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Copyright © 1999-2013, Vietnam Venture Group, Inc. All rights reserved.   July 1998; Updated March 2, 2004

NORMALIZATION OF RELATIONS WITH VIETNAM
By Peter N. Sheridan


[NOTE: More than 2 1/2 years later, this article was reviewed in January 2001 when we elected to make no changes. The information given and observations related then are still relevant today with the sole exception being that the Bilateral Trade Agreement, signed in July 2000, which waits the immediate attention of and expected ratification by both the US Congress and the VN National Assembly.]

From Where I sit: 
It's been more than four years since returning to Vietnam.  Twenty-eight years since my first trip, which was not a holiday.  It's difficult for many to believe I returned.  My best friend went home in a body bag.   But the war is long over. The events of the past are part of our collective memories.   They provide guidance to avoid earlier mistakes and to seize new opportunities. However, the past is not a place to dwell in.

Memories of my first trip are still all too real. I served as a lawyer with the 9th Infantry Division near Saigon only to return decades later with curiosity and trepidation. Curious to see what had changed (in January 1994 almost nothing visible, but for fewer shanties and one, 15-floor "modern" office building).   The trepidation came from having been part of the war (a "combat defense counsel" who often tried cases out in the field) and having suffered the death of my best friend who served with me in the 9th Infantry.

Returning as an American Veteran while the 20 year embargo was still in place  I was not certain how I would be received by the locals or their government.  I quickly found the Vietnamese are very similar to we Americans. There a few embittered folks who use their mouths as weapons against an enemy long turned to friend.  For the most part, the Vietnamese were and are openly friendly to all foreigners, particularly Americans.

Before long, as the CEO of a boutique international business service company, I was encouraged by my counterparts, formerly my enemy, to become part of the American Veterans' effort to locate MIAs: our own numbering about 1,500 and more than 300,00 Vietnamese MIAs. ( see Vignettes #2)

After one year here, I again served my nation. This time as the interim Chair of the American Chamber’s Government Affairs Committee in HCMC.   Now, once more in that Chair and on the Board of Governors, I am poignantly aware that full normalization of all positive relations with Vietnam is still long overdue.

Pleased to have been included with Secretary of State Madeline Albright's brick-laying ceremony at the grounds of the former Embassy, as plans were underway to build on that site a new Consulate building, I was also proud to join Rep. Hal Rodgers (R.Ky) along with 5 other Vets now living and working in Vietnam, to hear his moving talk at the Flag Raising ceremony.

For reasons strategic (balancing local powers), economic (restoring competitiveness to foreign business) and emotional (putting closure to past horrors), I am even more aware now that Americans and Vietnamese need to move forward in our thoughts and actions with regard to each other.

 

The MIA Issue
With more than 25 years experience living and working with the people of Vietnam, it is easy for me to see how well Vietnamese honor and respect friendship. People who do not know Vietnamese nearly as well do not always appear to understand how that works. 

The people of Vietnam are willing to assist a friend.   They have a 2,000 year history of not   "knuckling under" in the face of foreign, hostile pressure. Friendship is a major theme when I discuss the MIA issue with both the leaders of Vietnam and the common people. It is as friends that the Vietnamese want to help Americans find our MIA's.  And it is as friends that we seek to give them assistance to find their own MIAs.

To see the work the local people undertake in this extraordinary endeavor is heart rendering.  One must go into the field to the suspected sites to fully appreciate their dedication.  I now write of the effort made by domestic Vietnamese to uncover the suspected remains of American MIAs.

The effort spent is almost beyond belief.   There has been some success.  Of the nearly 1,500 remaining MIAs from America, more than 500 were lost over water. There are now less than 50 missing who at one time were either seen or reportedly seen alive in Vietnam.

They are important.  To their families and to their nation.  But it is also important to put closure to this and other matters that have been disruptive issues in order to move forward. I don't say we should forget.  I am sympathetic to the plight of those families and friends who lost dear ones. The first, best friend I ever had was killed in action when we both were in the war 28 years ago. The shock of Mark's death drove his name from my mind for more than 20 years.

 

When I learned almost 300,000 soldiers of Vietnam are still MIA, it was a shock.   I'd not heard or read that in the American media.  As a long-standing member of American veterans groups, I am proud that they are now supporting efforts of many American vets and their families to help find all MIAs.  I am saddened it took them so long to support normalization of full relations.

We help locate Vietnamese MIAs from information found in old battlefield operations maps, photos, captured diaries, serial numbers of acquired weapons, etc., that we soldiers brought home as souvenirs. Most of them have been stored-away in boxes or foot lockers for decades. Many vets wish to give them up to help put closure to their own war experience.

The families of Vietnam are still surprised when they for the first time hear of our effort .  Retired Generals and current senior leaders have cried in my presence when I tell them of this effort.  They never expected the Americans to help, and our assistance  gives them their first real hope that their loved ones will be found, reunited with their families, and buried with their ancestors.

Such activity helps to build the bridges of friendship, and encourages the Vietnamese to dig even deeper into their resources to find what we Americans need. This joint effort between our two peoples helps in part to explain the wonderful reception I now receive when I tell my new friends in Vietnam that I am an American Veteran.

Economic Issues.
The Vietnamese men-in-the-street have been expecting a flood of American businesses to Vietnam since the 3rd of February 1994 when President Clinton announced the lifting of the 20 year-old trade embargo. There was a wave, but no flood. It is now hardly a trickle.

To keep the metaphor, the tide may be ebbing.  Investors have run from neighboring nations in the wake of the currency crisis in Indonesia, Malaysia and Thailand.  The markets in the Philippines and Hong Kong are down. Even Singapore has seen a glitch in its currency.

The tide will again flow, and the flood of foreign investors from other parts of the world will return to this region.  But what of the chance of Vietnam's economic success?

 

Drop In Investment Growth.  Foreign investments in Vietnam, never easy, have taken a down-turn. Vietnam has not been quick to match International Standards of business approvals.  They at time seem to further hinder the process with unnecessary bureaucracy and exorbitant pricing.

There has not been the panic suffered in some other East Asian nations.   The extent of the losses is yet to be known.  Foreign invested projects from Thailand, Korea and Malaysia have reduced their local and expat staffs.   Exports have not dropped to the full degree they are expected to drop in the wake of a "too" strong Vietnamese dong vis-a-vis other local currencies that have been devalued 30% to 50% or more. 

Hotel and office building occupancy is down, and rates charged are expected to remain in decline, particularly in the high-density areas of Hanoi and Ho Chi Minh City.  Tourism will suffer from lower-valued, neighboring competition in Malaysia,  Indonesia and Thailand.  The number of new factories has slowed, and some infrastructure projects, even with ODA funding, are not moving with alacrity.

However, headlines in the International Herald Tribune tell a not well-kept secret:  "Rich Taiwan Sees Bargains All Around."  Datelined Taipei, the January 22, 1998 front-page article describes a "Go-South" program:

In a major policy move with long term implications for the region, Taiwan businesses are fanning out through the hardest-hit countries of Asia, hoping to take advantage of the current crisis by buying up assets at fire-sale prices.

Time will tell if the estimates of overall gross domestic investment, expected to average 15% to 16% through year 2000, will be met.

The American Tide.  I believe the tide of American investors to Vietnam has not yet begun to flow, provided both sides continue to learn from each other.  I and others here are working hard to help the Vietnamese learn how doing business with many foreigners is different from their own customs.  For starters, still bargain at every turn with the same style and vigor of American labor negotiators in the first half of the 20th century.

 

Lack of a Long-Term Vision..  Western and Japanese businesses seek long-term relations but only plan in short (3-5 year) cycles.   However, Vietnamese ask for business plans from 20 to 50 and even 70 years out. Then, in marked contradistinction, they yet show little confidence that there will be an economically sound tomorrow. The practice of trying to collect a full year's rent in advance, and recover in that first year their full economic investment, is ebbing but has not yet disappeared.  In a land coming out of nearly 2,000 years of war or serfdom, it is no wonder they have little confidence in the future. They often view grand investment plans of foreigners with routine skepticism.

There is no real, long-term planning here, yet.  Vietnamese demonstrate either greed or instability by seeking a full return on their investments in a year or two, while refusing to recognize the need of a meaningful ROI to foreign investors.

Lack of experience, along with general mistrust of foreigners, does not help the Vietnamese to understand our long-term marketing practices, the need to invest heavily in analysis and promotional practices, and to capture and build market share.  We consider a reduction in advertising and marketing dollars as adversely mortgaging our future. However, Vietnamese Joint Venture partners continuously push for short term profits, have no cash to increase their share, and feel cheated if early profits elude them.

 

Relationships Are the Key.  Foreign investors must understand while business in Vietnam requires the establishment of close relations, political relations consultants are not worth their weight in salt. Every door is open to American and Japanese investors. There is no need to retain anyone with "proper, high-level" contacts. We know, because we came to Vietnam knowing no one.  Now, members of our team have weekly meetings on the projects of our clients' with the highest levels of government and industry.

Long term relations do not mean there is a need for or acceptance of lengthy legal contracts. They can be a waste of money and give a false sense of security to back-home Board Members who have not been properly briefed on business in Vietnam. One European client had a problem with a forty-page contract drafted by their former lawyers "back home."  The Vietnamese side signed the contract immediately but did not read it for months. Then, when they understood the provisions of the written contract, they over-wrote their copy with their own version of the understandings.

A Word of Caution.  On the other hand, investors must be wary of domestic Vietnamese who advise, with a smile, a wink and a nod, "Don’t worry, I have contacts and friends who can help." That, I advise my clients, is exactly when they should begin to worry.

 

Vietkieu.  Some words about overseas Vietnamese. Having sponsored more than 18 families in the past 20 years, I returned here because families of my closest friends still live here. They asked me to help their country grow. "Viet Kieu," as the overseas Vietnamese are called, are often referred to as a National Resource or Treasure. And they are!

Vietkieu are expected to invest hard-earned money here to help Vietnam grow strong by creating jobs and other opportunities. It is a good idea. There are opportunities for small businesses their local families in Vietnam can run with your support, that are closed to foreigners. However, life in Vietnam for a Viet Kieu can be very one sided.

Viet Kieu are not recognized by Vietnam as citizens of their new countries. Holders of USA passports, born in Vietnam, are expected to know and abide by ALL Vietnamese customs and laws, known or not. Viet Kieus in jail are NOT afforded the rights of other internationals, but are jailed with and treated as common local criminals.

Inconsistently, if a Viet Kieu looses his/her passport, Vietnam will not issue travel papers to that individual, but will insist that the host foreign country provide another passport. This is merely proof of an even bigger problem. Viet Kieus have the ability to invest in Vietnam, but do not yet have the ability to be honored and respected as Americans! This situation in Vietnam is no different than in China for overseas Chinese who return.

Discrimination - Here and Abroad.  I too well recall the dismay of my many Vietnamese friends in America who did not understand when they first arrived, and then denied, the discrimination they faced because they are not "white." The returning Vietnamese have the same problem: recognizing and understanding the discrimination they face with the local authorities here who consider and treat them as foreign. There is a further, more troubling inconsistency. American-born Caucasian foreigners, even former enemy soldiers, are given better and more honorable treatment than are ethnic Vietnamese who are born or raised in foreign lands.

 

Recommendations. 
Foreign businesses seeking investment or infrastructure contract opportunities in Vietnam must (i) be patient, (ii) cautiously look at opportunities, (iii) be open to doing business in a more personal manner but not forsaking conservative, pragmatic business principals, (iv) recognize enormous cultural differences, (v) be tolerant of some local police practices that are still very foreign, and (vi) be certain they are on solid ground before they seek to put steel into the ground.

Small investments by foreigners are not encouraged or permitted by Vietnam. However, when accounted for by Vietnamese practices, a US$500,000 investment can look and sound like a $5 million enterprise We are helping companies to learn the facts, and distinguish them from the media hype about Vietnam. By providing business counseling services, not just public relations, we are also helping Vietnam to grow by creating jobs for its people.

What will be the trade consequences for Normalization?   Provided the American Congress approves a bilateral trade agreement, it will mean more jobs for Americans in the long term.  However, in the short term, the benefit will flow first the people of Vietnam.  However, that can directly effect the world.

Given the economic turmoil in the region in 1998, the more quickly there is a bilateral trade agreement with America, the sooner will there be a full normalization of trade relations (MFN) for Vietnam,.  That will give Vietnam the ability to compete on the American market to earn hard currency.  It is the only real reform that will have a significant impact on Vietnam's ability to grow economically strong before the other "tigers" can get back on their feet. 

An economically strong (it is already friendly) Vietnam will help the entire region grow out of its slump, and perhaps provide the spur to stop the regional slide before it becomes a disaster.

Normal provisions for ExIm bank financing, OPIC insurance, bilateral and multi-lateral trade agreements will precede MFN.  MFN will initially benefit Vietnam more than America.  The influx of hard currency from exports sold to America will be the largest boost available to help Vietnam grow economically independent.  As the markets in Vietnam grow stronger, then the American opportunity will grab hold.   Although agrarian in nature, Vietnam is a heavily consumer and technology oriented society.  There is already a nearly un-quenchable thrust for all products American.

Tariffs in Vietnam must soon be lowered to accommodate the needs of the ASEAN nations.   Lowering the same barriers for America will put our trade goods in direct competition with some home grown industries.  The inability of Vietnamese companies to invest capital in projects makes the burden on foreign investors difficult, particularly when neighboring countries have relaxed those barriers.  

Important is America’s insistence on free trade and Vietnam’s dropping its state-control over all import and export licensing.

In time, tourism will grow, and more people will fall in love with the country and the people of Vietnam.  American business is already here. The HCMC branch of the AmCham has more than 300 members; an additional 200 are in Hanoi. There is NOT much hard currency here from America yet, but the projected investment dollars had placed America as high as 5th on the list of investors. By the end of 1998, due to many pulling out, America's place dropped to 10th.

Will business in Vietnam ever be "normal?" Clearly yes. Vietnam is determined not to be the low-cost producer of cheap products, but the high technology producer of quality products for the world.

Is it a safe place to invest in? There is no doubt this is still a frontier land, but the government is stable, the people are willing and the infrastructure is growing to support foreign investment. Practice does not yet match policy, but we strongly believe in the strength of the people of Vietnam.  This is still the only nation in the world's history to change its basic economic structure with out a battle, or even an open struggle.  

However, as with everything else here, patience, patience and even more patience are the three rules to successfully undertaking business in Vietnam.


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