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VIETNAM VIGNETTES
Copyright © 1999-2000 Vietnam Venture Group, Inc. All rights reserved. Updated 10/22/1998
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VVG - VIETNAM VENTURE GROUP, Inc.VIETNAM VIGNETTESCopyright © 1999-2000 Vietnam Venture Group, Inc. All rights reserved. Updated 10/22/1998 |
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Issue No. 10
Mid-July 1998
A Periodic Report to Our Clients
US Senate (for the moment) overrides Sens. Smith and Helms attempt to block normalization. The Senate Finance beat back an attempt by Sen. Smith (R. NH) to override the Presidents waiver of the Jackson Vanik amendment. This may point the way to an early approval of a bilateral trade agreement with Vietnam, if Vietnam can move more quickly forward towards that end in long delayed negotiations. A fundamental error in thinking by the policy makers in Vietnam has not allowed this crucial agreement to move quickly in a forward direction.
Hanoi and HCMC will have a stock exchange in October 1998 proclaims PM Khai. In a statement made in mid July, the Prime Minister decreed that the long awaited stock exchange, approved in 1996 with the appointment of a Securities Committee, will start operations in both cities in the fourth quarter of this year. At the time of the American Expo '98, a US sponsored trade fair, it may forecast a new effort by Vietnam to move forward. Speculation is that the early trading will be in state-issued bonds and not securities.
| No.1 - November 1997 No.2 - December 1997 No.3 - January 1998 No.4 - March 1998 No.5 - April 1998 |
PRIOR ISSUES OF |
No.6 - May 1998 No.7 - June 1998 No.8 - Mid-June 1998 No.9 - July 1998 |
Current Dispatches
ODA Disbursements: a need to spend carefully but quickly. Vietnam’s Overseas Development Assistance (ODA) program has landed almost US$ 11 billion in credit to this developing nation that we often call the current frontier for foreign direct investment (FDI).The World Bank estimates that only $2.4 billion has been disbursed so far. Vietnam’s modest modernization and industrialization campaigns are targeting US$1,500 per capita gross domestic product (GDP) by year 2020. To achieve this, the nation must sustain an average growth rate of 8% over the next 25 years, and an investment increase of approximately 20% per year between now and 2015.
Should Vietnam’s GDP increase, then the amount of ODA funding will decrease, for this aid is provided only for developing nations with a GDP per capita of less than US$220.
Neighboring countries that are more developed than Vietnam receive more development funds because they can disburse the funds more efficiently. A recent call supported by the MPI is for a strong, prestigious state body whose actions and procedures are fully transparent. Its purpose would be to propose projects for ODA funding and administer guidelines for social organizations and individual provinces to enable the nation to design and implement projects which meet the targets and requirements of both the government and the donor country.
To be fair, the major problem is the failure of Vietnam’s many agencies to be able to comply with the standard but heavy demands of the donor nations in the disbursement of ODA funds. These funds come in three forms: non-refundable bilateral grants, bilateral low-interest loans, and multilateral agreement loans. Non-refundable grants account for between 20% and 25% all assistance. Such grants are mainly directed at improving the human development index by concentrating on health care and education systems, or the protection of national heritage.
The vast majority of the ODA funds are generally directed to infrastructure projects. ODA disbursements since 1990 are estimated as follows in US $ millions:
| 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 |
| 448 | 338 | 356 | 274 | 625 | 612 | 985 | 1,000 |
Stalled Property Projects. It has been reported by MPI that 28 of 72 real estate projects in Hanoi, and 53 of 114 projects in HCMC, have been put on hold. Some projects have cleared land, while others have put part of the structure in place. The problem has been the region’s economic crisis has dried up the in-bound flow of capital to these cities.
Most of the projects are high standard hotels, department stores and offices. The period of postponement can only be guessed at, and current speculation is from one to two years. Some of the stalled projects include:
Hanoi Plaza with $10 million of its $41 million already committed; the $200 million Asian Plaza in HCMC and the Saigon Grand Emperor Hotel, valued at $58.6 million.
Delays are causing some projects to reduce their expectations of returns in an effort to get back on stream. Office rentals for some buildings nearing or recently completed are down from $50 per meter to as low as $15 per meter.
Bamboo Bikes to America. The first shipment of rattan bikes were sent to Florida in June holding 240 of the environmentally friendly bikes. Lixeha, an Hanoi-based state owned firm has previously sent 200 bikes to the Netherlands. Plans are underway to send further shipments to France, Japan and Italy. Prices are bound to be higher than similar bikes would be sold for here.
However, status but not yet environmentally conscious Vietnamese are not expected to be seeking out these rattan bikes soon.
American Cocoa Investment. US-based Mars, Inc, the confectionery firm, recently indicated some interest in developing a large-scale cocoa plantation in Vietnam, following favorable results announced by the American Cocoa Institute. The report states: there is abundant land in Vietnam that can be cleaned up and used for cocoa production
Visa Cards. Vietcombank, after nearly two years preparation, began issuing Visa Cards with a credit limit up to US$ 7,000. Issuance was through its 20 branches nationwide. A distribution of 1,500 gold cards is scheduled for this year, requiring applicants to deposit $770 in the Vietcombank as a prerequisite.
The first Visa Cards were issued by Asia Commercial Bank, a joint-stock bank.
It is estimated that 3,000 outlets in Vietnam currently accept Visa Cards.
US Foodstuffs in Vietnam. US-based Kint and Associates, Inc., has been selected as the sole agent for Bar-S food in Vietnam. Bar-S, also a US company, specializes in processed foodstuffs. The first shipment, 12 tonnes of ten different processed items, will be delivered soon, it has been reported.
The products sold in Vietnam will cost about 150% of the cost of similar products made domestically. The arrangement will reportedly make Bar-S the sole exporter of US processed foods to Vietnam.
Investment Opportunity: Water Supply Systems. The amount of development assistance extended to water supply projects is more than US$ 1 billion in grants and confessional loans. The need is not in question. But the disbursement of the funds is.
A new Water Resources Law should provide proper allocation of the precious resource between urban and farm needs. However, in order to attract foreign investors to build water treatment plants, there is a need to provide an adequate return in profits.
Currently it is estimated that 70% of treated water is unaccounted for. Physical loss is estimated at 30% (leaks that don’t get to the consumers) and administrative losses (stolen or unbilled usage) take up the remaining 40 per cent.
The water metering system in place does not assist the billing system, that allows for billing only 30% (of the 30% billed or only 10%) of actual usage. As long as water firms continue to operate in this manner, they will be a burden to the system and a deterrent to investment.
Enhancement projects sponsored by the World Bank and ADB hop to change that. They aim to spend $343 million to improve the water supply systems in 18 cities and towns throughout Vietnam. This will proceed on two fronts: renovating & up-grading the infrastructure; and sorting out the inefficient local administration.
Ambassador Peterson's Message.
Pete Peterson's July 4th message includes frank language about America's relationship with Vietnam. Excerpted:
"Potential American investors are likely to be frightened away from investing in Vietnam more by the negative experiences of American firms already here than by concerns of the Asian financial crisis. However, if Vietnam adopts a more transparent, reliable and free trading system soon, American investors here now will succeed and others will follow.
"I continue to be touched by the warmth and hospitality of the Vietnamese people. I know that is the reaction of most Americans who come here. In the past year, having traveled to 30 [of 53] provinces, my experience has been the same, everywhere. I am genuinely welcomed.
"I continue to be impressed by the youth and dynamism of the Vietnamese people. Of it many natural resources, none is more important than Vietnam's human resources. Given the opportunity, the Vietnamese people prove time and again that they are world quality. Direct that potential in a positive way and this country will quickly become a regional leader in economic, political and cultural affairs.
"Vietnam is a country undergoing profound change. There is not a single aspect of Vietnam's society, its economy, or its culture Thai is not being reshaped by constructive forces of change. These changes are more obvious in the urban areas than in the countryside, but they are occurring everywhere. The challenge for the Vietnamese government and its people is to make use of these changes in a positive way - to develop a persuasive vision of Vietnam's future and then lead the way."
Expensive Cities: Hanoi & HCMC* For foreigner travelers, the list of the world's most costly cities is no surprise. However, for the city and national planners of Vietnam, this should be a wake-up call. Ho Chi Minh City and Hanoi are among the three most expensive cities for foreigners in south east Asia. As reported by the Associated Press:
Despite Asia's financial crisis, the region still has seven of the world's most expensive cities for foreign workers. The top ten are: Hong Kong (ranked number 1/index points 157), Tokyo (2/154), Beijing (3/153), Moscow (4/151), Shanghai (5/144), Osaka (6/140), Guangshou (7/122), St. Petersburg (8/115), Dailan, China (9/112), London (10/111).
The study, conduced in March and released in late June, measures the relative cost of goods and services. New York City is used as the benchmark, with 100 index points is at 21st place..
The dramatic effect of the economic crisis shows that of Southeast Asian cities, only Singapore, in 13th place, remains more costly than New York City.
However, closely following New York are Ho Chi Minh City ranked number 25 with 97 index points, and Hanoi, number 27 with 98 points. The only other Asian cities to follow New York in the top 80 are Seoul, Korea (number 48 with 87 index points) and Tianjin, China (number 62 with 82 index points).
In contrast, San Francisco ranks number 57 with 85 index points. Washington, DC ranks number 72 with 80 index points.
To Reach VVG: Our move has not been without problems. The delay in installing new cable has meant we are operating without an assigned fax line. Please do not send any fax messages to our HCMC office until we post a notice that the fax line has been installed. We also await the installation of our additional telephone lines.
Please note our new fax number 848-848-5671
Please note our new Telephone Number is fully operational: 848-842-0529.
Our new street address is : 30 bis Lam Son F2 TB, HCMC, Vietnam. The house is on a tree-lined, quiet street, conveniently located near the International Airport (Tan Son Nhat), and only minutes from down-town HoChiMinh City.
We are of course able to receive all E-mail messages. For more contact information, please refer to Our Offices.
Vietnam Vignettes is a periodic report distributed since early 1994. It is NOT a newsletter although for the ease of linkage we have called it that. It is a summary of domestically published media reports from more than 17 industrial sectors that we at VVG follow and report upon for our clients. * Due to the importance of certain topics of key importance to trade with Vietnam, we will occasionally include some wire reports.
Prior Issues On Line: No. 1 - November 1997 | No. 2 - December 1997 | No. 3 - January 1998 | No.4 - March 1998 | No.5 - April 1998 | No.6 - May 1998 | No.7 - June 1998 | No.8 - Mid-June 1998 | No.9 - July 1998 |
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