Talk of Hanoi Pact Good News for O.C. Firms

The possibility of Vietnam becoming a full trading partner with the United States comes as good news to Southern California, particularly Orange County, which is home to the largest concentration of Vietnamese immigrants in the world.

Businesses owned by Vietnamese Americans will be among the first to benefit, observers say, because of their owners’ ties to the homeland.

Other local companies stand to gain as well, including engineering and construction services providers such as Fluor Corp., financial and professional services firms, and makers of electronics, medical instruments and machine tools.

“I think the market potential is excellent,” said Don Miller, president of the World Trade Center Assn. of Orange County.

Many experts warned, however, that some U.S. companies might be hesitant to invest in Vietnam because of the current financial turmoil in other parts of Southeast Asia.

In addition, doing business with Vietnam will still be controversial, particularly within the immigrant community, which is deeply divided over the issue of normalizing trade while Communists remain in power.

Also, Vietnam remains a very poor country--per capita income is just $250 a year, and about two-thirds of the country’s 75 million people are involved in farming.

To date, U.S. exports to Vietnam have been tiny, but they’ve been growing steadily from $7 million in 1993 to $616 million in 1996, according to the Commerce Department’s International Trade Administration.

Co Pham, president of the Vietnamese Chamber of Commerce of Orange County, said that the removal of trade barriers would allow Vietnam to export coffee, rice, coal, oil and other raw materials directly to the United States.

That would boost the country’s economy and give businesses and consumers money with which to buy American goods--and Vietnam will be in the market to buy just about anything American, he said.

“You name it, they need it,” he said.

Rockwell International Corp. in Costa Mesa is one of many local companies that sees promise in Vietnam. The electronics concern sells automation systems to auto manufacturers, food processors, oil companies and other industrial businesses.

As Vietnam opens up and Rockwell’s customers begin moving into the market, “we’ll be there to support them,” said company spokesman Bill Mellon.

But some companies warn that progress will be slow.

“Clearly, it’s not going to be a huge market,” said Jeffrey D’Eliscu, spokesman for Allergan Inc., an Irvine maker of eye care products. Although the company has been selling to Vietnam for several years under the rules allowing medical shipments to the country, “short term it does not have a lot of potential for Allergan,” he said.

As Pham said: “The first year, we should not expect a miracle between us and Vietnam.”

But many believe that the removal of trade barriers with the United States will help Vietnam gradually build upon its small base of American investment.

“Little by little, a few large American corporations have started to do business in Vietnam,” said Ken Ackbarali, a senior economist at the Los Angeles Economic Development Corp.

Bank of America, General Electric, Phillip Morris, IBM and Motorola have operations in Vietnam. Nike Inc. began manufacturing athletic footwear there two years ago, and its Vietnamese plants now handle about 10% of its total production.

Experts say that other U.S. companies will now be encouraged to set up plants there, where they can take advantage of cheap labor.

“Vietnam has the potential of being another Malaysia or other places in the Far East that essentially serve as manufacturing platforms,” said David Blake, dean of UC Irvine’s Graduate School of Management and an international trade expert.

“It could be clothing, sunglasses, surfwear--anything that involves significant assembly. This is another place to consider.”

Many business people believe the initial demand from Vietnam will be for low-tech products and construction and engineering services. Some companies, such as Kingston Technology Corp., a Fountain Valley maker of computer memory devices, see little market potential for many years.

“They’re more concerned with the basics of roads and telephones,” said Kingston spokeswoman Peggy Kelly. “In terms of the high-level, corporate-supported memory market, it’s not there yet.”

But as Vietnam begins developing a more significant industrial base, Ackbarali believes that everything from computers to medical products to telecommunications equipment will be needed to help it modernize. Management expertise will also be in demand, he said, to assist in bringing factories and distribution systems on line.

“There’s a natural fit between our strengths as a modern industrial economy and their needs as a developing economy,” he said.

Within Orange County’s Vietnamese community, some business leaders expressed optimism over the potential of free trade.

“Little Saigon would expand,” said Frank Jao, the principal developer of the 2-mile stretch of about 2,000 businesses in Westminster that serves the largest Vietnamese exile community in the world. He added there would be more demand for warehousing goods and financial services, as well as tourism benefits.

“Orange County and Los Angeles would become an important distributing point for those goods throughout North America,” he said.

Although his dream is to build Little Saigon beyond an ethnic enclave into a mainstream tourist attraction, Jao isn’t sure opening Vietnam’s trading doors will help him achieve growth to that degree. But he believes more visitors will be attracted there to buy lower cost goods made in the Southeast Asian country.

“I’ve been advocating to open up full trade with Vietnam, because it will benefit Orange County and Los Angeles,” Pham said. He said he has written numerous letters to Gov. Pete Wilson, and talked with his staff members, to no avail.

“They need everything,” Pham said. “They need technology, services, things to build their infrastructure and economy. If we open up trade with them, selling things here will give them money to buy from us. So we would benefit.”

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Trade Deal

Full trade partnership with Vietnam is likely to stimulate growth in both U.S. and California imports and exports, as was the case in 1995 when diplomatic relations normalized. A closer look at how U.S. trade with Vietnam has grown in value. Amounts in millions:

Imports: (1996) $332

Exports: (1996) $616

Imports from Vietnam

* Agricultural products

* Minerals

* Marine products

* Coffee

* Petroleum

* Rice

Exports to Vietnam

* Petroleum

* Steel products

* Railroad equipment

* Chemicals

* Medicines

* Raw cotton

* Fertilizer

* Grain

State Exports

California exports to Vietnam exploded in 1994 and have since dropped. Totals in millions:

1996: $616

Top five California exports to Vietnam in 1996, in millions:

1. Industrial machinery, computer equipment $14.4

2. Chemicals and allied products 9.4

3. Petroleum refining and related products 4.3

4. Agricultural products--crops 2.9

5. Fabricated metal products 1.4

Sources: U.S. Department of Commerce, 1998 Information Please Almanac