Vietnam’s Promising Market : Many in O.C. Predict Bright Future, but Obstacles Remain
Since April, Don Dang of Westminster has been shipping California table wine to his native Vietnam, trying to compete with French and Australian brands that now fill the cellars at hotels and restaurants there.
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But the higher tariff on U.S. wine--currently $6 a bottle--more than doubles Dang’s costs. So far, he’s exported about 2,000 bottles, mostly to Ho Chi Minh City, but Dang says he’s barely able to pay his clerical and sales staff in Vietnam. “I’m not making money yet,” said Dang, who owns American Freight & Trading Co. in Little Saigon.
But with Tuesday’s announcement by the Clinton Administration that it will fully normalize relations with Vietnam, Dang is buoyed by the promise of lower tariffs and more opportunities.
“From a business standpoint, I’m happy with normalization,” said Dang, 48, who is also trying to export bathtubs and lavatories to Vietnam.
From small exporters such as Dang to giant aerospace and computer firms, California businesses predicted new opportunities will emerge in this country of 70 million people.
But the normalization announcement, while expected, evoked strong feelings in Orange County, home to the largest Vietnamese population outside of Asia. Little Saigon’s large business community remains deeply divided on resumption of trade with Vietnam, with some adamantly opposed to having anything to do with the Communist government and others believing that normalization will help heal wounds left from the Vietnam War.
A number of businesses in Little Saigon as well as other companies in Orange County have been trying to establish footholds in Vietnam since February, 1994, when President Clinton lifted the U.S. embargo on trade with Vietnam.
Even so, the removal of the embargo did not spur a boom in trade, said Dung Trung Tran, president of the Orange County chapter of the Vietnamese Professional Society in Southern California, whose members have gone to Vietnam to research its business climate.
But the decision to normalize relations with Vietnam is a major step that will allow both countries to exchange ambassadors and establish embassies. While no one expects Vietnam’s difficult business environment to change overnight, the biggest immediate impact will be a boost in confidence for U.S. and Vietnamese companies worried about the long-term health of the bilateral relationship and political stability.
“More businesses will feel more comfortable having our government represented in Vietnam,” said Frank Jao, a Westminster developer who has waited patiently for this day. Last year Jao opened an office in Ho Chi Minh City to scope out business opportunities in Vietnam. “This will certainly enhance the capital flow into Vietnam and help it become more attractive and stronger,” Jao said.
And that should spur trade, which, although growing, has remained insignificant. According to the Los Angeles Area Chamber of Commerce, the value of Vietnam exports through the Los Angeles Customs District increased from $1.7 million in the first quarter of 1994 to $14.8 million for the same period in 1995.
But the biggest payoff for U.S. companies interested in Vietnam remains in the future, when the U.S. government is expected to negotiate trade, investment and tax treaties and lift restrictions on export finance support through such groups as the U.S. Export-Import Bank and the Overseas Private Investment Corp.
These federal agencies can provide long-term, low-cost government guaranteed loans or technical aid that is routinely granted by foreign competitors from Asia or Europe. These trade finance programs are of particular concern to U.S. manufacturers of big-ticket items, such as airplanes or construction equipment.
In the long run, businesses believe that normalization of relations will also help cut the red tape that has made it a nightmare for businesses to get in and operate there.
Warren Brainard, senior vice president of Allergan Inc., an Irvine-based eye-care products company, said it took his company two years to get approval to do business in Vietnam because of the country’s complex bureaucratic and legal system. He said Allergan finally opened an office in Vietnam two months ago and just sent out its first shipment. Now, he said, “the attitude to U.S. companies will be much more positive.”
Even so, another barrier that stands in the way of any immediate investment in Vietnam is its poor infrastructure--crumbling roads, inadequate communication systems and obsolete airport facilities.
That was the principal reason Charles Haggerty, chairman of Western Digital, says his big Irvine computer parts company late last year decided against building a factory in Vietnam.
“Infrastructure development is the key to this whole process,” Haggerty said. “It goes all the way to power plants, telephones and air transportation on a regularly scheduled basis.”
Haggerty, who last year sent a team of sales and marketing people to study Vietnam, thinks it will be another three to five years before the infrastructure will be ready to support a company like his.
“But it should start to take shape and normalization should accelerate it,” said Haggerty, who hopes to sell computer disks in Vietnam. “As the country opens up and infrastructure develops, it’s going to require computers and disk drives and chips to go into them.”
Chuyen Nguyen, a publisher of a Vietnamese language newspaper in Little Saigon, is one of a number of Vietnamese American business people who say they will not do business with the current government, however.
“It is still very risky to do business in Vietnam because there is no set law in the books and they [government officials] don’t have to answer to anyone,” he said.
Those risks aside, many businesses believe they can hardly afford to ignore a country whose population is comparable to that of South Korea and Malaysia combined.
Raquel Garcia, manager of marketing communications at Burlington Air Express Inc. in Irvine, said the international freight carrier opened three offices in Vietnam late last year “because we wanted to be on the scene as things started happening.”
Most of Burlington’s business there involves shipping between Vietnam and countries other than the United States, but Garcia said she expects the U.S.-Vietnam freight business to grow--not fast, but still grow--now that diplomatic relations have been established.
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Times staff writers Lily Dizon, Evelyn Iritani, Ross Kerber, Dan Margolis, and John O’Dell contributed to this story.
* U.S. RECOGNIZES VIETNAM
Time for healing, Clinton says. A1
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
The Road Back
Key events involving U.S.-Vietnam trade relations:
1973
* Peace agreement: United States signs peace agreement calling for withdrawal of U.S. military from South Vietnam and the release of prisoners of war.
1975
* April--Saigon falls: North Vietnamese forces capture Saigon and the remainder of South Vietnam; Communist regime established.
* April--Trade banned: United States refuses to acknowledge Vietnam’s new government. Diplomatic relations are severed and a trade ban imposed.
1978
* December--Cambodia invaded: Washington breaks off normalization talks with Hanoi when Vietnam invades Cambodia.
* December--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 United States to help determine fate of more than 2,000 Americans still missing.
1989
* September--Troops withdrawn: Vietnam withdraws from Cambodia, fulfilling a condition for improved relations with United States and European nations.
* September--Trade increases: 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
* January--Subsidies end: Soviet economic subsidies end. Vietnam steps up its efforts to attract foreign investment and correct serious trade imbalance.
* October--Travel OK: Washington lifts ban on organized American travel to Vietnam.
1992
* April--New constitution: Vietnam adopts a new constitution formalizing free-market reforms.
* December--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 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
* January: U.S. Senate passes non-binding resolution calling on Clinton to lift embargo.
* February: Clinton lifts 19-year trade embargo.
1995
* July: Clinton normalizes relations with Vietnam.
Source: Times reports, Researched by JANICE L. JONES and LYS CHUCK / Los Angeles Times
