Decemnber 2000 - VVG reports to clients on Vietnamese foreign direct investment.

IN THIS ISSUE
COMMENTARY: The tale of a son's adoption is the story of his nation.
We missed an issue due to a special family project. Present in Hanoi and HCMC for the Bill Clinton visit, we were also witness to a growing desire but lack of current ability to change the nature of Vietnamese business. See our commentary (linked above) and our dispatches (linked below).
*BP-Statoil Gas Deal - Nothing final yet. Economy: Bouncing, but back up or back down? Rep and Branch Office Fees - no change	New American Transactions Gas Pipeline - Progress? Tourist Season Now Open and MORE

PERSONAL NOTE: An almost 14 month ordeal is now complete. The past month is a blur: three weeks in Vietnam to complete the adoption of a son; the last week in hospital fighting pneumonia caught from the sheer exhaustion from that effort.

Fourteen months ago the adoptive father was found by the young boy. A child of circumstance and the streets of Vietnam, from his fifth year until last week when he is almost 15 years old, there has been no safe haven he called home.

The provincial authorities said from the start that the adoption would be a breeze, which was notice of problems ahead. At month 11 into the process the parents were told the adoption failed due to the absence of a "spiritual guarantee." "How much does that cost?" was the first question. After a nation-wide inquiry, the adoptive parents were still being assured that central authorities believed the boy's life on the street was a better course for him then living abroad!

A visit to the Ministry of Justice gave assurance that the issue was a purely local one. While the provincial authorities said there was no need, the adoptive parents made a hasty trip to the distant province, gave the man in charge a box of cookies with an envelope inside, and passed a few more envelopes to staff the following day. A week later they got an adoption date.

A few more envelopes during and after the adoption proceedings got them through the day. We found that the cost of a "spiritual guarantee" is that for the first time in seven years they were compelled to pay.

We are often told that it is the wealthy foreigners who put temptation in the path of decent officials to break the law. We know the lie to that tale. Nothing could be more clear. To fail to pay was to compel the boy to suffer his fate on the streets. What a pity for the people of Vietnam. What a price to pay for the new life of the boy,... and his nation.

NOTHING FINAL YET IN BP-NAM CON SON DEAL* - Vietnam and an alliance of BP Amoco and Norway's Statoil have initialed a contract to build a $ 400 mm gas pipeline as part of a key energy development, a source close to the deal said. The source said the Business Co-operation Contract (BCC) was initialed. Under the agreement, Vietnam oil monopoly PetroVietnam has 51 % equity in the pipeline and BP Amoco and Statoil the rest.

The 390 km (244 mile) pipeline forms part of the long-delayed $ 1.5 bn Nam Con Son integrated gas project, which aims to tap proven gas reserves of 58 bn cm off Vietnam's southern coast. The Nam Con Son basin itself will be exploited by a consortium of PetroVietnam, BP Amoco, Statoil and India's ONGC Videsh Ltd.

"Yesterday, the BCC for the pipeline was initialed, which is another step forward. We have not formally signed anything", the source told. "We have still yet to reach final agreements on other outstanding issues."

Officials hope to have final agreements on the overall project, which includes a combined power and fertilizer plant, in place by the year-end. Those agreements should include an investment license for the pipeline.

[Ed. NOTE: This long awaited agreement, and the downstream power plant usage agreements, still need the principals to reach agreement with the Ministry of Industry, Ministry of Finance, and EVN (Energy Company of Vietnam, theoretically under the control of Industry but operationally most independent) on the cost of gas, electricity, and transportation that have long delayed this project from going forward.]

Our offices | Back to index

THE ECONOMY: IT IS BOUNCING, but is it going up as the State media reports, or down and the economic indicators seem to point? "The economy begins to bounce back," proclaim headlines in the State controlled media of Vietnam, but as we notice, it seems to be bouncing in a downward direction.

The rate of inflation has fallen every month since February 2000 or been in negative numbers. See Economic Indicators. The number of domestic and foreign invested projects are reportedly gaining, but there is no transparency in those statements.

Driving the length of this long land shows few new projects being started but for government office structures. The numbers of dormant projects show no sign of decreasing.

Foreign invested companies report domestic sales are in fact increasing, but the numbers from last year were so low that we doubt bonuses or promotions will be made using this year's numbers as justification.

While Joint Ventures remain the historic high in investment form, more than 60% of new ventures started this year have been fully foreign invested. While Vietnam struggles to attract new investment dollars, the world recognizes that almost 60% of all foreign investment is being made in China, up nearly 30% from before the 1997 regional financial crisis.

Vietnam's own goals for the next ten years are ambitious, if not overly optimistic. However, the propagandizing of socialist ideals with mega projects in which independent analysts foresee no profit even if there is a way to finance them, does not inspire investment dollars to flow to Vietnam.

With NTR (MFN) with the USA just around the bend (spring or summer 2000 at the latest), we believe that the increased flow of hard capital from the export sales of textiles and handicrafts will spur the rest of the nation to take careful stock of where it really wants to go.

Vietnam is still blessed with the most attractive labor force in Asia: most educated, most willing and able to be trained, hard working, loyal, and friendly to good management, and at monthly rates that are attractive to all.

What is needed only is a jump start in the right direction. Transparency in the government's reporting of its economic numbers, and not just reporting numbers, will be a good start.

FEE SCHEDULE - UNCHANGED - The ministry of Finance rejected a request by the Ministry of Trade to increase the fee for licensing Rep. Offices from VND 1 million (US$72) to VND 5 million (US$357), and to start charging Branch Office Licensing fees of VND 20 million (US$1,429). There will still be no charge for opening a Branch Office once a Rep Office is in place.

NEW AMERICAN TRANSACTIONS - During President Clinton's visit to Vietnam, ten separate business deals were signed. Among the leading were:

GAS PIPELINE - PROGRESS? In spite of recent reports of a new deal, not so quiet reports abound that all is not yet well with the BP/Amoco-Statoil 400 km long pipeline.

This project is to bring gas from the Nam Con Son Basin ashore to Long Hai in BaRia VungTau Province, or directly to Phu My, depending on who you listen to. Pretrolimex Gas predicts demand will grow 20% to 25% year to year through 2005, with consumption in 2005 estimated at 650,000 tons compared to 240,000 tons in year 2000.

Provided, that is, that gas actually starts to flow. At stake ultimately is the price the consumer will pay for landed, delivered gas, what profit the State will take, and what if any profit is left for the investors to recover their costs of AND profits from installing, running, and maintaining the line.

While contractors have reportedly been selected for equipment supply and pipeline installation, no announcements have yet been made. No wonder. As the general partners have yet to reach agreement with the State on production sharing ratios, methods of cost sharing, transport cost payments, or gas sales. [see more recent dispatch, above]

Vietnam Airlines - With the Tet Holidays only two months away and cooler weather keeping the skies clear and crisp, Vietnam Airlines reports that international visitors have increased 13% over last year, far above the predicted 3%-4% in the budget. For 2001, VN Air is now boldly predicting a further 15% increase.

By far the most impressive market remains Japan, that showed almost a 35% increase over last year's numbers, not quite matching an increase in Japanese investment of 73% over last year.

The increased traffic on international flights has yet to help the domestic situation, where many passengers think the letters for VNA should change to VNA-AL (Viet Nam Airlines Always Late). Delays exceeding 5 hours are standard, with delays up to nine hours not being unusual.

Beach Battle - The domestic market is ripe for tourism and more development, to say nothing of the international travelers when they make their return in numbers. However, we marvel that a nation with over 3,000 km of pristine beach front yet clusters the few current projects in such close proximity that battles may erupt.

Nha Trang, a quiet, if not sleepy, beach town located 12 hours north (by car) from HCMC, or a one-hour flight (plus delay -- thanks to VNA-AL), is set for a swarm of "noisy buggers" as one newspaper referred to those who will infest a small section of the 10 km beach front.

For some reason, the People's Committee has approved the licensing of the Phu Dong Waterpark that will open its doors along side the quiet Ana Mandara Resort.

The luxury Ana Mandara will be only 30 meters distant from the Giant Slide where thousands of kids and adults are expected to scream their lungs out as they drop 40 meters to the ground below.

Noise pollution from the projected Waterpark is expected to discourage further quality investment in Nha Trang, as well.

This problem is typical of all land development: if you ask for open land to screen future noisy neighbors, the State expects it to be fully developed. However, there are no investment funds to develop larger facilities, so the smaller hotel takes its chances that Waterparks and the like will not be permitted in close proximity.

The Chair of the provincial People's committee granting approval to the waterpark disclaims any noise pollution: "It will be used only by teenagers and will be around 30 meters away.... I don't think there will be any negative impact," he is reported to have said.

It appears this chair may have as much building and planning experience has he has teenage children.