Doing Business In Vietnam

Saigon has grown up (photo: Hanukikanker)

Por: kekepana.com

I’ll never forget my first impression of Hanoi: “This is like Taiwan, but thirty years earlier!” So much has changed since then – and so much has stayed the same. You see, my first visit to Hanoi was in 1995. President Clinton had ended the U.S. trade embargo on Vietnam, and I was dispatched by the Commerce Department to look into how the U.S. Commercial Service could start work in the market before we even had an embassy. I checked out office space in Hanoi, visited Saigon and Vungtau, and was the first American diplomat to meet with Vietnam’s economic and industrial ministries. (Scott Marciel was with me. He’s now the American ambassador in Indonesia.) I found a Vietnam that had moved on from our war, that revered the quality of American products, and that wanted American investment – but only wanted one of everything. Most of that still holds true.

We had a workshop recently in Honolulu that explored getting into the Vietnamese market in advance of next month’s APEC summit in Hawaii. Our speakers were videoconferenced in from Ho Chi Minh City (HCMC or, as the locals still call it, Saigon): Jim Mayfield, principal commercial officer at the American consulate, and David Day, a Honolulu lawyer on business in Vietnam. Jim did most of the presentation, with David providing color commentary. They painted a picture of a market with strong possibilities, but with some daunting challenges as well.

The challenges are familiar. Inflation is running at 20% a year. Physical infrastructure is a problem. While there are shuttle flights between HCMC and Hanoi, getting to second and third-tier cities, or into the countryside, can be a considerable issue. The education system has trouble keeping up with the demand for capable workers. A general lack of transparency and a profusion of red tape go hand-in-hand with rampant petty corruption. The legal system is still new and developing (David commented that contracts in Vietnam should only be considered a guideline for behavior, not the controlling documents that Americans are used to).

Getting paid is likely the single biggest issue for companies that simply want to sell to Vietnamese importers. Be cautious and check out the people you are thinking about doing business with. It is common for U.S. (and other) companies to begin by demanding cash-in-advance before shipping anything, gradually loosening their terms as relationships develop and confidence is gained. remember that Vietnam is largely a cash-driven economy, with perhaps only 20% of the people or their companies making use of banks. Your initial payments are likely to be by wire transfer.

All that said, Vietnam can be a delightful place to do business. There is a lot of good will for the United States and an enthusiasm for American products. Yeah, I know we fought a war with them, but that is ancient history. Seventy percent of the population was born after 1975 and they get taught about more recent wars with China and Cambodia. If anybody in Hanoi thinks about our war, they just assume that those silly Americans were duped by nefarious southerners. I have met American vets who have gone into business with Vietnamese partners after discovering that they had fought in opposing units in the Central Highlands. They bonded because they knew the conditions that the other had survived.

Per capita income is rising. While about US$1160 for the country as a whole, income in Hanoi is now about $2000 and zooms up to $2800 in Ho Chi Minh City. This will continue to rise and 40-50% of the population will be urban by 2020, so the consumer market is going to grow profoundly.

Some of the opportunities for U.S. companies are founded on Vietnam’s current infrastructure deficiencies. We can expect continuing opportunities for architectural and engineering services,urban planners, and for companies in energy projects and water resource management.

There are huge opportunities in education and training services. Vietnam is already the 9th largest source of foreign students coming to the United States, more than 13,000 students last year. They are especially attracted to 2-year college programs at which they can improve their command of English before moving on to a full university or grad school. And on-the-spot training in Vietnam is taking off, with U.S. companies and colleges offering training in business, management, information technology, engineering and for the hospitality industry. The University of Hawaii, by the way, is the only accredited U.S. MBA program presently in Vietnam.

Jim Mayfield sees room for U.S. retailers and franchises in Vietnam. Saigon has a newly opened Gap store, in addition to Carl’s Jr. outlets and a Hard Rock Cafe, but still no McDonalds or Starbucks. Most U.S. brands simply are not there yet.

The entire hospitality industry is open, not just training for the local industry. American companies are investing (I know of Hawaii investors busy at China Beach), but U.S. style marketing and amenities are needed if Vietnam is to attract foreign tourists in great numbers. Jim specifically mentioned opportunities for golf course developers.

I asked about Hawaii as a brand in Vietnam. Both Jim and David responded that, while Vietnamese are aware of Hawaii, it is not necessarily thought of as part of the United States and definitely needs work as a brand to help with marketing. It is more important to be seen as American in this market.