impediments are an ailing infrastructure, murky laws, corruption and a discriminatory pricing system that charges foreigners twice as much as local residents for labor and office rents.

The war’s devastation on the land and people still lingers. Yawning bomb craters are evident from the skies above Hanoi. Several bridges and roads remain damaged. The 19 million gallons of Agent Orange and other toxic chemicals dropped on Vietnam have, according to the World Bank, left much of the land unfit to grow crops for human consumption. Agent Orange has also retarded forest growth, limiting exportable lumber. Birth defects and psychological scars from the war continue to plague the population, said Phillipe Annez, chief of the World Bank’s regional mission in Bangkok.

Vietnam’s economic future is still so uncertain that 160,000 of its own people took to the seas and fled in the last three years. The majority will probably be screened as economic refugees rather than victims of political persecution, according to the U.S. Committee for Refugees.

To the savvy business person, the myriad needs spell opportunity. But the sheer task of rebuilding Vietnam requires massive amounts of international aid and investment. Critics say the U.S. government has held the country back through its trade embargo, which prohibits not only commerce but also lending by U.S. banks to Vietnam.

The United States imposed the embargo during the Vietnam War. Although President Jimmy Carter offered to lift the embargo and re-establish relations in the late 1970s, Vietnam’s invasion of Cambodia ended his efforts. Vietnam withdrew its troops from Cambodia in 1989, but the absence of a comprehensive peace settlement has remained the principal roadblock to normalizing relations with the United States.

“It’s been the consistent policy of the U.S. that since the Vietnamese went into Cambodia in 1978, that it was not appropriate to normalize relations,” a State Department official said. “Normalization is contingent on a settlement in Cambodia . . . ; we believe the Vietnamese can play an important role.”

To pressure Vietnam into a formal settlement in Cambodia, the United States also has successfully lobbied the World Bank, International Monetary Fund and foreign governments such as Japan not to resume lending to Vietnam.

But however closely U.S. allies followed the policy in the past, they are increasingly breaking free of it today. Last month, the European Community re-established diplomatic relations with Vietnam; Italy and Germany have resumed aid. Canada will reopen its embassy in Hanoi next year. Indonesia, one of the most anti-Communist regimes in Southeast Asia, signed agreements with Hanoi last month encouraging joint ventures.

Vietnam’s need for Western aid is particularly critical now, analysts say, because the Soviet Union slashed its $1 billion in aid by 60% this year. It also began to insist on payments in hard currency instead of trade credits.

“When you travel in the country, everywhere you can still see the damage of the war. People are so poor, and all the new economic policies still need a lot of foreign assistance to be successful,” said Martina Weidner, the German Embassy’s first secretary in Hanoi. “Even if Americans are not prepared to give it themselves, they shouldn’t hinder other people from doing it.”

U.S. allies and trading partners don’t want a change in policy merely for humanitarian reasons. The bottom line is dollars. Duong Van Ve figures his seafood joint-venture with the Soviet Union could double its business with access to America. Peter Dalton of OTC, Australia’s telecommunications firm, is eager for the phone traffic between Vietnam and the 700,000 Vietnamese in the United States. Rick Yvanovich of British Petroleum wants to use U.S. oil exploration equipment instead of the French equivalent, for which he pays premium prices.

The United States now appears poised for a policy change. Vietnam is helping to forge a peace settlement in Cambodia. It has agreed to allow resettlement abroad of 10,000 political prisoners. Hanoi has also cooperated in helping account for Americans still listed as missing in action.

The efforts were recognized in September, when Secretary of State James A. Baker III met Foreign Minister Nguyen Co Thach in the highest-level bilateral contacts between the two nations since Henry A. Kissinger and Le Duc Tho concluded the Paris peace agreement in 1973. Depending on the outcome of upcoming Cambodian peace negotiations in Paris, analysts predict that the embargo could be lifted within the next several months.

For their part, Vietnamese officials say they are eager for the Americans to return. The “American imperialists,” as the national war museum calls them, are more often welcomed today as “Russians with dollars.”

Dang Nghiem Bai, director of the Ministry of Foreign Affairs’ North America department, said he has actually signed letters of intent with U.S. firms for business ventures pending the embargo’s end. He declined to give details.

“During the Vietnam War, the American people had a movement against it, at last making a contribution to the restoration of peace in our country,” said Phoi of the Ministry of Commerce. “Now we do hope the American people will launch the same movement to lift the embargo.”

Very slowly, some Americans have. On Oct. 29, eight U.S. senators, including California Democrat Alan Cranston and Indiana Republican Richard G. Lugar, sent a letter to President Bush urging removal of the embargo for non-strategic trade. In a recent survey for Time magazine, 48% of Americans favored diplomatic ties with Vietnam while 32% opposed them.

The U.S. Chambers of Commerce in Hong Kong and Bangkok, Thailand, have officially urged an end to the embargo. Forty American companies and law firms--including AT&T;, Merrill Lynch, Oscar Mayer Foods Corp. and American President Lines--last year established the United States-Vietnam Trade Council to begin collecting trade and economic data on Vietnam.

Many U.S. business people, however, are still fearful about publicly advocating a policy change.

“No one wants to be the first,” said one oil industry source, who spoke on condition of anonymity. “Our shareholders are by and large very conservative, and throwing Vietnam on them now might be a pretty heavy dose.”

One American advocate of trade with Vietnam is Belvin Friedson. He is chairman of the Florida-based Windmere Corp., which manufactures hair dryers and other appliances in China through his Hong Kong office. But Friedson, who opposed the Vietnam War, is looking ahead to 1997, when the Chinese will resume control of the British Crown colony. He wants to hedge his bets and believes Vietnam could provide an alternative site for his business.

Bruce Burns, a San Jose attorney who has made 15 trips to Vietnam in the last three years, said the fear is that once the IMF resumes lending, a flood of foreigners may flock to Vietnam. Americans who have not been able to lay the groundwork may be badly outmuscled.

In fact, while Americans debate, other nations are digging in.

Overall, 2,460 delegations from more than 32 nations descended on Vietnam in 1989, a 50% increase from the previous year. Officials could only say “hundreds” of Americans visited.

The boom in outside interest began after Vietnam enacted a foreign investment law in 1987 and began to move to a market economy. Most prominently, Vietnam has deregulated most of its prices, drastically devalued its currency to bring it into line with black-market rates, allowed farmers to sell excess production on the free market and made state-owned businesses responsible for their own profitability.

Asked why the changes, officials are blunt.

“No country in the world now can close its doors and develop its economy, and we are not so stupid to close our doors,” said Nguyen Mai, vice chairman of the State Committee for Cooperation and Investment. The committee was established last year to approve investment applications.

Vietnam’s reforms have been widely praised. Officials have wrestled inflation down from 1,000% to 40% in the last few years and reduced what had been a 5,000% gap between the official exchange rate and the black market rate in 1986 to about 5% today.

In an April report, the Asian Development Bank concluded that Vietnam’s measures had been “comprehensive and consistent.”

Most experts say that Vietnam’s most immediate opportunities are in oil. The nation became an exporter last year, selling half of its 2.5 million tons of crude oil to Japan. Vietnam has issued nine exploration licenses to foreign oil companies, including British Petroleum, Total of France and Royal Dutch Shell. Although a stream of U.S. companies have visited Vietnam, including Mobil, Exxon, Unocal and Amoco, they can only watch while their competitors carve up the coast.

“They’re running circles around us, but what can we do?” a U.S. oil executive lamented. “There is considerable interest in Vietnam, and with good reason: There is a vast continental shelf that merits exploration. We’d like to have a piece of that action, but we can’t.”

Since its first visit to Vietnam in April, 1989, the firm has tried to position itself within the embargo’s constraints. It sends teams to Vietnam every few months to meet officials, collect information and “fly the flag.” It has even purchased geophysical data on a particular area. But as the embargo drags on, the Vietnamese are losing patience and have begun to sell rights to concessions near the perimeters of the U.S. firm’s targeted interest.

The French dominate foreign banking opportunities. Five firms have established representative offices in Vietnam. Perhaps the most successful is Banque Francaise du Commerce Exterieur, which returned to Vietnam in 1984 mainly to work with the state bank in offering trade-related services, such as letters of credit.

The relationship paid off four years later, when Hanoi decided to renew ties with the IMF and other international banking institutions. Vietnam tapped the French bank to arrange a $136-million bridge loan to clear up Vietnam’s outstanding debt to the IMF.

“When financing arrives in Vietnam, there will be a lot of money everywhere and competition will be fierce,” said a Banque official, who asked for anonymity. “So we made the choice to get some advance vis-a-vis our competition.”

The Japanese have become Vietnam’s second-largest trading partner after the Soviet Union, buying oil and seafood while selling industrial machines and chemical products.

The Vietnamese expect them eventually to become the nation’s largest foreign investor as well, but so far they have studied more than they’ve actually shelled out.

A few firms have established small joint ventures, such as a $300,000 garment factory by Hikosen, a textile firm. But Japanese firms are mostly eyeing big-ticket projects to repair roads and bridges, modernize ports and airports, build dams and hydroelectric power plants. A chief reason: Such costly infrastructure projects would be backed by Japanese government loans and thus reduce the private risk.

“Japanese companies are very risk-aversive,” said Hisashi Nakatomi, first secretary at the Japanese Embassy in Hanoi. “Sometimes the Vietnamese side will offer: ‘We’ll give you a nice field.’ But there is no electricity. There is no road. The water is not clean. The present situation in Vietnam is still serious, and Japanese companies don’t want to own the whole risk by themselves.”

On the other end of the scale from the Japanese giants are the small “hit-and-run” enterprises operated by overseas Chinese from Hong Kong, Taiwan and Singapore. According to Vietnamese statistics, the average Hong Kong investment is $2.2 million, compared to $17.9 million for Britain, $13.8 million for France and $8.1 million for Japan.

The Board of Trade in Taiwan, which holds the region’s second-largest foreign currency reserves, recently issued a bulletin touting Vietnam as an investment opportunity. Officials are also considering plans to build a $100-million industrial park near Ho Chi Minh City to house Taiwan factories.

“Taiwan is the great hope for the Vietnamese in the short run,” said John Brinsden, Vietnam manager for Standard Chartered Bank. He estimated that the Taiwanese have invested $60 million in about 100 ventures, although official Vietnamese statistics differ.

Is there room for Americans? Many say yes--but only if they’re willing to think long-term.

“I think there’s going to be a big party that a lot of people go to but a lot of people leave early,” said Burns, the San Jose attorney. “They’ll think it’s an opportunity to make a fast buck, but they won’t know from experience how difficult it is to do business here. In reality you’ve got to be able to stay in for the long haul.”

Next: Turning war memories into a tourist attraction.