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Issue No. 2, December 1997

A Periodic Report to Our Clients

JACKSON-VANIK. Imposed 23 years ago using a law meant to pressure the old Soviet Union, the Jackson-Vanik Amendment may soon be waived, further normalizing trade relations between America and Vietnam. The Administration of President Clinton has reportedly begun to seek the prior agreement of Congress. If Congress does not agree and a waiver is enacted, it will be subject to annual review beginning in June 1998, similar to the annual review of China’s trade status with America.

Jackson-Vanik normal trade relations with any nation that does not permit free emigration. Compliance, or a Presidential waiver and annual approval by Congress, is mandatory in order to permit backing by the US ExIm  Bank. It is a further step towards a bilateral trade agreement leading to the granting of MFN.

There is some resistance, particularly from Sen. Jesse Helms, Chair of the Foreign Relations Committee, who states in opposition that Vietnam is a one-party communist nation.

This action by the Clinton Administration closely follows the late November 1997 decision of Prime Minister Phan Van Khai that abolished the previous state requirement for all Vietnamese citizens who hold a valid Vietnamese passport to also obtain an exit visa from Vietnam.

VIETNAM TODAY. Vietnam is today’s financial frontier, not a war, to the vast majority of the world. A full change to a market economy, true democracy and granting full, individual freedoms are being hampered by some remaining, conservative elements. But progress is being made. Freedoms many Americans at home often take for granted do not exist in most places outside of the United States, including and not exclusively in Vietnam.

However, half the 77 million Vietnamese population is under 25 years old. They have no personal memory of the now ancient wars. Many Vietnamese are heard to say "the past is the past. We are interested in the future." From our perspective, the past is part of our collective consciousness. We must learn from it, not dwell in or forget it. Life is difficult, in Vietnam and elsewhere. However, the opportunities for growth in Vietnam are not merely potential. They are actual and are being accomplished, by others if your company is not already here.

OVERSEAS DEVELOPMENT AID (ODA). Pledges of US$2.4 billion for 1998 are in a word: remarkable. In dollars, this is the same amount as pledged in 1997. In Yen terms, this is a boost of more than 18% over last year’s pledges. Reportedly, more aide was pledged this year to Vietnam than for any other developing country. Japan is again the largest donor with approximately US$800 million pledged at even lower interest rates than before.

This is a remarkable statement of commitment from the World Bank, organizer of the Tokyo Consultative Group that includes all the G-7 countries. The discussions were reportedly open and frank by all parties. While strong support for Vietnam’s current economic reforms were expressed, it was also made clear that Vietnam must speed-up all reforms. The urgency of such reforms was made apparent by the Southeast Asian crisis and the slowdown in economic development.

To date, ODA funding in excess of US$ 11 billion is now available for infrastructure development of Vietnam. Approximately US$ 3.5 billion of these funds have been committed to date.

INTERNET. It’s available, but severely limited in access and scope. Our intention is to report timely data useful for the investing community. This may prove to be a challenge. Reports will be filed directly from Vietnam to the extent they are allowed. Currently, direct access to the Internet is not available. These reports are being prepared and inserted from outside Vietnam.

The people of Vietnam are ready, but the systems within Vietnam are not. Officially, the hook-up occurred on 19 November 1997 for the Internet Access Provider (VDC) and the four licensed Internet Service Providers (ISP). However, the connection out of HCMC is via a 64-kb line; out of Hanoi by a 254-kb line. Many businesses and some private homes in America are connected to larger lines, permitting far greater access than the entire Vietnamese nation. Reportedly, a maximum of only six users at a time will be able to make a connection out of HCMC until the lines are up-graded.

The costs are also well beyond the reach of the average Vietnamese, who have a per capita annual income of US$230. The fees are: direct access (for ISPs) US$370 for instillation and US$3,600/month (sic); indirect access (via an ISP) US$37 for instillation and $4/month; information access $0.03 per minute ($1.80/hour). As most folks in Vietnam are currently Net illiterate, the start-up time to learn how to effectively access the data available (not including delays in getting on line or down-loading data) is estimated at 200 hours for a cost of $360.

Monthly usage is projected by authorities at 1-hour daily or $54/month . Private estimates are usage will be in excess of 5 hours/day or $270 per month, in addition to telecom charges. At these rates, even if folks can get on line, we expect few will fill their days on the Net from here.

LAWS AND CUSTOMS AFFECTING FOREIGN INVESTMENT IN VIETNAM, Edition No. 8 January 1998, has been put to bed. This authoritative, limited-edition, hard-bound, 250 page book includes 65 pages profiling 17 of the many industrial sectors VVG follows, daily. Complying with Vietnamese regulations on publishing, this book is not for general distribution. It is available only to Clients of VVG. However, interested investors can see a copy of this valuable investment tool in the library of both Vietnam’s Embassy in Washington, DC, and Vietnam’s Mission to the United Nations in New York City.

"WELL, THEY ARE COMMUNISTS!" It is our experience that labels don’t always fit. Vietnam is changing, evolving, growing. Vietnam is like a new wine in an old bottle. Some want the bottle and label to be changed, and are holding back their investment decision for that reason alone. We, too, recognize the need for even more and faster growth, but there is more to consider.

While we've seen substantial growth over the past four years, it is important not to neglect the even older accomplishments made when contemplating future investment. It was in 1986 that Vietnam became the first country in the history of the world to peacefully change its basic economic structure, whether from a central-command to a market-style economy, or the reverse. There have been no purges, certainly no pitched battles or any blood-shed. We are not aware of any other nation that made that switch in a similar way since that time. Vietnam is a nation of consensus, not monolithic-unilateral, decision-making.

The sharing of experiences and values between Vietnam and America go far beyond Thomas Jefferson being quoted in Vietnam’s Constitution. We intend to periodically make these similarities better known. For starters, the reconstruction period following the American Civil War was perhaps more harsh and longer than the reconstruction now in progress in Vietnam.

Following 2000 years of war, this is the 9th year of peace in Vietnam. Vietnam suffered from nearly 1,000 years’ domination as an exploited, vassal state of China, and many subsequent invasions in the 900 years since that time. China’s last border war with Vietnam was in 1979. Following exploitation by the French for 100 years, interrupted by the World War II slaughter of 3 million by Japan and their then vassal Koreans, and 25 years of war with America, a brutal imbroglio with Cambodia ended in 1989. The last Vietnamese troops returned home in 1991.

Excess, by internal and external factors, upon the people of Vietnam cannot be denied and are not excused. But the wars are over. A small corps of those who are still in denial, who seek to re-open old wounds, or stubbornly hold on to the past, must not hinder general progress. It is they who must now walk fast to board the train of advancement, or be left behind.

An integral member of ASEAN, Vietnam also entertains American and the world’s leaders who explore avenues of cooperation. Douglas "Pete" Peterson, a prisoner of war in Hanoi for over six years, is the admired American Ambassador. Few suffered more then he, yet Pete fully supports progress in relations between America and Vietnam. Why then are a few, vocal Americans still so focused on the past?

In order to better demonstrate Vietnam as it is today, we intend to soon publish on this site:

- Current photographs of Vietnam, including the growing skylines of Hanoi and HCMC
- Site Photographs of leading Property Development Projects for investment
- Photographs of leading artists’ works and other signs of the new Vietnam

COMPLIANCE WITH REGULATIONS. The diminishing old guard is worried about new ideas, peaceful evolution, and the inevitable change that is already well under way. An annoying and intellectually destructive current hold-over from the past is censorship. The censorship of ideas concerning cultural, economic, political, and social ideas from the Internet can make insertion of credible data difficult for anyone in Vietnam. Only State licensed companies that have prior approval for content and form, along the same lines now required for international seminars, can place such data on the Internet.

This restricts only data that is directly fed from Vietnam to the Internet. Data, which is often inaccurate, if not wholly incorrect, is freely and often inserted on the Internet from any other location in the world.

A battery of data firewalls and monitoring "experts" will review all in-bound and out-bound data that must be stored by the IP and the ISPs for at least 30 days. Given almost 300,000 personal computers in Vietnam, an estimated 10,000 users who may be able to afford the price of entry, and the small-size telephone lines that will be available, delays will be monumental.

The only feature of Vietnam’s Internet not to be an initial technical problem will be the real-time and delayed monitoring of all activity originating from and entering into Vietnam.

THE MIAs ARE IMPORTANT. As of October 1997, there were still 1,003 MIAs unaccounted for, excluding 568 lost over-water. This number includes 42 of the original 196 high profile cases of American’s photographed or seen alive in captivity. However, there are still 25,000 American MIAs in Japan, and 15,000 American MIAs in Korea.

The American MIA Task Force, after spending more than $100 million since September 1992, has located and clearly identified the remains of 90 MIAs. As of October 1997, the Task Force reports having not yet found any evidence of any live Americans that were held in captivity following the April 1975 fall of the government of South Vietnam.

There are also more than 300,000 Vietnamese MIAs in Vietnam. American Veteran groups are now working to help locate former battle sites in the hope of locating some of the missing Vietnamese. This work is aided by American Veterans who choose to yield war-trophies such as maps, former enemy personal possessions and weapons, and other memorabilia that resides only in dusty boxes left in attics, garages or basements.

The founder and CEO of VVG is a Veteran (3rd Brigade, 9th Infantry - 1970) and helps returning Vets to face the catharsis we all go through on re-entering Vietnam for the first time. It takes little time to realize that the folks here really are our friends and the government is both stable and friendly to American and other foreign investment.

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 published  media reports from more than 17 industrial sectors that we at VVG follow and report upon for our clients.

The Current Issue of Vietnam Vignettes | Issue No. 1 November 1997

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