Apr ‘98 - report to clients on Vietnamese businesses, investments & problems.

IN THIS ISSUE

OPIC Now In Vietnam

Vietnam's Investment Door: wide open

Regional Economic Outlook: Cloudy

Tourism Mega-Project Approved

Vietnam's Targets: Remain Steady

Additional Japanese ODA Funds

Rating Vietnam's Golf Courses

OPIC Now In Vietnam The Overseas Private Investment Corporation (OPIC) signed a new bilateral agreement on 19 March 1998 with Vietnam, thus clearing one of the final hurdles to re-opening OPIC's programs here.

OPIC is a self-sustaining federal agency that operates at no net-cost to American taxpayers. The agency sells investment services to American business of all sizes, investing in 140 emerging markets and developing nations around the world. OPIC's political risk insurance, project finance, and investment funds fill a commercial void, create a level playing field for American businesses, and support development in emerging economies. Since 1971, OPIC has supported US$112 billion worth of investments that will generate US$56 billion in US exports and create more than 230,000 jobs for domestic American.

Before signing the agreement with Vietnam, OPIC President and CEO, George Munoz, stated, "The OPIC Agreement is a concrete step toward building normal economic relations between the United States and the Socialist Republic of Vietnam. It is truly a historic moment and I am honored to be part of it."

Munoz added, "There is little doubt that the Vietnamese market has enormous economic potential for US investors. The investment climate in Vietnam is strong, and the potential for US firms to help Vietnam particularly with its needs in the energy, telecommunications, and other infrastructure sectors, is tremendous."

Mudoz stated that approximately 20 companies have already approached OPIC to discuss potential projects in Vietnam. OPIC representatives have been meeting with American businesses and the American Chamber of Commerce in Hanoi and Ho Chi Minh City in early April.

Vietnam's Investment Door: Wide Open. Le Kha Phieu, General Secretary of the VCP and therefore the leading Vietnamese official, emphatically stated in early April 1998 that Vietnam is not about to close the door to foreign investment. "The great achievements of renovation have helped change the country's face and created a basis for Vietnam to advance to a higher period of modernization and industrialization," he stated in a recently published interview appearing in Vietnam's official International Weekly.

"The Vietnamese Government is determined to improve the environment for investment and commerce, and create a legal competitiveness for all businesses.... The newly waived Jackson-Vanik amendment has paved the way for the signing of a commercial treaty [with the US] and this will help US companies to trade in Vietnam.

"But the commercial and investment environment must continue to improve to become more attractive."

Regional Economic Outlook: Cloudy There are no fire-sales in Vietnam, but there are some shoppers. Many are currently looking elsewhere in the region and stop here for a quick look.. While few foreign investors feel the rosy forecasts for 1998 made late 1997 will be met, there is still no panic in Vietnam as elsewhere. [See related dispatch below: Vietnam's Targets: Remain Steady.]

There are some, such as the Templeton Fund, that have elected to keep their offices in Vietnam but expand its investment interests to the region. Templeton advises they are planning no investments in Vietnam in this year.

That is not a universally held view, however. American entrepreneur, Britt Todd, of Texas has organized American Expo '98, billed as the largest trade exposition featuring American industry to date. Business and trade delegations still make Vietnam a key stop on their Asian travels to explore opportunities.

Many of the early-arriving scouts and sharp-shooters have left Vietnam: those who did not have either a long-term interest or the skills in making investments grow solid. Certainly investors are being more cautious. But caution has not ever been a bad strategy on making long-term investments.

To the contrary, many in the region, particularly those in Singapore and Taiwan, recognize that now is the time to make the best deals in Vietnam. Americans and Europeans are now learning that opportunities are growing, if they have the foresight and the financing.

Tourism Mega-Project Approved The following report is taken directly from The Vietnam Business Journal, Vol. VI No. 2 - April 1998.

The Ministry of Planning and Investment took a big step toward ensuring that 1998 does not see a continuation of 1997's drop in foreign investment when it licensed a $706 million tourism resort in early February. A consortium of Singapore companies - - Nat-Steel Resorts International, Lim Kah Ngam Management,and Singapore Leisure Industries - - were granted a 70-year land lease to build a tourism complex in the mountain resort city of Dalat. [Dalat-Dankia Resort.] The project was delayed last year because the Vietnamese government would only grant a 50-year lease to the consortium. The Singapore companies hold a 70% stake in the joint venture with Dalat Tourist.

Vietnam's Targets: Remain Steady In this land where decisions and laws are not yet transparent, it is difficult to judge what is solid and what is simply a shadow or reflection. Understanding the economics of the region well, the Government of Vietnam yet holds firm to the course set in motion for the 1998 targets. This is not the betting of many in the international community who predict a more realistic appraisal will be announced in the third quarter of this year. However, foreign interests have often before been wrong about this remarkable land and vibrant people.

While there have been achievements in agricultural production, budget collection, financial and credit operations, other sectors of Vietnam's economy have recorded record low performances. A review of the first quarter's economic performance shows that industrial production, capital construction, import-export, air transport, tourism and foreign investment failed to reach the expected targets.

This has been attributed by the government to the effects of the regional crisis. Foreign interests claim it is also due to Vietnam's refusal to act with dispatch to devalue its currency.

Given the large amount of dollar-debt in the State and Private sectors, the refusal to devalue the Vietnamese Dong in this still managed economy may be a correct decision in order to maintain economic order and stability in the face of neighboring chaos.

The government has chosen to adopt new measures to cope with the regional crisis in lieu of following its neighbors into chaos. Interestingly, China has adopted a similar position. It will be of interest to all to see if these two nations have the internal ability to withstand the mounting external pressures.

Additional Japanese ODA Funds In spite of its own, mounting, internal financial problems, Japan has offered 85 billion Yen (US$660 million) in additional financing at a rate of 1.8% annual interest for a term of 30 years with a grace period of ten years. This aid is to develop eight major infrastructure projects:

Rating Vietnam’s Golf Courses. Asian Golfer rates Vietnams eight courses as a mixed bag. The highest rating went to Dalat Palace Golf, edging up from last years A+ to AA for 1998. The bottom rung is now occupied by Vung Tau based Paradise Golf Club (retaining last year’s D rating) tying with Tay King’s Island Golf Resort in Ha Tay (up from the bottom-most E rating in 1998).

Rounding out the courses, in Phan Thiet, Nick Faldo-designed Ocean Dunes kept a steady A+; Vietnam Golf East came in at B+ while its sister course, Golf West dipped to B, along with Bo Chang in Dong Nai. Song Be was rated at B-.

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.

VVG - VIETNAM VENTURE GROUP, Inc.

VIETNAM VIGNETTES