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Asia’s Best Business Spots. 
By Peter N. Sheridan

Vietnam is found to be the safest place for expatriate business leaders to reside and work, even as it is among the region’s most stressful and the most risky nations for developing and growing an investment project. That is the conclusion from reading three recent surveys about doing business in Asia. We know Vietnam well and have good reason to support its potential. We also know how difficult it is for others to see.

Reading the tea leaves has not ever been more difficult for investors.  When assessing Vietnam, our almost 9 year experience shows that few outsiders fully appreciate the opportunities present.

Sadly, few people within Vietnam have clear vision either.  The Expatriate community is geared towards their own employer’s or their own personal bottom line.  The result is a view that is often more harsh or Pollyannaish as their corporate empires and careers are built upon and either swell or retract to their own success or failures, and not the nation’s.

Private, domestic investors are burdened with Vietnam’s 2,000-year history of invasion, flight, and loss to the point where few are able to see any tomorrow. This fuels their “living for today” syndrome.  Few attempt to forge tight business ties to foreign communities, thinking it is best to take as much as they can “today” as any tomorrow remains questionable or problematic.

State owned companies are little better, mouthing the new buzz words that free enterprise is good, but yet unable to move from the Party line that demands all profits to the State. In shrinking but yet prevalent quarters remains the notion that foreign investors are invaders, or at best interlopers. To these few but powerful, the future of the nation’s foreign investor community be dammed, as they suffer from the same “live for today” syndrome, want only to retain their own power base, and hold Vietnam back from being closer to being a good, much more a best, business spot in region.

One recent but striking project that involved a deminimus investment provides an example. The total cost of renting a venue was agreed at US$ 5,000, but in spite of the small size of the project, it consumed the better part of two weeks to negotiate. That is because the foreigner felt compelled to offer his full rental authority in order to reach agreement. A tea drinking ceremony with hands a-shaking and backs a-slapping followed, as the venue manager and the foreign party planned a formal signing ceremony the next day between our two principals.

One hour before the meeting the foreign party received a call that the Vietnamese vendor demanded a 10% increase, claiming the venues director helped the manager to understand his error. The only error made was in the manager’s assessment of what the foreign party would pay.  The same venue is often rented to domestic parties for half the agreed sum, or US$ 2,500. 

However, the Director no doubt convinced the manager of his negotiating error in failing to fall back upon the time-honored mantra that goes like this:

All foreigners are rich. He can afford to pay more. He won’t miss the extra money and we are in our rights to charge as much as we can.”  

The foreign investor rushed to the venue to try to save the deal.   Offering that as the parties had already reached agreement, if the vendor kept to the price agreed to, the foreigner would agree immediately to hire the same venue for the next year. At that time he could increase his rental budget and cover the extra amount.  There was no way to make the extra rent without going over budget. It did not work.  The vendor would not budge.

The foreign investor knew other venues were available. There was no logical reason (using Vietnamese logic) to stay at the current venue.  However, applying foreign (to the Vietnamese) logic, the investor reasoned that he could go over budget as the extra 10 per cent, only $500, was not large and the venue would remember the good will of this year’s bargain to help achieve a better price next year.

The next year, with absolutely no improvements made to the venue in a year the nation suffered from deflation, the venue management demanded upon US$ 7,500 or 50% more than before.

Similar obstacles prevail in larger projects, some valued at hundreds of millions of dollars. The State insists investors complete projects approved in the late, booming 90s even as there is no current or foreseeable market that will materialize in the next 3 to 5 years.  “Get the money now,” is the working mentality.  “Hell or be dammed the future.” 

The State thus seeks out smaller, less profitable and even harmful projects, rejecting the wisdom of preserving large and beneficial projects that will transform the nation to a world-class community when the market is once more present. It’s nearly impossible to see a good future when one has only experienced pain.

EIU Picks the Best Spots

According to the London based Economist Intelligence Unit, Singapore and Hong Kong top the list again, only trading places, for the best business spot in Asia.

Australia and New Zealand flip-flopped as well for spots 3 and 4 on the list.

Taiwan, Japan, and the Philippines held their middle ground positions remaining at Nos. 5, 7, and 10, respectively.  China slipped a notch from 11 to 12, while Vietnam and Pakistan held firmly onto their last place positions at Nos. 15 and 16, respectively.

Decisive elements in the ranking used to forecast regional business conditions for the next five years are highly competitive elements that include: (1) placement of regional headquarters,  (2) simple and low tax regimes, and (3) proximity to large markets - namely China.

  There is little difference when viewing the overall ranking of nations by EIU:

The EIU's risk ratings methodology examines risk from two distinct perspectives: 1) broad categories of risk grouped in analytical categories of political, economic policy, economic structure and liquidity factors; and 2) risk exposure associated with investing in particular types of financial instruments, namely specific investment risk. This includes risk associated with taking on foreign-exchange exposure against the dollar, foreign-currency loans to sovereigns and foreign-currency loans to banks.

The model operates by asking the EIU's country expert to answer a series of quantitative and qualitative questions on recent and expected political and economic trends in the relevant country.

The EIU View: “The Communist Party general secretary, Nong Duc Manh, will pursue a tough campaign to crack down on corruption. The pace and progress of economic reform is unlikely to quicken in 2002-03. Real GDP growth will slow in 2002, but a recovery in the global economy in the second half of the year will provide a boost to inward foreign investment and exports. The economy will expand more briskly in 2003, at a rate close to 7%, as exporters take full advantage of the benefits of the trade agreement with the US.

“Relating this to earlier surveys, and understanding the dynamic of these surveys, makes the picture of investing in Vietnam look less murky. Foreigners outside the nation try to compare it to their other experiences and thus fail as Vietnam is not only the frontier but is outside the mold used by others.”

Vietnam: Safe but Very Stressful   Hong Kong’s Political Risk Consultancy’s (PRC) report on stress taken from a poll of Expatriate Executives in the reporting nations compares favorably to its earlier report on the relative sense of safety by the same pool of in-country foreign executives. 

Vietnam came out on top as the safest, and among the most stressful, places to be for expatriate business executives in Asia. 

Vietnam remains one of the top three most stressful lands as a high-pressure country for expats. This is an improvement as last year Vietnam was rated the most stressful location, now held by Indonesia, followed by South Korea in second slot.

At the other end of the scorecard is Japan, again rated the least stressful land but more stressful than it was last year.

It is important to note that high degrees of stress alone are not bad for business.  Many American companies internally drive up stress levels to increase productivity. Getting the balance right between stress and growth is the key.  China and South Korea seem to have found the correct formula, as they both continue to draw more direct foreign investment that countries with better marks on the survey.

The most stressful nation in Asia is ranked 1 with a rating of 7.33: Indonesia.

The least stressful nation in Asia is ranked 10 with a rating of 2.00: Japan.

The full list of ranks and ratings follows: Maximum stress rating level is 10; minimum is 1

Most foreigners in China and Vietnam enjoy a good life, particularly when contrasted to the life styles of most domestic nationals.  Expat frustrations deal with bureaucracy, language, and cultural barriers, and some relatively minor living inconveniences.  Where police actions in China are mostly directed towards native and expat Chinese, and while police actions are on the wane in Vietnam, Vietnamese expats must deal with a government not yet accustomed to world-level business.

Most investors still consider the cost of doing business in Vietnam as too high, particularly the cost of utilities, transportation, and communications.  Further frustrating growth in Vietnam is frequent changes on the laws and regulations, lack of uniformity in enforcing the laws and regulations, and the relative lack of experience of new administrations at every level of government thus necessitating returning to square one on major foreign investor undertakings with almost every new Chair to a local, district, or provincial people’s committee.

Vietnam enjoys the benefits of those nations raking less stressful, but through frequent missteps, cannot sustain those feelings in a consistent manner. Singapore does better perhaps in part because there is greater confidence in the leadership there then in the nations rated below it.  The Philippines seems to suffer from an inexhaustible sense of optimism, and Malaysia (but for its outspoken leader) is one of the least confrontational societies in Asia. Thailand’s success appears to be based on the absence of extremism and the willingness of most Thais to seek a rapid accommodation.

The effort to and the fact of compromise among Thais go a long way towards creating a comfortable environment among expats.  Vietnamese make the effort but are shy in actual acts of compromise.

Perhaps next year will be less stressful in Vietnam as NTR takes hold and brings both more hard currency and new business to this expanding nation.

Vietnam - The safest place to live and work.  Business executives are increasingly uneasy about security risks in Asia Pacific countries that they previously considered safe, with Vietnam now considered a safer place than any other in the region, including the United States.

The Political & Economic Risk Consultancy (PERC) survey found confidence in Australia, Japan, and Singapore had fallen sharply since the September 11 air attacks on America.

Ninety executives from the tourism and hotel industries were polled in the survey, which was conducted in late October 2001.

Australia, which had been ranked as the safest location in PERC’s last survey before the attacks, fell to third place while Japan slipped from second to fifth spot.

It is not that Vietnam grew to be seen as the safest place because of internal conditions (as they State would now like to promote), but because (i) all previously top rated nations with scores better than Vietnam’s dropped significantly in rating, and (ii) because of its location, Vietnam is not exposed to the social unrest of its neighbors, as is Singapore.

The worst possible grade is 10, which indicates places where respondents feel the most threatened by risks of social unrest.

The biggest change was in Singapore, long viewed as one of the safest places in Asia.  No longer an island unto itself, “the marked worsening of perceptions probably reflects much greater awareness of the island’s vulnerability to social disruption in neighboring Malaysia and Indonesia,” PERC reported.

China, ranked 10^th safest place prior to the 11^th of September is now ranked 6^th because China is “not shy about using force to nip any signs of unrest i the bud,” PERC reported.

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