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Copyright 1998-2013  Vietnam Venture Group, Inc. All rights reserved.  July 1998,  Updated February 27,  2004

Been There, Done That:
Opportunities and frustrations from working in the Frontier.

By: Peter N. Sheridan


Robert Clarison and Sandra Mureblum are back home from more than 10 years of overseas service. They compare notes, and contrast perspectives on doing business in the Frontier.

We’ve been there, seen it, and done that. Now it’s time to face reality: the frontier is exciting. But it is hard work and profits do not come easily to the honest and hard working folks who are scouts and pioneers. Speculators, fast talkers, the high-rollers, attract business before others do. The poor results their operations achieve in the face of their personal large profits, often discourage substantial investors who consider following.

Having now completed long stays abroad both as in-house managers and outside consultants, we want to set the record right. We intend to collaborate from time-to-time to expand upon this theme. We hope you will join us, and perhaps send to us some of your own experiences.

Bob: Folks who are my functional equivalents in China, Russia and more recently Vietnam, went to these outposts for the same reason as I. We are expected to open the door of opportunity to the needs of our companies. Working for a "Fortune 100" multi-national with world-class experience, I’ve taken part in start-up operations as much as anyone, in some of the most difficult locations at their times.

Sandy: I started as the inside consultant, a key member of the company’s advance team. Then I moved on when the company pulled back. I remained to become the outside retained expert. It is no different where ever that frontier is: Hong Kong, China, eastern Europe or Vietnam. Now back in the US, I find my sophisticated local community as foreign to me as were the outposts to which I eagerly earlier went.

It is the same in each "frontier." Living in a foreign land without infrastructure as we know it, we soon find some services are essential that we take for granted until we must do without. We land in the new country standing on our feet.  Then soon, and often, we get bumped to our bums. The problem is not only driven by the locals who do not fully understand us or our new system of democratic capitalism. Our employers and clients quickly forget how dirty, difficult, depressed and dilapidated are the systems in these outposts.

Bob: "Frontier" needs to be explained. China is culturally older and far more sophisticated than are many other places in the world. Russia was a functioning political and military power for centuries before she became a world threat during the Cold War. Vietnam’s culture goes back 4,000 years. And yet in terms of highways, skilled secretarial services, phone books, 24-hour electrical service, and even flush toilets, each of these nations were less than outposts when they first opened their gates to the western world. Collectively, they were a vast wilderness.

"Find the local taxi company and have me picked up," the foreign boss told me on my first day. The phones don’t work, there is no "411" information number to call if they did, the English speaking translator’s accent is confusing because her vocabulary is limited to 200 words, none of which include the phrase "pick up" that is not literal.

The telephone book may have an English language section, but it's not been updated in years, and nothing passes on the street that even looks like a taxi. The frontier changes in some respects a few years later. We can flag down or telephone a taxi, but a near current telephone directory, "Yellow Pages," or a skilled secretarial services still elude us.

Sandy: Clients call with seemingly simple requests. One wants to meet with Minster so-and-so the next afternoon when the client will stop by for an unannounced visit. How busy can the Minister be if the CEO of a multi-national is expected to invest in his nation? Another wants a compendium of local soils that are favorable to growing cotton. Yah, right! Which soil, in what province, in who’s back yard, and why should we search for it, if we could find it, if we don't yet have a professional relationship?

In the Frontier, there is no reliable, central data source such as the Departments of Agriculture, Commerce or Interior that can assist us. The Ministry of Interior in the Frontier is in charge of police (secret and more secret), and internal security. I will need to start my research by going to established friends (that takes years to develop) who will give me quickly (in a matter of days) government published statistics on a few major growing regions. The information will be outdated and mostly useless.

From there I will locate telephone numbers and street addresses that are two to five years old, and make hundreds of calls to update the contact numbers. Frequently the offices have moved, and no one seems to know where. I will fax a letter asking for an appointment, attaching a letter of authorization or introduction, or a copy of our business license. I must demonstrate to those hidden people unknown to me that neither I nor my client have any evil motive or hidden agenda beyond gathering data on the condition of local soils for growing cotton. If the office is a few hours drive away, I will need to take a day trip with our company car and driver, or get there myself on motorbike. More distant locations require overnight stays, and often air travel.

Bob: In Vietnam, many of the maps are those used by the American forces during the war more than 30 years before. Roads and paths depicted on the maps, and many hamlets and villages, no longer exist.

I often hire companies such as Sandy’s to scout an area before we land in force. While we seek manufacturing sites, the data we need seems at first glance to be as easy of discovery as might soil samples. Before I lived and worked in these Frontiers, I often asked why should we pay for locating the names of government officials, making simple appointments, or doing basic research that will only benefit the consulting company in its next retention. After all, why should I pay them to go to school?

The reasons can still seems clouded back home. The internet seems to contain much of the data we need. But then on closer examination I find that in 1999 the published data is still showing estimates of 1993 population figures! How current can the other information be that is publicly available, such as the names of leaders and their contact numbers.  The Internet page may have a calendar date on the top that creates the appearance it was updated the day you are reading.  On closer inspection by a knowledgeable reader it will show the site and page have not been updated for years.

Sandy:  In the Frontier, the use and ownership of luxury items are heavily taxed.  Telephones cost as much as $1,000.  Automobiles are taxed at up to 200% above list price.  The same for fax and computers. Setting up an office means renting dingy quarters at "international" rates.  Good office space costs multiples of that.   Labor rates may be low, but then the standards are different as well. In lands where labor has no value, my auto's tire is fixed for under 30-cents. But a new pressure cap for the same tire costs me a full dollar.

The smallest nation I’ve worked in is Vietnam. Geographically tall and lean, it is more than 1,250 miles from the Chinese border in the north to the Gulf of Thailand in the south. There are more than 50 provinces, and more than 30 are capable of growing cotton.  Gathering current data from each province will be accomplished only when I or one of my staff travel in person to each province and meet local officials. Then, when we finally meet with a provincial authority, he or she will give us sketchy data that can be years old.

Bob:   Reference books are no better. In mid 1999, some major publishers are still offering for sale Business and Investment guides published in 1996 written in 1995 using 1994 estimates.

Years ago, my company contacted a foreign consultant in a Frontier.  The consultant had key credentials and seemed to have the ability to locate a good building site in a major provincial city of a frontier.   For us, key credentials means an American with a substantial corporate business background who has achieved and is recognized for his/her earlier success.  A few gray hairs also help. We’ve been too often burned by "kids."  Recent B school grads, attorneys fresh from their internship with a leading firm, accountants who magically become "experts" after auditing companies for a few years, or whiz-kids from major consulting firms, are the one's we avoid.

We also avoid the 25-year expat or retired project manager. The former is too often out of touch with our needs; the latter has already made too many mistakes and did not advance in his earlier career.

The estimate came in at $5,000 which we thought extravagant. I'd been to that Frontier before. I'd met with many consultants. I knew this one did not live in an extravagant style, and could not justify authorizing so much money for work that I could probably due better in less than one week, for less.

The cheapest coach airfare was a bit more than $1,000. Even at $200 per night for 7 nights, the best hotel was still cheap by LA and NY standard pricing. Food, car and driver rental, plus hiring a good interpreter might add another $200 per day, but I would not use the car and interpreter on each day. We could run a ten day trip (three days travel included) for under the quoted $5,000 cost of the outsider.  I would do the research and report in a fashion and language the Company knew and appreciated. I had room to argue successfully for Business Class airfare.

Sandy: A client hired us to search for a site on which to build a fully foreign owned manufacturing plant. We always begin a project with desk research. That includes data we earlier uncovered for prior clients. We save locally published reference magazines and newspapers for at least six months. We review all the materials published in the local press over the proceeding six months, and government reports earlier received. We also get updates that we collect from the relevant Ministries at the start of each project or job. We carefully track the data needed, and record changes for future reference.

Our local staff, who are skilled in meeting government officials and better skilled at extracting information from them, speak with the leading officials in the relevant ministries. These key folks are usually the civilian equivalents of Army Sergeants. We save meetings with the big boys only to impress the clients.

We locate from these sources the names of the key local land agents who can direct us to key parcels. Frequently we know someone who lives there, or who has close family there. We make contact with them, as well.  Then we hit the road. Usually in teams of two: one American and one senior staffers. For this particular job, the drive time south was four hours. Leaving the house at 5:00 AM, we stop for breakfast at 7:00 AM and arrive not quite worn out by 9:30 AM.

Our first appointment is with the Provincial Foreign Commercial Relations Officer at 10:00 AM. We have time to spare.  My associate connects with our local contact and schedules our second meeting for 11:30 AM over lunch.   The lunch meeting will be far more informative than is the official one. However, we know how important it is to be polite when acting in the Frontier. The local contact has selected ten parcels to look at. However, we immediately eliminate four because we learned in Desk Research that an adjoining highway was scheduled to be expanded within the year. We are not always so lucky to get this information early. It was a pearl others knew nothing about.

After inspecting the six sites (and five others we learn of during the day’s effort), we are ready to head home. But it is only 5:00 PM.  At 7:00 PM, we know the drive home can be quicker due to less road traffic.  We take time for a relaxing dinner. That too was lucky. Two hours from our home destination, at 10 PM, we join a 5 km long line of traffic. The local authorities are rebuilding a two lane bridge at night. One lane is serving traffic in both directions.   If we had left earlier, we'd have been on line longer.

We arrive home at 3 AM, along with our still cameras and video shots of 11 parcels. The next day we draft our report, drawing maps of each site from measurements we paced. At 3:00 PM we collect photos from the local lab. From the 11 sites, we select our top three favorites, and down-load photo images of them. Our report is sent by E-mail to the client on each of the 11 sites, with the advice that we Express Mailed the video tape earlier in the day.

Bob: Admittedly, at the start of every trip I am psyched. My passport has many extender pages, but I am still awed by the sense of getting to know a new land. Thirty hours after I leave the office, I arrive at the Hotel. It’s billed as a four star, but I’ve not seen many better back home. I've been here before and am yet still amazed to exit the local streets (in dire condition) to the Hotel's commodious, dramatic lobby.  It is comforting as well to know there are five restaurants, a gym and swimming pool. I strip to shorts and relax for a few hours. Then I eat, and sleep for 12 hours.

I awaken at 6 AM with little difficulty, and am eager to start the day. The hotel arranges a car and driver, and we join him after a good, hearty American style buffet breakfast. Oh, I neglected to mention my associate.

After deciding not to hire the consultant and go it alone, since we were strong on this Frontier for development, we thought it would be useful to travel with a staff member who was born in the Frontier Nation and speaks the local language. Our rooms are not adjoining , but we have the Executive Floor lounge in which to meet easily. Conference rooms are provided on the Executive Floors for one hour a day without extra charge.

Sandy: The client reported back the next day that none of the 11sites were promising. He refined his needs and asked us to try another province, or more sites in the same province. We elected to do both, and advised the client there would be a five-day delay in reporting. Because our work load was heavy, I was the only American available. Due to the importance of pleasing this client on our first assignment, I choose to go to all the sites and not delegate one province to a senior staffers.

We went back to the first Province and found four more sites. After completing our inspection, we said our good byes to the Provincial leaders and thanked them for permitting us to make the inspections. We resisted their importuning for us to rent State land and form a joint venture with a State owned company.

The bridge repairs were completed and the round trip took only 10 hours. The next day we headed west. The roads are not as well developed out west. When it rains, the mud become all pervasive. It started to rain the hour we left, and it rained all day long. It was slow going, and twice we were stuck in the mud, literally.

Bob: The hotel provided a Mercedes E-230 sedan that was perfect. After a light breakfast, we got into the car at 6:30 AM. The trip to the Province was to be more than four hours, and the hotel thoughtfully provided a box lunch for we three (including the driver). The Concierge provided us with the address of the Provincial leaders, and we found the building without much difficulty.

Arriving at 11:00 AM, my associate spoke the same dialect, but seemed to have trouble with the guard, even before we entered the Provincial compound. She said the guard was looking for a bribe that we of course would not pay. It took a bit of talking, but we eventually got in.

The first meeting was, in a word, weird. First we were told we would have to wait two hours. As we had no appointment and the local lunch "hour" begins at 11:30 AM, we were told to return at 1:00PM.  We expected delays such as this because it is the Frontier. We had nibbled on the box lunch on the way down.  Our driver told us he knew a good river-front restaurant in town.  The food was great and cheap.  It also gave me and my associate time to better formulate our planned discussions.

Back at the offices at 1:00 PM sharp, three men and two women came down to meet us. We had brought ten small gifts (wrapped silver dollars) from America to give to the officials when first meeting them. The five staff members we met with seemed very appreciative.  Each one gave a fact-filled presentation on the investment climate of the Province and the history of their Nation. Each time we tried to cut them short (we only wanted to look at available land), we were simply ignored.

At  2:30 PM we were told that the Land Office would see us the following morning at 8:00 AM.  The Tax Office would see us at 10:00 AM.   However, the Director of Foreign Investment would see us at 4:00 PM that same afternoon. That second meeting was a lark. The man spoke English quite well.  He had studied in Chicago thirty years before. It was a joke- filled hour-long meeting of absolutely no substance. We did learn that State owned land was available for lease, and that if we agreed to form a joint venture the likelihood of getting a license much faster would be enhanced.

I politely told our host that our present intention for this small project would not permit profits to be shared, and in fact, we in America intended to operate as the captive buyer of the full production run. Therefore, it would even be economically worth our while to run the small local factory at a loss.

Are you laughing now at me? If not, then, as I did not at the time, you too don't realize the enormous error I made.  I made many before that moment, but that one was supreme.

Sandy:  It was pointless to view the land in the rain. After meeting with the Provincial authorities to pay our respects, we camped out at what passed for a hotel in town. Before the nation opened up to foreigners, the toilets were inadequate. The presence of American Standard plumbing fixtures did not mean they had running water to flush with. In fact, there was no sewer system either. Night soil is collected from the johns and used as fertilizer in the local gardens.

Out at 6:00 AM the next morning we met our domestic friend and went to 5 sites. While there were three more sites to see, No. 5 was outstanding. Based upon the refined directions from the client received after reviewing out first report, we sensed we had found the right site. The site owner thought we should discuss price, but we kept putting him off. The client would discuss price, if, as, and when he choose to visit. We resisted the owner’s pressure to make a quick deal. He claimed there were a large number of people interested in the site.

However, we knew the market, and knew there were more sites to look at.  There was little demand in that Province. We also knew two other foreign invested companies were in the Province. It was our   intention to speak with them about land values before we started to talk price with the land owner.

We know owners try to sell for what the buyer can afford, and ask prices that have no relationship to market value.  We knew as well that if there was a chance to get this site for a fair price, we must never allow the owner to know that we thought the site to be perfect. But it was.

Bob:  The driver found a charming hotel with rooms overlooking a river and a riverside park. It was more than charming. Delightful is the best description. However, the air conditioner was not working. With windows open, the street and river traffic noise continued well into the wee hours of the next morning. And that says nothing about the mosquitoes, or the loss of electric power at midnight. We were  deprived of even a fan to push the hot, bug infested air from our faces.

Sandy:  We returned to our offices back in town before 9:00 PM. There was time to both drop off our prints for development and dash off by E-mail to our client a preliminary report of our findings. The photos were ready and downloaded by 10:00 AM the following day.  We supplemented our earlier report and included measured sketches of site 5. The client loved it, as we though he might.

Two weeks later, after receiving and editing our video tape, the client was ready to address its Board of Directors. The intended plant was not large by their standards ($8 million total projected investment, including working capital and projected debt), but it was their first project is this Frontier. The client asked if we could be available to attend the meeting if he felt it was necessary. We did see the need to attend but to hold our client's hand. We are comfortable addressing the boards of many companies, but with a well prepared client and a thorough report, we believed the client could save his cash for better purposes.

I suggested that we could stand by the phone and be available to address any questions that arose, asking only for a 30 minute wake-up call to be prepared. It was not necessary. The Board considered our project without questions, and approved it two weeks later.

Bob: The next day's 8:00 AM meeting was, in a word, a disaster. Following the prior day’s success where we were brief by five pleasant folks, we went into the second day's meetings blindsided.   We faced an assault of major proportions. Two men never removed the scowls from their faces. They demanded to know how we could plan in investment project that would not make a huge profit.  Why, they seemed to shout at us (although they never raised a voice far above a whisper), would we not consider a joint venture, and one that made a profit?  Both were beyond their ability to understand. Then, business issues aside, the topic of the next harangue concerned why we did not present a formal, written proposal.

I had enough by then. If they wanted to remain in the 18th century while the world prepared for the 21st, it was fine by me.  I told them so. I remained polite but told them they had a lot to learn about doing business with foreigners, and particularly Americans. We came to invest in their country, to build up their land, to help them grow, to provide jobs to their unemployed, and taxes to their near empty coffers. If was a great speech for Evanston Illinois on the Fourth of July. It was a terrible speech for a mid August day in the New Frontier.

Sandy: We received approval from the client to proceed. The licensing procedure was not difficult but time consuming.  We found in a matter of months there was less and less need for our services. The client and his excellent domestic staff became more familiar with procedures. It is important to know that establishing an office in the Frontier is expensive.  It is a daunting experience in what ever Frontier it is done.  There is substantial satisfaction from knowing that we can do it much better, faster, and cheaper then can others, however.

Bob:  We drove home in silence. However, I began to wonder where I would go from here. Three days into my seven day journey, and I had to start over in a new land with little guidance. My associate spoke the language well enough, but she had problems with some of the current commercial terms that had developed in her long absence.

I reviewed my mental notes on the long drive back. I reflected on my early experience in that Frontier, and how I had met many people, including Sandy.  On reflection, and I know how self serving this statement will read: the cost of a skilled expert in the first place would have been worth the price in aggravation and money spent.

Sandy: Lessons learned are many. The big accounting and law firms offer consulting services. Some charge upwards of $25,000 a month. Clients hire them to cover their soft-side to avoid criticism in case a projects fails. They can't be criticized for not doing the job right if they hired the biggest and the most expensive consultant.  Or could they? 

I’ve learned that doing the job right means getting the proper information to the decision maker the first time.  We can do that better than the big firms at far less the cost.

Bob:  Do the math yourself. In the reality of life, budget plans usually go awry even in the tightest of organizations. Business Class airfare for two ($6,400); five hotel nights (for two rooms @ $100 with tax and charges = $1,000) and almost $1,500 in misc. costs (the box lunch cost $75 alone), exceeded by two-fold the cost first quoted to me by Sandy, the local expert.

That is how I pulled success from the jaws of defeat. I called and hired Sandy. On arriving back to the hotel, I spent the fist two hours handwriting a report to fax home. It was a self-critical evaluation of failure for no apparent reason other than we did not adequately understand the terrain. I offered to go to another province, to look in the big city, or to return home. I suggested the better course would be to call Sandy, whose retention we first rejected in order to save money.

We could consider her method, her experience, and then decide on a course of action. I also offered to revisit other local consultants, even the big accounting firms or the  branch of a big law firm that did some of our corporate work back home. The time would be put to good use once we gathered more data.

Sandy:  Why did I give it up? I miss constant running hot water and flush toilets. I miss garlic-beef hot dogs with deli mustard and real cole slaw. I miss dirt-free, smoke-free air, and clean linen sheets that feel crisp when I crawl into bed on wintry cold nights. And I miss the security of knowing where and when I can collect my next pay check. That is to say nothing about the absence of police protected if not inspired crime. It is still too prevalent in the Frontier, where ever it may be.

I also miss the Yellow Pages, and the ease of letting my "fingers do the walking." I’ve had enough of the muddy roads, the mosquitoes, the smells and the sounds of the third world. It’s a good place to visit and a good place to be from…, far away from.

Bob: I am not discouraged. The Frontier is a happening place. Money and market share are to be made there. It is important to fly the company flag and increase our markets, and our presence in a global capacity. We found the site, in the very Province in which I first looked. The first one I picked out was in the path of an unannounced highway expansion. Sandy helped us to effortlessly find another location, and steered us through the paper work and politics. The plant was licensed and built in less than 18 months.

Now, a 100% foreign investment, it is producing goods that are finished and sold back home in the US.  We buy its capacity but are considering an expansion to take advantage of the turn around when the Asian nations regain their stability. We can be a low cost local producer and ship to ASEAN nations, taking advantage of the favorable rates and tariffs. When MFN issues, our savings on sales into the US will be even greater.

I learned my lessons the hard way.  If you are thinking of making an investment in the Frontier, please write to me with your questions. I will answer them all.

Sandy: If you do write and tell us your own true experience,  we may write a sequel to this article and included your story, always protecting your identity if it is important to you.

_______________

"Robert Clarison" and "Sandra Mureblum" are pseudonyms adopted in order to allow the author to boldly and dramatically disclose opportunities and problems from actual business experiences.   However, they represent real people in actual consulting and development situations.  It is our intention not to deceive, but to make disclosures from which other investors can learn. But, we also seek to avoid embarrassment.  We hope you enjoy this dramatic form of presentation.  We will relate only true stories, except where the author clearly states he is being inventive for illustrative purposes.

If you have a story to share concerning opportunities and/or frustrations, please write to Bob and Sandy at VVG


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