DISPATCHES

We are genuinely pleased with the progress and success achieved by VVG and our staff over the years.  Our clients tell us of their pleasure as well with the success that we've brought to them. And through it all, we learned well that there are new ways to define achievement and success.

Our own growth is seen on these pages.  Vietnam Vignettes began in April 1994 as a four page photo copied newsletter sent by snail mail to 600 former clients and business associates of our founder.  By July 1994 we added a few photographs and two additional pages.  Now we attract more than 10,000 readers each and every month, and that number grows daily.

As more clients turned to VVG for assistance in the heady days of the middle nineties, we found the issues of Vignettes needed more attention while there was less time and internal support. Challenged to meet the demand for current, reliable, business news and information, we changed our direction and efforts. 

In early 1995 we published the first of what grew to nine editions of VVG's Laws and Customs Affecting Foreign Investment In Vietnam.  This 250 page treatise became an all time favorite desk reference sought by many.   Nearly obscene IP infringement coupled with equally repugnant government restrictions on printing and publishing the truth about direct foreign investment in Vietnam, compelled us to restrict distribution only to our clients.  

It is still quite difficult to find transparency in most government written or approved reports.

In January 1996 VVG first became interested in the site we soon called the Cua Lap Beach Resort. A pristine, virgin beach along 4.5 km of the East Sea with 1.25 km frontage on a new, to be opened, 4-lane Highway 51C, this project took on a life of its own as the nation's premier hospitality enterprise. The site of 5-star hotels, conference center, apartments, villas, shopping centers, marina, golf course, botanical gardens, authentic fishing village, exotic fishing lake, with a full scale aquarium and 300 seat IMAX Theater on 150+ ha of sand-dune and forested land, the start up was only a few hundred million dollars away. Best yet, it would be less than a one hour drive from downtown HCMC when the new highways (51C and the HCMC to Phu My connection) were completed. 

The highways are still not open, and as for the project, well, see below....

By  late 1996 retentions by others to provide advice on forming large infrastructure, manufacturing plants, and hospitality projects occupied much of our time.  Our hard covered book went into it's third edition.  By mid 1997 our success allowed VVG survive an American client who reneged on his six-figure debt (in US$) to us. We also overcame the challenges of the State Security Police who at that time still knocked on our door for 2 AM inspections of our paper work -- always in order thank you. 

We are now better able to avoid dead-beat clients, and the police have found that sleep is a better use of their early morning hours.

As the 3rd quarter of 1997 came to a close, VVG was first able to access the Internet from Vietnam. Among the earliest users, we quickly resumed the monthly Vietnam Vignettes, but this time in virtual and not postal form.

By mid 1999 the customs and security forces appeared to be under better control and avoided harassing private citizens, while bribery and corruption remained and remains a secondary if not primary mode of operation still affecting domestic and foreign businesses.  

Two years late, unable to capitalize on the opening afforded by the downturn in the region, Vietnam finally admitted it was affected by the 1997 regional financial crisis.   Many projects too soon started, ground to a  halt leaving ugly skeletons or scared land, both conditions of moving too fast and too long at a time when investment capital was too short.

Capital supply is still short and there is no sign that it will soon improve in neighboring lands. This once more gives Vietnam a small window to seize funds as a safe place to invest -- provided the State now eases the restrictions that have for so long held Vietnam's overall growth to a snail's pace.

At the time VVG's foreign invested growth lost ground, domestic growth began in earnest.  We also elected to grow as VVG open new offices in Thailand and opportunities in China.  Never loosing our focus as providers of formations services for foreign direct investment in Vietnam, the expansion to other lands helped to cushion the downturn that affected all domestic and foreign growth in the land of our second home.

Our staff and former staff have done well.  Kiet is long married and a private entrepreneur in America; Tien is a successful banker in HCMC; Thanh runs his own successful Internet and Computer operations in My Tho and Saigon; and most recently Hao left to squeeze numbers for a foreign maker of toothpaste.  Mr. Ai (now called Mr. Pham to reduce English language confusion) as our acting HCMC manager, now holds down our local operations and growing support staff.  Karl remains in Hong Kong but has new adventures building for him and VVG in the north, Woody helps our group in his California location, and Michael, close to Ground Zero in NYC, is well and thriving in our New York operation.  Peter still is a moving target, going to all locations while also running operations in Bangkok and a small staff now numbering six.  Plans to move operations further into China are closer than ever as well.

Our new, solid strategic partner is INVESCO, a branch of the Hanoi Construction Company, itself under the auspices of the Ministry of Construction.  Mr. Bao is the General Director who with us will be forging new alliances and projects nationwide on behalf of VVG clients.

Our Cua Lap Resort Project?  After nearly six years at the effort, having located a major investor willing and able to put up more than $55 million needed to complete the first stage of development needing only the last $10 million to move forward, we are now told that the entire region will undergo a national review and new master plan. Why?  The State tells us it is our fault that we failed to attract the investors to start the project, but we are given the opportunity to get on board if the master planner now agrees to incorporate our project into the new master plan ! !

We pointed out to the State that they gave us an empty table glass of water in which to fish for sharks and in spite of the odds we found one.  But they complained we failed to locate a second, and now once again or risk loosing it all unless we produce !  

We do and you must laugh at this progress.  It may seem to those not familiar with this nation that not much has changed since we first arrived in January 1994. 

However, this is the nature of progress in this region.  Even in China, only the city government of Shanghai seems to understand and get private apartment investment correct at last.   

We still solidly believe in both the inherent goodness of the wonderful people of Vietnam and the strength of direct foreign investment here. It just takes time and persistence. And armed with a major investor, great plans, five years experience on the ground, and a strong construction partner, we are confident as well of opening our now long-in-tooth beach resort.

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TEXTILE & GARMENT FIRMS PREPARE FOR US MARKET 

Vietnam's textile and garment enterprises, both State Owned and Foreign Invested, are preparing to start direct exports to the United States after the approval of the Vietnam-US trade agreement. 

Vietnam's National Assembly and President Tran Duc Luong are expected to finalize their approvals in December. 

An industry dealer noted that Vietnam's textile and garment industry is facing two big opportunities. First, when the trade pact takes effect, Vietnam will be able to export its textile and garment products to the US market without quota limitations in the initial period.

Second, Vietnam is considered to be a safe country for business operation and investment. Therefore, it is well placed to take trade orders that have shifted from countries regarded as politically unstable such as Pakistan, Turkey, Indonesia and the Philippines, added the dealer.

Vietnam’s State Sector has already charted a long-term course for developing its textile and garment industry during this decade. Accordingly, the Government has given financial support to the industry, including policies providing soft bank loans with an annual interest rate of 3.5 per cent for 3 to 5 years as well as giving awards to the best exporters.

There are substantial challenges ahead for companies in both sectors, but it is clear that the State Owned enterprises have the longest haul to reach success.  America and the world expects the Foreign Invested textile enterprises (Korea, Taiwan and Singapore for the most part) will take the lions share of all exports to America in the opening competition when the BTA takes effect, presumably in December 2001.

Economists warn that Vietnamese domestic textile and garment exporters face big challenges in the US market. Many are not fully aware of procedures governing clients and customers, import-export tariffs on export items, and customs procedures.

In fact, most Vietnamese products currently found in the US market are made under sub-contracts between foreign companies and their Vietnamese partners. These products are sent to the U.S. via the European Union, Japan and Taiwan.

In response to the situation, many Vietnamese domestic enterprises and companies are hard at efforts to learn ways into the US market. The Vietnam Textile and Garment Corporation (Vinatex) said it has been preparing for two years now.  A delegation will be in America in December.

The Duc Giang garment corporation is preparing to export products to the US market in the spring of next year.  Investments reportedly reaching $2.5 million have been made since 1999 to upgrade its equipment, which it hopes, will allow its products to meet the requirements for the U.S. market.

While local media proclaim that such investment is sufficient, others know this is merely a further indication of how far the State Sector has yet to grow to meet its real challenge from China.   A factory near Beijing, with over $100 million spent on its modern  equipment, reportedly recently constructed its new car parking lot for more than Duc Giang spent for its equipment upgrade.

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Land Use Rights for Viet Kieu - New Decree.  Not since 1975 have all Vietnamese, both domestic citizens and expatriates, been permitted to own their own homes.  Long promised, the decree allowing "those who wish to stay a long time" was enacted and comes into force November 20, 2001.

Of course there is a catch, for this is still Vietnam.  Long term permission to live in Vietnam is not yet granted quite so easily. See our article on new visa authority.  

Decree 81/2001 implementing the provisions of the Land Law put into operation this past October is more broad, for it extends the right to purchase apartments, private houses, and villas, and extends land use right ownership to four categories:

1. VK committed to long term investment projects, applying to investors acting under the Foreign Investment Law or Domestic Encouragement Investment Law, that first requires that  the VK have an investment license or business registration from the appropriate authorities;

2.  VK who have made valuable contributions to the country. This will not apply to many VK living in North America or Australia, as it is restricted to:

• Those offered preferable conditions under the ordinance concerning "invalids, martyrs, and people who have helped the revolution,"

• Those who helped the revolution, or

• Those who participate on the management boards of social, economic, or political organizations for Vietnamese cities or provinces, or have helped Vietnamese representative branch offices abroad;

3.  Cultural specialists and socialists awarded certificates in science, education or culture, and economic experts who regularly return and are invited by the government to contribute to the country's development; and 

4.  Those who wish to stay a long time in Vietnam.

There is no wonder that to date reportedly less than 5 Viet Kieu have received permission to purchase land use rights. 

Restrictions noted are: (i) one house at a time; (ii) designated areas for VK homes are distant from the central cities; (iii) available housing styles are often more appropriate to foreigners than VK; and procedures for long term residency are still inadequate

While the current decree provides more details, there is still wanting a procedure for Viet Kieu to obtain long term visas, or permanent residence.

Contrast neighboring Thailand that has world class banking, hospital, and commercial opportunities and make one year visas available to any foreigner (not simply repatriated Thais) who are over 55 years old and show either (1) US$ 40,000 deposited in a Thai bank from overseas sources, or (2) a pension or other annual income of at least US$ 20,000. 

Going even further, after three consecutive one-year visas, any foreigner can become a permanent resident of Thailand.  This provision alone attracts hundreds of wealthy retired foreigners to live in Thailand where they invest heavily in the local economy by purchasing apartments, home furnishings, cars, domestic employment, restaurants, hotels, and entertainment.  

If only the authorities in Vietnam had equal vision and truly put the past behind them as they are so fond of saying that they have.

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Improve Market Standards, Vietnam Told -  Vietnamese exporters need to bring their standards up to international standards if they want to compete in the United States, US businessmen warned at the sixth annual forum for Vietnamese and US business leaders.

The forum was held in late October in Ho Chi Minh City in preparation for the upcoming ratification and implementation of the trade agreement between the two nations.

Brenda Jacobs, representative for the US Textile and Garment Import Association, met with Vietnamese businessmen to tell them what the US expects from Vietnamese producers.

"Vietnamese textile and garment producers gain a significant opportunity under the agreement," Jacobs said, "but it will put serious pressure on existing Vietnamese firms to prove they can meet US market standards."

Ho Chi Minh City's Customs and Taxation departments and post office said they are prepared for the trade agreement. Do Dinh Thuc, vice director of the Customs Department, said a new customs law will come into effect on January 1. In trials begun October 10, more than 90 per cent of exported goods were able to avoid lengthy customs checks.  [But what about delays on imports?]

"We'll continue to improve procedures and implement international customs law in Vietnam," Thuc said.

Meanwhile, Ho Chi Minh City's post office is upgrading services while lowering prices. Telecom and Internet prices in Vietnam are the highest in the region. The postal sector has recently tried lowering prices for services by 20 to 40 percent. "Prices will continue to drop in the coming years to promote development," said post office vice director Thai Van Khang. [Why not immediately?]

The Vietnamese textile and garment sector currently exports very little to the US market - US$49 million in products, just 2.5 percent of total Vietnamese exports and 0.06 percent of US apparel imports last year.

"The US is the largest market for textiles and garments. Last year, Americans spent more than US$72.8 billion on imports. Vietnamese products are good quality and reasonably priced and could tap the market," predicted Le Quoc An, president of Vietnam's Garment and Textile Association. [He’s not listening, is he?  Quality control does not mean lowering prices, or promising to do better! ]

"To achieve success, Vietnamese and US businessmen should cooperate closely and inform each other regularly," said Walter Blocker, president of the American Chamber of Commerce in Vietnam. (in part Asia Pulse/VNA)

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Vietnam: More growth, more investment - (Asia Pulse/VNA)

HANOI - Vietnam is expected to notch up 7.1 percent growth in gross domestic product (GDP) this year, beating last year's rate but falling short of the official target.

The General Statistics Office (GSO) says the country's GDP growth reached 7 percent in the first nine months of this year, and should reach 7.4 percent in the last quarter. It said that an overall GDP growth rate of 7.1 percent is achievable for 2001. This would be 0.4 percentage point higher than last year's growth, but lower than the 7.5 percent target.

But the GSO warned that this outcome would depend largely on movements in the country's consumer price index (CPI) and the country's economic activity.

In the first three quarters of this year, the GSO said that the CPI dropped 0.4 percent, with significant price falls in food and foodstuffs (0.9 percent), medicines and health care (1.3 percent), and transport and postal services (1 percent). But there was a 3.3 percent rise in the cost of education and training, and inflation of around 1 percent in the services sector.

At the end of September, the year-on-year CPI increase was recorded at just 0.7 percent, whereas the value of the Vietnamese dong was up 6.2 percent over that of US dollar, and gold had fallen 0.3 percent. Even if the country's CPI rises by 0.5 percent in the remaining three months of the year, the annual CPI will hit just 1.1 percent.

"This is well short of our forecast CPI growth of 5 percent, an indispensable condition for raising the GDP growth rate to 7.5 percent," the GSO said. It noted that that signs of a production and trade slowdown were emerging in several crucial sectors, including textiles and garments, seafood and tourism. It attributed this problem to the unexpected international crises that arose last month.

"Vietnam's GDP growth will be led by increasing exports of rice, seafood and crude oil," the GSO said, emphasizing that this should have a knock-on effect on export-related production and services.

In a recent survey conducted by the GSO, only 27 percent of the 1,154 small and medium enterprises surveyed said that they would recruit more workers to expand production. In a more promising sign, 55.8 percent said that they would spend more money on better technology to raise their competitiveness.

Meanwhile, Vietnam licensed 336 foreign invested projects with combined investment of US$1.94 billion in the first nine months of this year, according to the Ministry of Planning and Investment.

The figures saw year-on-year increases of 42 percent in project number and 218 percent in registered capital. The industrial sector was the most attractive to foreign investors, who have poured $1.6 billion into 263 projects over the past nine months.

Ho Chi Minh City topped other localities by attracting 125 projects with a total registered capital of $486 million. Hanoi granted licenses to 29 foreign invested projects capitalized at $159 million in the year ending September. The number of licensed projects dropped 10 percent, year-on-year, but average per project investment rose more than three times compared to last year. Hanoi's processing industry drew a large amount of foreign direct investment in the past nine months.

Hanoi has so far attracted 385 foreign direct invested projects capitalized at $7.46 billion. Half of the investment projects are in the fields of industrial production and construction and the remainder in the trade and service sectors.

Investors from other Southeast Asian nations have invested more than $3.43 billion or 46 percent of the total in 59 on-going projects in the capital city.

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Vietnam - The safest place to live and work.* Reuters  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 survey by the Political & Economic Risk Consultancy (PERC) 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.

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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World Bank: Vietnam Will Grow In Global Downturn.  Internal drivers of growth are stronger than in recent years, thus insulating the domestic economy as the external context is getting worse, concludes the most recent report.  The negative impact from the worsening world economy will more than offset the positive effect from the improving domestic economy.

A downward revision of its projected GDP for this year from 7.5 is in order.  And the World Bank agrees that the new target for growth is 7.1 while others feel it will be lower.  Worsening of growth in Asia, Vietnam’s largest market will slow export earning growth to 7% against last year’s growth of 25 percent.  The implementation of the BTA with the US comes far too late for any impact, while the budget optimistically accounted for a boost of nearly $800 million.

Growth in domestic production in agriculture is more than offset by even greater drops in world prices.

The implementation of specific reform measures this year, and perhaps announcements of yet more measures in years to come, have spurred the private sector with a large number of new registrations of firms.

With growth in the region second highest (only China projects higher growth), the World Bank encourages Vietnam to :  (1) Continue to implement good policies already fashioned, such as reformation of banking and state sectors, and improving the investment climate;  (2) stable nations such as Vietnam can become more attractive than others in the region, benefiting from its similarities with China, but vital to continue to improve its climate for foreign investment; and (3) accelerate public spending to stimulate domestic demand, spending both its own and ODA funds more rapidly.

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Second Refinery: Plans Proceed - Two Japanese firms have agreed to go forward with a $2 million pre-feasibility study on the projected $2 billion second refinery in the central province of Thanh Hoa, much closer to Hanoi than the projected first refinery in far more central Quang Ngai.

Mitsubishi and JGC will reportedly submit their pre-feasibility plan to the government for approval by year-end.  Called Ngai Son Refinery No. 2, it is located 125 km south of Hanoi.  With a perhaps optimistically projected opening in year 2005, it is planned to refine 7 million tonnes of crude from Vietnam and the Middle East, also producing petrochemicals and bitumen.

The Dung Quat Oil Refinery No. 1 in Quang Ngai is still projected as a $1.3 billion project with a projected opening in 2004. The planned expectation is that this first refinery will process 6.5 million tonnes of crude each year. The two partners are each scheduled to put in $500 million and raise from other sources the balance or $800 million. It is a 1999 JV with Russia’s Zarubezhneft that has yet to put forward its plan for raising the capital needed for construction. 

While Vietnam turns out more than 16 million tonnes of crude that provides almost 1/3 of the nation’s revenues, it also must import all of the refined products, as there are no commercially significant domestic refineries in operation.

The major obstacle to raising funds for Dung Quat Refinery is that the crude -- produced more than 700 km distant in the south -- must be transported north to be refined and then further transported either north or south for commercial use. 

As most of the nation’s industry is in the south, positioning the proposed second refinery closer to Hanoi only begs the now ancient question of why the first refinery was moved so far from the southern well head in Vung Tau in the first place?

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Approval of the BTA By Year End - Vietnam's National Assembly has the BTA on its agenda for approval when it meets in late November.  Both houses of Congress approved the historic agreement already.  President Bush signed the document before leaving for the Shanghai APEC meeting in October. 

Normalized trade relations between the two former enemies will happen as soon as Vietnam's National Assembly and the Prime Minister sign off on it, expected later this month or in early December.

 Most Favored Nation status (MFN) now styled Normal Trade Relations status (NTR) by the US, will automatically come into effect at that time, thus reducing tariffs to normal levels on most imports between the two nations.  This has long been projected as a shot in the arm for U.S. business access to a market of 80 million people.  More immediately, it will boost Vietnam's sales into the US by a pre-slowdown projected US$ 800 million.

Seen as the high point of a long drive for rapprochement between two former enemies, the pact was concluded by the administration of former president Bill Clinton last year and subject to annual review.

The pact signed in July 2000 in Hanoi removes one of last political vestiges of a bitter war that ended 2-1/2 decades ago with the defeat of U.S. and South Vietnamese forces and the establishment of the Socialist Republic of Vietnam.

Vietnam is one of just a few countries that do not have normal trade relations with the United States. As a result, U.S. tariffs on products from the country average 40 percent -- more than 10 times the level for most other nations.

The bilateral trade pact commits Vietnam to an ongoing process of economic reform and market opening in exchange for the United States' extending normal trade relations on an annual basis. It also brings a reconciliation process begun nearly 10 years ago between the two countries closer to completion.

But US opponents of the Hanoi Communist government passed a separate bill in the House of Representatives which ties future US aid to Vietnam to improvements in its human rights record, passed the House on a 410-1 vote.

The Vietnam Human Rights Act also demands Vietnam halt jamming of broadcasts by congressionally funded Radio Free Asia, protect refugees and mandates US assistance to groups promoting freedom and democracy in the country.

In practice, the human rights legislation provided political cover for representatives who support expanding trade links with Vietnam, but were wary of being seen as soft on Hanoi's human rights record.

House opponents of the deal argued that by delinking human rights and trade, Washington loses valuable political leverage with Vietnam's communist government.

"Why, with a regime like this are we going to give our businessmen subsidies to invest over there, to create jobs over there, exploiting their slave labor?" said Republican Congressman Dana Rohrabacher.  "This is ridiculous."

This ultra-conservative's ideas, whose constituents include many disenfranchised overseas Vietnamese in Westminster, California, are not mirrored by many in Congress or America.

Even with current events in Central Asia taking much attention, there is no impediment forecasted that will block approval expected before the end of the year.

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