Returning to Trade : Commerce: Vietnamese emigrants are returning to their homeland as expectant capitalists--and finding both opportunity and frustration.
In District 3, just north of the center of town, an upscale boutique stands out among the battered stores, sidewalk bicycle repairmen and pushcart vendors selling noodles with pungent-smelling meats and sauces.
Squeaky-clean windows and doors give way to freshly painted walls, racks of silk and linen dresses and a row of wooden dressing rooms. The sign atop the store, one of three in the former Saigon owned by a pair of 33-year-old Americans, reads “Dung/Joyce U.S.A Fashion.”
Owners Tony Vuong, a women’s clothing designer with outlets in Orange and Los Angeles counties, and Danny Trinh, a former resident of Alhambra who has moved to Ho Chi Minh City, are among a vanguard of emigres leading a drive by U.S. business to take advantage of the new freedom to trade and invest in Vietnam. They opened the store in February, the same month President Clinton lifted the nearly 20-year-old ban on commerce with America’s wartime foe.
For them, Vietnam--which has been trying since 1986 to re-enter world markets after years of isolation--is the latest business frontier. It seems to offer limitless opportunities, not to mention low labor costs.
“Whenever a communist country opens up, its economy can only go up year after year,” Vuong said here recently.
This year, international trade and investment in Vietnam--where foreign employers are required to offer a minimum wage of just $35 a month--is expected to total about $9 billion, according to Virginia Foote, president of the United States-Vietnam Trade Council in Washington.
But while some U.S. businesses--among them many small businesses owned by Vietnamese Americans--welcome the chance to catch up with competitors who haven’t been kept out of Vietnam by economic embargoes, most are still cautious. The ban, they note, was lifted only seven months ago, so many firms are still researching opportunities in this nation of 70 million people.
Business people also warn that commerce in Vietnam can be a nightmare of frustrating bureaucracy, incompetent or greedy officials and uncertain business laws.
“When a country has been closed for 20 years like this, there has to be a time in between with lots of problems before it gets better,” Vuong said.
“There’s no business court you can go to to if contracts are broken. It takes forever to get licenses to do anything, and corruption here is worse than ever,” said the designer, who owns Cerlini boutiques in Westminster’s Little Saigon and in Alhambra. “But we’re here because we’re looking to the future in this market.”
According to Foote, between February and early July, 15 projects with a total value of $141.9 million had been awarded to U.S. companies--big ones such as Coca-Cola Co. and smaller ones such as Dung/Joyce.
That placed the United States 15th among nations doing business with Vietnam, but the ranking should rise soon, analysts say, because hundreds of Americans are now in Vietnam closing deals or developing relationships with entrepreneurs and investors.
A good example is American Rice Inc., a subsidiary of Los Angeles-based Erly Industries Inc., which recently set up a joint venture with Vietnam’s ministry of agricuture to begin producing rice for export to the U.S. and other countries.
The company’s first shipment of rice to the United States left Vietnam in April, said Richard McCombs, American Rice’s chief financial officer, and the company hopes that is only the beginning. Vietnam’s cheap labor and other low costs attracted his company’s interest, he said.
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The arrival of foreign capital is good news to Vietnamese government officials, who estimate that more than $40 billion will be needed through 2000 to keep their nation’s economy growing at 8% to 10% a year. (Economic expansion was 8.3% in 1992, according to the General Statistics Office.)
Tourism and exports--of crude oil, rice, seafood, coffee, coal and rubber--helped to feed that rise, but the nation is dependent on imported fuel, construction equipment, cars and fertilizers, as well as consumer goods such as clothing and computers.
“Basically, we need everything, because we’re starting from the bottom,” said Tran Thien Cuong, speaking for the Chamber of Commerce and Industry of Vietnam.
Officials in Hanoi readily acknowledge the difficulties of doing business in their country.
“We’re still new at this, so we’re making up laws to fit our uses as we go along, and that can be inconvenient for Americans, we know,” Cuong said. “Americans like everything to be clearly defined: Water is water; fire is fire. But this is the time when fortunes are made. After the rules are written clearly, the big opportunities will be gone.”
Besides trying to straighten out commercial law, officials are trying to clean up extortion and other improprieties among government administrators and employees, he said. Violators include license regulators, police officers and airport customs clerks.
“Corruption is our biggest misfortune. The hard economic times have created this very ugly industry, but we’re determined to solve this problem,” Cuong said.
Ironically, the crackdown on illegal business practices actually hurt a deal that another Vietnamese American was developing.
Christopher Phong Tran, the 29-year-old president of Tymes International Inc., a Westminster investment company, was to sign a contract in April to import clothing made by Legamax, a major Vietnamese garment maker with plants in Hanoi and Ho Chi Minh City. The company is partly owned by the Hanoi government.
Several days after Tran arrived in Ho Chi Minh City, however, federal officials fired Legamax’s chairwoman. An audit of the company’s books accused her of applying for too many loans from international banks, according to the Vietnam Investment Review newspaper.
Officials put off Tran’s negotiations indefinitely as they conducted further audits of the management of the 8,000-employee company. Since then, the government has replaced most of the firm’s executives, Tran said recently.
“It can be very unpredictable here,” he said. “That’s the risk you take.”
Though not yet 30, Tran is a seasoned businessman who has been working on deals here since the late 1980s. His father and older brother brought him along on business trips to Vietnam, then helped him start his own company. On his own, he scouted investment opportunities and waited for the United States to lift the trade embargo.
Though the Legamax deal fell through, Tran used the time to set up a branch office. He also met with potential Vietnamese partners in the banking, seafood and travel industries.
Tran, who left Saigon at 13 and later graduated from UCLA, typifies the young Vietnamese American business professionals who have few memories of their birthplace but are now visiting it several times a year to wheel and deal.
They can be seen riding around the major cities of Vietnam in hired cars or zipping around on Honda motorbikes. They are never without cellular phones. Some, like Tran, spend several weeks on each trip; others stay for long-term assignments as corporate managers.
Ideologically, they are distant from many of their expatriated elders, who frown on renewed ties with the Communist regime that forced 2 million Vietnamese into exile with the fall of South Vietnam in 1975. Nearly half the emigres now live in the United States.
“I know the past was horrible, but it’s still the past,” Tran said. “We, the young people, are trying to go on. We are the future, and we’re trying to work for the future.”
Each time he lands at Tan Son Nhut Airport in Ho Chi Minh City, Tran said, he still feels angry that his native land is so poor compared to many of its Asian neighbors.
“I get upset when I see foreign businessmen in Vietnam making fun of our people or the lack of conveniences,” Tran said. “I ask myself why it has to be that way. I want to help Vietnam improve. I want to create jobs.”
About 3% of the 70 million people of Vietnam are jobless, according to Cuong, the official with Vietnam’s commerce group. The average annual income of a Vietnamese worker is about $300, but that figure belies the true buying power of Vietnamese citizens: Hundreds of thousands of families here receive money from relatives and friends living abroad. Their annual contribution is estimated at $500 million or more, Cuong said.
But consumers have few choices. That’s where Vuong and Trinh see opportunity.
On a visit last year to Ho Chi Minh City, they said, they noticed women from abroad coming to Vietnam to work, more foreign companies hiring local women and more local women opening their own businesses. Yet there were few shops offering professional dress suits for women.
After conducting interviews, the partners estimated that about 5% of Ho Chi Minh City’s 4 million to 5 million residents were adult women able to afford designer clothes. They opened their first boutique in Ho Chi Minh City in February.
Their hunch proved correct, and customers scooped up $80 suits and $100 dresses--prices comparable to those in the United States. So Vuong and Trinh opened two more shops in Ho Chi Minh City.
Even at a small percentage of the city’s women, the customer base “is still more than the same target market in Orange County, where there are only about 100,000 Vietnamese,” Trinh said. “We’re ahead.”
Outside the original Dung/Joyce boutique in District 3, where the partners have their headquarters in an upstairs office, the searing afternoon heat was pierced by the sounds of roaring motorbikes, scooters and cars. But the air-conditioned shop was comfortable and the city noises could barely be heard inside.
Dang Thi Minh Ngan, a 21-year-old saleswoman, said customers realize that they need to catch up with international fashions.
“The newer the styles, the more they like and buy,” she said, standing among the business suits and dresses. “We actually teach them how to dress.”
Even the color black--which had been considered impractical for the warm climate here and unfashionable because it is associated with death in Vietnamese culture--is starting to come into vogue, Ngan said.
Explained Trinh: “We tell them it’s sophisticated and that it’s very popular in the West.”
The partners plan to open their own clothing manufacturing plant in Ho Chi Minh City by the end of the year.
“Who knows? Maybe after that, we open a store in Hanoi,” Vuong said.
Another consumer product in short supply in Vietnam is computers.
“Vietnam is starting from ground zero,” said David J. Drinkard, a representative for Maynard, Mass.-based Digital Equipment Corp. “And as its market takes off, it will help (Digital) worldwide.”
Digital executives have hired eight Vietnamese salespeople to promote their products, opened an office in Hanoi and want to open another in Ho Chi Minh City, he said.
Though Drinkard said he likes being a pioneer in the nation’s computer market, he called Vietnam “a hardship post.”
“What could be taken care of anywhere else with a phone call or a fax requires a meeting here,” said Drinkard, a native of St. Louis. “Things take longer.
“It’s because of the lack of exposure to international business practices,” he said. “I do a lot of training here to get people used to the nature of business, like marketing and keeping up with new technology.”
Vietnamese workers are learning quickly and have the reputation of being easy to train, Drinkard added.
Vietnam’s General Statistics Office estimates that the nation’s work force totals more than 30 million people and that the literacy rate is nearly 90%. More than 10,000 Vietnamese have earned doctorates, mostly in social and technological subjects, from universities in the former Soviet Union and Eastern Europe.
To Jeannie Wey, who represents Vision Air Expedition Inc., a Los Angeles-based wholesale broker of airline tickets, the biggest obstruction to doing business in Vietnam is the language barrier.
“You have to find somebody good who can speak Vietnamese to work for you, someone who has to know the system and which official to go to for what,” Wey said.
She chose Tran of Tymes International Inc.
He and Wey met after his travel agency, a division of the investment firm, became one of Vision Air’s clients several years ago. Now the two are building relationships with Vietnam’s two airlines to prepare for the day when, they believe, the United States will open direct routes to Hanoi and Ho Chi Minh City.
But there’s another problem Wey is glad to handle herself: Most of Vietnam’s investors and traders are men--and most still aren’t used to negotiating with professional women.
“They’re usually taken aback by me,” she said, smiling. “But I just go ahead and stick my hand out. They’re still trying to get used to shaking hands with a woman.”
Vietnam’s Economy Blooming
Economic growth in Vietnam is advancing at an impressive rate. In 1985, imports and exports were valued at just $1.4 billion. Seven years later, the most recent year for which information is available, the comparable figure was $5 billion. As American investment increases, growth will doubtless accelerate.
Import-Export Trend
The value of Vietnam’s exports increased almost 400% between 1985 and 1992, nearly matching the value of all imports. Amounts in millions of dollars:
Imports (1992): $2,535
Exports (1992): $2,475
Petroleum’s Place
Petroleum figures prominently in Vietnamese trade. Refined petroleum products ranked as the second-largest group of imports in 1992, while crude oil had by far the largest share of total exports:
Imports:
Capital goods*: 37%
Petroleum products: 23%
Fertilizer: 9%
Steel: 3%
Other: 28%
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Exports:
Petroleum: 32%
Agriculture, forestry products: 18%
Rice: 17%
Marine products: 12%
Light industrial goods: 9%
Other: 12%
* Materials, equipment or products used to produce salable goods
Foreign Investment
Taiwanese interests were the top investors in Vietnam for the period 1987 through July, 1994. U.S. investors rank behind those in 14 other nations, having faced a trade embargo until February. Top foreign investments by country, amounts in millions of dollars:
Country Investment Taiwan $1,677 Hong Kong $1,671 Australia $756 France $717 South Korea $716 Singapore $548 Japan $518 Malaysia $510 England $387 Holland $380 Switzerland $247 Thailand $194 Russia $173 Indonesia $160 United States $142
What’s Next
Some unresolved issues and steps in U.S.-Vietnamese trade that will be addressed or completed in the near future:
Liaison offices: The two governments are expected to open political liaison offices in Hanoi and Washington by the end of the year.
Diplomatic relations: Though trade has been resumed, the United States has yet to fully normalize diplomatic relations with Vietnam. This step hinges on Hanoi’s cooperation on the MIA--POW issue.
Government investment: Although U.S. firms are free to invest in Vietnam, government-funded investments are not yet allowed.
Trade status: The Vietnam government will seek most-favored nation status with the United States.
Sources: Vietnam Today; World Bank; Researched by JANICE L. JONES/Los Angeles Times
The Road Back
Key events involving U.S.-Vietnam trade relations:
1973
* Peace agreement: United States signs peace agreement, which calls for withdrawal of U.S. military from South Vietnam, and the release of prisoners of war.
1975
* The fall: North Vietnamese forces capture Saigon and the remainder of South Vietnam; communist government established.
* Relations severed: United States refuses to acknowledge Vietnam’s new government. Diplomatic relations are severed and a trade ban is imposed.
1978
* Cambodia invaded: Washington breaks off normalization talks with Hanoi when
Vietnam invades Cambodia.
* Allied embargo: U.S. allies, including Great Britain, Japan, Taiwan and South Korea, end trade relations with Vietnam in opposition to the Cambodia invasion.
1979
* Privatization: Faced with a sagging economy, the Vietnamese government moves to allow private commerce and postpones collectivization in the south.
1988
* Talks resumed: Vietnam begins cooperating with the United States to help determine fate of more than 2,000 Americans still missing from the war.
1989
* Troops withdrawn: Vietnam withdraws from Cambodia, fulfilling a condition for improved
relations with U.S. and European nations.
* Trade increase: U.S. trade embargo remains in effect, but other nations drop restrictions and re-establish trade relations.
1990
* Washington visit: Vietnam’s foreign minister, Nguyen Co Thach, makes an unprecedented visit to Washington, pledges to do everything possible to resolve the issue of MIAs in Vietnam.
1991
* Subsidies end: Soviet economic subsidies to Vietnam end. Vietnam steps up its efforts to attract foreign investment and correct serious trade imbalance.
* Travel OK: Washington lifts ban on organized American travel to Vietnam
1992
* New constitution: Vietnam
adopts a new constitution formalizing free-market reforms.
* Door opens: President Bush allows U.S. companies to open offices in Vietnam to position themselves for lifting of the trade embargo.
1993
* Sanctions eased: President Clinton announces that the United States will no longer block an International Monetary Fund loan package to Vietnam. He eases sanctions to allow U.S. firms to participate in international development projects.
1994
* Road to open trade: U.S. Senate passes non-binding resolution calling on Clinton to lift embargo.
* Embargo lifted: Clinton lifts 19-year trade embargo.
Source: Times reports, Researched by JANICE L. JONES and LYS CHUCK / Los Angeles Times
