NEWS ANALYSIS : The Door’s Open, But Don’t Expect a Stampede : Vietnam: U.S. firms will face challenges from burdensome bureaucracy and European and Asian rivals already there.
Vietnam’s doors may finally be opened to U.S. businesses, but its lack of modern infrastructure and institutions--along with a head start by investors from rival nations--will make doing business there a challenge for Americans.
President Clinton’s announcement Thursday lifting the 19-year embargo on Vietnam was well received by American business people who see huge potential in a fast-growing market. Major corporations such as Bank of America, American Express and United Airlines have announced plans to expand into the country.
But those firms and others will find red tape and bureaucracy among their biggest problems, experts say. Because governmental departments overlap, paperwork for permits and licenses is repetitious. Also, the Vietnamese are still trying to root out corruption at all levels--from customs officials to police officers to government ministers.
“When you have people making extraordinarily low salaries and who are being bombarded by many investors, the temptation (to accept bribes) is there,” said Phillip D. Grub, professor of international business at George Washington University and co-author of “Vietnam: The New Investment Frontier in Southeast Asia.”
The same problem exists among Vietnamese businesses. Thomas Mattia, who set up Hill & Knowlton Inc.’s public relations operations in Hanoi, recalled how local newspapers had rates for both advertising and editorial coverage. You could pay to have a news story done on your company--a practice unacceptable in the United States, said Mattia, now executive vice president of Hill & Knowlton’s Los Angeles office.
Lack of infrastructure is another problem. Despite its recent economic growth, Vietnam still has a tremendous need for highways, roads, rail lines and airport and seaport facilities. Pepsico, which has a facility in Ho Chi Minh City, must fly its beverage products to Hanoi because transportation by road is not practical. To cut costs and to tap into the growing economy, the company is considering a new facility in Hanoi.
Legal and accounting standards still aren’t well established because Vietnam remains a developing country. Grub said foreign investment laws are not complete and do not apply to all international transactions the same way. This leaves room for individual interpretation, especially at the local level.
Copyright, patent and trademark laws have improved in recent years, but they have not been enforced, Grub said, suggesting a demand for international attorneys.
And because Vietnam lacks accounting standards, Western-trained accountants are badly needed.
Grub attributes this to the process of “transforming from a Marxist economy with barter trade to a market economy.”
Since Vietnam opened its doors in the last few years, Asian-Pacific and European countries have started multimillion-dollar projects.
Though there’s room for U.S. companies to expand, they will face competition in telecommunications, beer making, food processing and other areas.
That’s the price of the delayed entry, and it could be a strong handicap for U.S. companies, Grub said.
With an anticipated increase of U.S. businesses expanding into Vietnam, there will be a shortage of housing, especially higher quality housing.
Even the low-cost housing that local workers live in will face similar shortages.
Above all, doing business in Vietnam or any developing country doesn’t lead to quick profits, experts say. Rather, business must be viewed as long-term investments.
“You absolutely have to take a long-term view in any emerging market,” said Ken Ross, a spokesman at Pepsico in New York. “It’s not a short-term game--you’ve got to build and be patient.”
