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Issue No. 7
June 1998

A Periodic Report to Our Clients

Current Dispatches

Developing Vietnam - We Warned You!  In early 1997 we first wrote about Phu Quoc Island, then a sleepy secret.  It appears others knew about it, or read our article and moved forward.  See Return to.... Peace.  There is now one, and soon two, additional places to stay.  And that is not all....

In late 1997, a joint venture between Kien Giang and HCMC was signed to develop 20,000 sq.m (2 ha)  into a 60 room  resort on Ba Keo Beach near Duong Dong Airport on Phu Quoc Island.  The entire island is only 625,000 sq. km, a bit larger than all of Singapore. The population of Phu Quoc is reported to be from 60,000 to 70,000, indicating either a significant increase from 1996 reports (50,000), or shoddy reporting.

The US$1 million resort broke ground in early May 1998, and is planned to be constructed to international standards (unspecified but we speculate 3 stars), with restaurants, swimming pool, tennis courts, karaoke, massage and other services.  It is a joint venture (90% held between Kien Giang Tourist Company and Saigontourist) and 10% held by Phuong Dong Joint Stock Company of HCMC.

The Tropicana Club recently opened in Phu Quoc. Covering a full hectare (10,000 sq.m) in Duong To Commune, it currently has 6 bungalows and a 60 room hotel, with plans to add another 8 bungalows, a 25 meter swimming pool and tennis courts by the end of 1998. While the owners claim the "fresh" night breezes make air conditioning uncomfortable, natives of more temperate climates will find the days, and most evenings, uncomfortable no matter how "fresh" the air is.

Attractions to the Tropicana are typical of the island in general: white sandy beaches, visits to small islands, fishing and diving. Rooms start at $15 a night while bungalows start from $20.  Telephone direct at 84-77-847-127, contact your travel agent or send VVG an e-mail (write to us) for more information.  Please mention Vignettes Issue 7,  June 1998.

Plans are afoot to make Phu Quoc into an economic zone.  There is a lot of talk, but while those outside the region paint all of Asia with the same colored brush, those who live here know there are local differences.  This small island in Vietnam should be one of them.

Infrastructure development, particularly the north-south road, will go forward with an approval of $1.2 million. The southern port is being rebuilt with an additional $2.8 million. Singaporean investors are looking into a $500 million project to develop an economic zone near the airport, to include a law-jawed anchovy plant for export.  Canadians had proposed another mega project that included a casino, but that was rejected.

Fishing makes up 65% of the island's production.  The well-loved, special-flavored fish sauce (with a local capacity of 12.5 million liters per year), and the favored pepper vines (harvesting 12 tonnes annually) make up the rest of the current production capacity of the island.  Tourism is the industry of choice now being developed that will make the greatest return on investment dollars spent in Phu Quoc Island.

Go to Phu Quoc Island by plane (45 minutes) from HCMC.  Go quickly, for it's developing fast.

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Fourth of July in Saigon (HCMC).   This will be the fourth annual 4th of July Celebration in Vietnam since the lifting of the embargo by President Bill Clinton on February 3, 1994.

Planned to be held in Saigon's Water Park, the newest entertainment center in this bustling city, it will be a 9 hour extravaganza featuring: WaterPark's wonderful rides and slides; all-you-can eat  American Hotdogs and Hamburgers (imported for the occasion); a Taste-Of-America Food Fair; free T-shirts; door prizes; The Dunk Tank; international bands playing American pop and historic rock; adult water-contests; children's games; late-night dancing; and all the drink one can consume in the space of   the 1:00 PM opening to 10 PM closing.

The first year's celebration in 1995 was a near fizzle but became a great success.   Originally planned to be held on Saturday, July 2 at the former Presidential Palace, the non-poll planners did not realize the date was Reunification Day, celebrating the joining of former north with former south Vietnam, or that the site was now the official Reunification Palace.  That was a small oops.

A last-minute change in venue was made, and fireworks were planned.  But once more, the ill-informed did not realize the problems raised with that request.   Earlier that year, the Prime Minister issued a ban of all fireworks, nation wide. That act unemployed thousands of Vietnamese who, for thousands of years, had a family tradition of making fireworks. The ban was considered necessary to save limbs and lives, and distressed millions. The American request was thought ill-considered, and a big OOPS.

Yet 700 attended and had a great party.  The 1996 Celebration featured for the first time American imported beef and the first Taste of America.  That drew 1,000 paying guests.  However, 40 "BGI Girls," each weighing not more than 40kg (88 pounds) -- who dispensed beer when not feeding their faces or stuffing their purses --   managed to consume nearly as much food as the paying guests.  Luckily there was plenty for all.

The event took a marked turn in 1997 for several reasons.  Foremost, Ambassador Pete Peterson made it his first official function in HCMC.  Next while the rains came, they did not dampen our spirits.  We managed to reign-in the consumption of food by the BGI girls, but they got even. They stopped serving beer at 7 PM! 

Taking full control of events, both building on achieved successes and improving from past errors, we expect 1,500 paid guests to attend this year.  BGI will NOT be serving beer or eating our food, and we intend to have an even better and more fun celebration. 

A friendly warning to all: BUY YOUR TICKETS EARLY. The maximum number to be sold will be 1,500 and we expect them to go fast.

The date:  Saturday, the Fourth of July, of course

The Place:  Saigon Water Park

Buy your tickets from the Am Cham office in the New World Hotel Saigon.  The expected price: $25 for adults; $15 for children under 12 years old.

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Vietnam: a calm sea in contrast to the region.  Investors have been told to steer clear of Asia's debris, (see Issue 6, Vietnam Vignettes) but we caution our clients to not paint the entire region with the same colored brush.

Vietnam, in spite of its growing pains and search for it best economic path, remains a strong and secure area for property development and manufacturing site location investment.  Others may not see it that way and drive Vietnam down to join the rest. That would be a pity: for Vietnamese and for potential and current investors.

The reasons today for having confidence in Vietnam's future are the same as they have been for the past five years: a large (77 million), well educated (80% literacy), easily trainable, long-known committed and dedicated work force that has still the most favorable labor rate ($35-$50 per month) in the world.  Not to be missed is the strategic (economic and political) importance of the nation, and the stability of Vietnam's government.

There is a lot of bang available for the bucks invested in Vietnam. But for a closer look at other locations in the region, the following is excerpted from Reuters,13-MAY-98 By Elif Kaban

GENEVA, May 13 (Reuters) - Money managers meeting in Geneva warned investors who may be tempted to pick through the debris of Asia's collapsed markets in search of bargains to steer clear of the troubled region for the years to come.

It is no time to go asset shopping when the region is on fire with riots on the streets of Indonesia, underground nuclear blasts in India, damage caused by freaky El Nino weather and the prospect of more trouble, they told an investment conference.  ``Asia has got everything going against it at the moment. I'd hate to see an atomic bomb in India, and we are not going to have another bottoming out in Asia until there's going to be blood on the streets of Indonesia,'' said Terence Mahony,
managing director of TCW Emerging Markets Equities.

``In Asia, we're moving into another downturn -- the eye of a storm. Asia's problems
are going to last two to three years,'' he said.

``What will save Asia is going to be a downsizing of the broking business and a downsizing of the investment banking business. It is going to be very painful for us.''

Indonesia, Malaysia, Philippines and Singapore are to be avoided.   Most fund managers said they did not have a penny at present in Indonesia and Malaysia while some said they were about to cut exposure further to Singapore and the Philippines after the election of former film star Joseph Estrada as president.

``Stay away from Asia. Don't get sucked into an optimistic fool's rally in Asia,'' was the message to the conference from Jim Mellon, founding partner of fund manager Regent Pacific.

Topping the worry list of fund managers was Indonesia, where at least 10 people were killed in riots in Jakarta on Wednesday, a day after six students were killed in clashes with security forces during violent street protests against President Suharto.

Mellon said he expected Suharto to be toppled soon and replaced by a military junta in the mainly Moslem archipelago hit by rising unemployment, a weakening currency and expected 5 percent contraction in the economy in 1998.

``There will be hyper-inflation in Indonesia. It's going to be the Serbia or Beirut or the
Buenos Aires of the 1980s,'' he said.

Mellon said investors were hoping that a coup might restore order to the country. But others were more pessimistic.

``Indonesia is going to blow up,'' Mahoney said. ``It's going to be complete political turmoil. There will be a military coup but then we'll see regional fractionalism within the military.

``Indonesians are not violent people but they can run amok. We're just keeping fingers crossed.''

Jim Ayer, general partner and portfolio manager at U.S. Tiedemann-Ayer Asian Growth Fund, a hedge fund investing in Asia which provided 44 percent return last year, said he recently sold his long positions in Indonesia.

``I'd wait until the panic on the streets is over,'' he told Reuters. ``I think the government will fall and the army will come in, but the army is divided in Indonesia.''

Mellon said there were opportunities -- buying into Indonesia's real estate market after the currency meltdown, underwriting rights issues in the recapitalisation of firms and buying distressed company debt and swapping it for equity.

Recently in Jakarta, he said Regent bought 334 luxury flats at a cost of $18,000 each now and $200,000 before the crisis.

Elsewhere in the region, fund managers said emerging market investors were likely to buy Korean and Thai paper.

Ayer said his hedge fund would go for securitised loans in the region backed by real estate and public sector equities trading at attractive valuations.

The fund managers gave the ``thumbs-down'' to the Philippines and its newly-elected ex-film star President Estrada.  ``Philippines is disastrous because Estrada is a populist. He will resort to printing
money,'' Mellon said. ``They have elected a guy who has no knowledge of economics. He is even worse than Ronald Reagan.''

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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.

Current Issue | 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 |

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