| Consultant Services  | People  | Business & Investment Articles | Business & Investment Property Development  | Handicrafts |

Return to VVG's Home Page

V V G  ~ Business and Investment Articles

Copyright © 1998-2014 Vietnam Venture Group, Inc. All rights reserved.   Updated January 1, 2005

Vietnam: Great or Not-so-Great for Foreign Investment?

By: Jules Carlson*
June 1998

*Former Chair, American Chamber of Commerce, Ho Chi Minh City Division

Message From The Chair:

As Country Manager for Cargill Inc. for the past three and a half years, and current Chair of the American Business Community in HCMC, I have seen volumes printed on how great and not-so-great Vietnam is for investors.

I have also had two years of experience in Moscow in 1990-91 which are not unlike the years when Vietnam first opened up. First came the carpet braggers ad consultants to make a quick buck.  They were followed by the consumer marketing companies who had to be here to build brand recognition.  Then came the Asian property development companies with ready cash to build hotels and apartment buildings. Serious manufacturers in  a wide range of industries also followed, and the race was on.

Now with the Asian financial crisis, reality has set in. Investors who carefully did their homework and did a good job of judging risk - including debt - will stay on and weather the storm.  Others, especially some of those who blindly went ahead with projects proposed to them will have losses and close some operations.

Based upon my experience in Vietnam, the reason business activity and investment is slowing is not terribly complex. Most of us know from early contact with overseas Vietnamese  that the work force - given training - is world class and this has proven true in-country. 

What creates the problem is the complex matrix of governments intertwined with State Owned Enterprises that investors and other foreign-based business people must deal with on a daily basis.  The time needed to manage these relationships is simply too costly - compared to the profits forecast in many cases - to sustain more investment in Vietnam today.

It is simply supply and demand. There are simply too many toll gates, ministries, customs officials, tax collectors, inspectors, People's Committees, quotas, licenses, chops, etc. than many managers can manage and still run a profitable business.  Too much control over too few businesses. 

These factors, together with an overvalued currency, high land costs, and lack of a sound legal system make Vietnamese-produced goods and services too expensive to be competitive in export and domestic markets today. In addition, lack of credit makes it hard for a local private company to grow.

Not to be forgotten, foreign investors have many alternative nations to invest in.

All of the above should not have been unexpected by investors, and it can change. The people needed for Vietnam's economy to grow are in place and the environment can quickly improve. Again, from my perspective, a few suggestions on what to do to make this happen:

Vietnam has come a long way in the past several years through the efforts of investors and the Vietnamese people. The pace of change may seem slow to the outsider, but change is one of the most difficult things [in Vietnam], especially when consensus is needed among those who have to make the changes.

How great or not-so-great Vietnam is for investors is up the government of Vietnam.  They have received countless recommendations from the business community, international agencies, and foreign governments.  They know what needs to be done.  The only question I see is timing.

If Vietnam can move quickly to reform the economy [the nation] has an opportunity to leap-frog ahead of other Asian competitors who are preoccupied today with financial problems. 

However, if Vietnam continues to drag its feet, surely Asian competitors will come out of the financial crisis with re-structured and re-engineered economies that are more competitive.  Then, Vietnam will be left even further behind in creating jobs and increasing the wealth of its citizens.

Articles | V V G’s Home Page | People | Southeast Asian Handicrafts 

Write to us | Our Offices