Promised Land Again
By Lan Anh, Sai Gon Times Weekly, March 15, 2003
Vietnam's economic development potential was the main topic at the 13th Asian Corporate Conference held in Hanoi last week. Vietnam has golden opportunities to continue the positive growth rate trend, and attract more foreign investors, said speakers at the conference.
Despite being a regional economic forum, the 13th Asian Corporate Conference centered on Vietnam. Some speakers even said that this was a historic conference, reviving foreign investors' interest in Vietnam. With an audience of 800 who are
government officials and businesspeople from 25 countries, the conference was undoubtedly Vietnam's largest economic forum since it embarked on the open-door policy back in the late 80s.This was the time in which American companies paid an unprecedented attention to Vietnam, stated Maria Cino, U.S. Assistant Secretary of Foreign Commercial Service, to the audience.
Seeking commitments. One of the participants' wish list is to know whether Vietnam's long-term economic reforms are effective, and how they are conducted and will affect multinationals' investment strategies. Investors also want to know how the process of policy making will be conducted, and whether the majority of the government members agree on the ultimate implementation of the reforms. In short, they want to listen to commitments made by the Vietnamese Government.
Klaus Rohland, World Bank chief representative in Vietnam, said with a stable macro economy and stable politics versus instability on the global scale, Vietnam has proved itself to be a success story. The problem at the moment is, however, what to do to maintain that success, said Rohland. In macro-economic terms, investors continue to urge Vietnam to adjust mechanisms, and consider it the core of the issue.
Importantly, according to Rohland, Vietnam has opened its door to the outside world, and the process is irreversible. Economists forecast that Vietnam's economy will develop strongly in the future compared with the present time, spurred by commitments to the open-door policy, the implementation of the U.S.-Vietnam trade agreement and the ASEAN Free Trade Area (AFTA), as well as negotiations for Vietnam's accession to the World Trade Organization (WTO). In addition, China's prosperity may be a crucial element for boosting Vietnam's economic development.
Investors caution, however, that the reform pace may be hampered by negative factors. Tony Foster, a veteran lawyer working in Vietnam and a standing member of the Vietnam Business Forum, cited some of them. Laws are not properly compiled while law enforcement bodies are vested with excessive power but their responsibilities are not up to the necessary level, said Foster. A lack of transparency in court activities and the juridical sector, coupled with inching reforms of the financial system, has eroded foreign investors' interest, he added.
To tackle this problems, Rohland said the State should clearly define principles for transparency that enable tax payers to know where the budget goes and what it is used for. In this context, the acceleration of the reform pace of State-owned enterprises (SOEs) and favorable conditions for the development of the private sector should be underlined.
Richard Holbrooke, former U.S. ambassador to the United Nations, said currently, Vietnam is attracting the largest attention from the world than ever before. However, he said if the country fails to eliminate red tape, corruption and other barriers, investors will move out.
For his part, Deputy Prime Minister Vu Khoan said Vietnam is committed to follow the open-door policy on foreign investment. Khoan elaborated on a new theory on the three pillars of economic reforms, namely, the development of a multi-sectorial economy, the application of the market-economy mechanisms, and regional and international economic integration. "Forms of ownership are not so important as business efficiency," Khoan affirmed, adding that no countries can develop separately, and integration is inevitable.
Giving marks to investment environment. Assessing the local investment environment, Prof. Marc Faber, editor of a book entitled the Gloom, Boom & Doom Report, said Vietnam is the only country in Asia that can compete in the long run with China in terms of manufacturing, and has great potential for industries and tourism.
The three guest speakers who were invited to voice their opinions on Vietnam's investment environment-CT&D, LG Electronics and Samsung-all had good remarks. Cho Dae Ki, general director of LG Electronics Vietnam, said he would give Vietnam seven or eight marks on the scale of 1 to 10. Nonetheless, Cho also reiterated areas to improve, including infrastructure development such as transport systems, power and water supplies, and banking. This should grow faster than the country's development rate, he emphasized. Vietnam should foster a healthy financial network to bolter transactions via banks in place of the current cash payment method. In addition, the competitiveness in production costs must be ensured by, for instance, the availability of more parts suppliers who can offer reasonable prices. Although the Vietnamese work force is considered intelligent, it lacks managerial experience and expertise on international trade.
Lawrence Ting, chairman of CT&D of Taiwan, the proprietor of a host of big projects in Vietnam such as Tan Thuan Export Processing Zone, Hiep Phuoc Power Plant and the Saigon South urban area, adopted a optimistic view, advising investors to be patient. Imagine a panoramic picture by linking Singapore with Hong Kong, Thailand and the Philippines, and Vietnam lies in the center of that picture, he said. Investors should ponder on long-run strategies because they cannot win in short-term ones, he added.
However, investors have had reasons for their reluctance to invest heavily here. While rating Vietnam as one of the leading countries that can meet requirements by multinationals, they are still doubtful about whether Vietnam can fulfill its AFTA commitments by 2006 or WTO commitments in the future. How competitive Vietnam will be depends largely on how reforms are conducted, asserted Andrew White, Philip Morris vice president for corporate affairs in Asia. In his opinion, SOE reforms are at a snail's pace.
Investors also voiced their concerns over the predictability of the investment environment. William Botwich, general director of General Motors Thailand that has just bought out Daewoo Vietnam, cited the imposition of motorbike quotas and increased tax rates for auto parts as examples of the unpredictability of government policies. Such unpredictability makes it extremely hard for investors to set long-run development strategies, he said. While praising Vietnam's business opportunities, Dominic Scriven, a veteran investor who is managing director of Dragon Capital, said nothing is impossible in Vietnam, but anything can happen.
Investors at the conference shared a common feeling that Vietnam is welcoming them and it's time to continue to strengthen investments in Vietnam. On the sidelines of the conference, a Singaporean businesspeople who manages a project in Vietnam, said competition will be tenser in the future. "Such a conference will bring more investors to the Vietnamese market," he concluded.
U.S.-Vietnam aviation pact negotiated
The U.S. and Vietnam began this Wednesday and Thursday the second round for the signing of an aviation pact and the opening of direct flights linking the two countries, said the U.S. Ambassador to Vietnam, Raymond Burghardt.
Speaking at break time at the Asian Corporate Conference in Hanoi last week, Burghardt said Vietnam's aviation market is expanding robustly; therefore, the U.S. wants their airlines to set up direct flights to Vietnam. Currently, U.S. airlines have only code-share flights via third parties that have already established flights to Vietnam.
Stanley Roth, Boeing vice president, stated that Vietnam is one of Boeing's important Asian markets in the future. Roth said the potential for a rapidly growing passenger and cargo transport market will turn Vietnam into an important customer of Boeing in the years to come.
Vietnam Airlines has made a deal to purchase four Boeing 777s which will be delivered between now and 2005 at a cost of US$440 million. According to Roth, this contract is only "the tip of the iceberg," though. Sources from Dow Jones said last year Vietnam Airlines grossed VND11,000 billion (some US$713 million) in sales, and gained a profit of VND570 billion (US$36.9 million).
A Successful Dialog Forum
An interview with Mr. Nicholas Platt, president of Asia Society that masterminds Asia Corporate Conference
Q - Why did you choose Vietnam as the main subject and location for the 13th Asia Corporate Conference?
A - We felt that Vietnam represents a unique opportunity, and the Asia Society always looks for important historical points to organize its conferences. Vietnam is really interested in integrating itself to the world economy. We also get that good impression through our contacts in the rest of Asia.
What we tried to do is to put the time, the places and the serious issues together, and hope that the conference will work. We made the decision a year ago because it takes a year to prepare a conference of this sort. At the time, we had to choose from more than 20 different countries because there are several ingredients for the success of the conference. One was the willing of the Vietnamese leadership to present themselves to business communities around Asia-to be there at the meeting to talk, not just making statements then going away, make statements, listen to comments and then answer questions. Businesspeople I know who came from afar and who live here have really had an opportunity to exchange their views with the leaders in such an open way. I am very grateful to the top leaders of Vietnam for their understanding of the importance of this forum and making it a success. Of course, a lot of countries sent VIPs here while we invited very high level speakers from all over the region and from the U.S. But to me the real secret of success was Vietnam's own determination to put the point across and to send the messages to the world.
Q - Recently, as well as at this conference, people have kept talking about how good Vietnam business environment is. But in reality, Vietnam has yet to receive many more new investors. What is the reason for that, from your point of view?
A - In the mid-90s people felt that Vietnam began to open its market and seemed to be willing to form a market economy. However, the window has not really opened. Many companies came and were disappointed.
This time, businesspeople are reacting with both great curiosity and a certain amount of caution. With the bilateral trade agreement and institutional changes in Vietnam, they want to invest and take the advantages of it, and I think Vietnam wants to take advantage of it too.
Meanwhile, the caution is perfectly understandable. The country is undergoing changes from a subsidized economy to a market economy. It's a complicated process. We see that the market forces are forcing the government to make changes. However, changes are more slowly than the market wants them to be. That is what happening now.
China, Vietnam's big neighbor, is getting huge FDI inflow. How would you compare China and Vietnam in terms of attracting foreign investment?
I think China has really made major changes in its law and investment climates. Although, in economic terms, Vietnam is smaller, it presents equal opportunities. If you compare China to other countries that are competing in attracting investment you can see that China has made it easy for people to invest and own business. Still, there is way to go and there are more reforms that need to be done in China. The Chinese have made up their minds that they are going to open. Last year, they gained the WTO membership. In addition, they have started to take some decisions that are painful to the old economy but afford the country great advantages. So, they are several years ahead of Vietnam in this regard.
Q - How would you predict the FDI inflow to Vietnam in the years to come?
A - I would not put it in the short term, I'd prefer to see it in the next five or ten years. I think people who invest in Asia come for the long term with the generation point of view in mind. You have to do homework, have to make sure time is right and the situation is right. So it takes time. Many investors are here, just watching, waiting, and testing the opportunities.
Q - Would you describe this conference as an effective lobbying channel?
A - It's been a wonderful networking opportunity. Everybody who came here has tried to get their point across-to each other and to the government officials. It's a normal way that business gets done. I mean it's done through communication. This has been a wonderful opportunity to communicate.
