Category Archives: Uncategorized

Another $100 Billion Pipe Dream for Vietnam

Vietnam’s newspapers are reporting that the Hong Kong-based Dragon Best International has agreed to a partnership with a Vietnamese company, Ho Tram Tourism JSC, that envisions investing in: a $32 billion real estate development in Ho Chi Minh City, an $18 billion eco-tourism project nearby Ba Ria – Vung Tau Province, and a $50 billion economic zone.

On a global scale, these are huge projects.  In Vietnam, they are head-scratching, utopian dreams that make experienced developers and economists skeptical about Vietnam investors’ capacity for realism.

Many international investors believe Vietnam is a promising frontier market, but none of them are going to pour an amount of capital into Vietnam that approaches the country’s annual GDP.  Vietnam’s economy cannot absorb $100 billion in capital; moreover, it could not generate a return on the investment any time soon.

For Vietnam, the problem is that this is not the first pie-in-the-sky project that didn’t materialize.  Last year Dubai investor Global Sphere announced its plans to spent $30 billion on the Hanoi Wall Street — 70 apartment blocks at heights ranging from 40 to 70 stories and housing up to 400,000 people with a 102 story central tower.  Hanoi’s planners hadn’t heard about the project, and it has yet to be registered with the government.

In 2007, the US Eminence Group announced its plan to develop a $30 billion economic zone in Thanh Hoa Province.  However, soon after the group made an enthusiastic presentation on the project, the investor vanished.

Ultimately, the investors who will be successful in Vietnam are those patient and disciplined enough to develop realistic, credible plans — not pipe dreams.

 

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The Americanization of Vietnam’s Food

McDonald’s has been in business for one month in Vietnam, and it’s already clear the culinary culture of this leading producer of rice and seafood has changed forever.  Just one restaurant served 400,000 customers in the month after the grand opening on Feb. 8.

So far, the Saigon McDonald’s served 61,980 Big Macs for $2.84 apiece, well above the daily income of a typical Vietnamese rice farming family.

This is just the beginning.  McDonald’s is the latest chain to join the fast-food reformation of Vietnam’s diet, but it should have no problem surpassing Burger King, Domino’s Pizza, Popeye’s Louisiana Kitchen,  KFC, Subway, and others.

In part, that’s because the owner of the McDonald’s franchise has the political clout to get things done; he’s the prime minister’s son-in-law who, like McDonald’s itself, is a Chicago native.

McDonald’s Vietnam owner Henry Nguyen spent two summers as a teenager working at McDonald’s in Chicago before moving to Ho Chi Minh City a decade ago and ultimately impressing McDonald’s as “the ideal mix of business acumen, proven record, passion, and ability.”

Similarly, Vietnam’s hunger for American products and culture makes it an ideal market for McDonald’s — as it is for American soft drink, alcohol, tobacco, and other brands that are contending with legions of skeptical consumers at home.

China’s Grim Shadow Brightens Vietnam

As Western investors sour on China’s troubled economy and outlook, more of them are seeing opportunity in Vietnam.  The European Chamber of Commerce in Vietnam (EuroCham) reports renewed confidence.  American senior executives at the ASEAN business meeting in Hanoi this week were sanguine about their prospects in Vietnam.  And an internal Vietnamese survey confirms the upbeat atmosphere.

The annual ASEAN event attracted 50% more American businesses than last year’s, reflecting the view that Vietnam’s economy has improved significantly as inflation and the exchange rate have stabilized.  These businesses also are anticipating ratification of the Trans Pacific Partnership agreement expected to result in a doubling of American manufacturing in Vietnam.

An example is Boeing, which expects explosive growth in the aviation market in Southeast Asia — and is working with Vietnam Airlines to capitalize on it.

EuroCham just announced a survey found nearly half of its members believe the business environment in Vietnam has “remarkably improved” — up from 38% at the end of 2013.  Moreover, 78% of EuroCham respondents say they expect to increase investments in Vietnam, compared to 41% a few months ago.  That’s partly because they now expect Vietnam’s inflation rate to be below 4%.

The EuroCham survey is an important indicator of future economic activity in Vietnam because of its sheer size; it represents 750 European businesses, including some of the world’s largest corporations.

Another survey, this one of 3,000 Vietnamese enterprises, also finds optimism, with 82% reporting their 2013 revenue was higher than that in 2012 — and 86% expect another increase in revenue in 2014.  Among Vietnamese companies, the most optimistic are mineral, petroleum, steel and construction material firms.

American businesses and investors have been slow to catch on to the Vietnam opportunity.  Meanwhile, upbeat reports like these help explain why Vietnam’s stock exchanges are on top of world markets so far this year.

Vietnam’s Telecommunications Collision Course

Just when Vietnam’s government announced this week that the country now has 132 million mobile phone subscribers, the Wall Street Journal adds that sales of tablets also are booming — even as Vietnam cracks down on political dissent.  The effort to control conversation is on a collision course with the Internet’s uncontrollable means to converse.

Sales of smart phones and tablets more than tripled in Vietnam last year, growing more than any other country in the world except Colombia.  Subscriber numbers are so high they stretch the credibility of service providers:  Vietnam is reported to have nearly 1.5 active phones per person.

Yet, the Journal reports, Vietnam is second only to China among the world’s most risky places to use the Internet — with about 35 bloggers currently spending time in prison for spreading antigovernment propaganda.

The government contends it strives to protect intellectual property and limit the spread of damaging content.  The real problem, the Journal suggests, is that the country’s leaders strike out at the Web when they feel that their own status is threatened.

In other words, the explosion of telecommunication in Vietnam seems to be colliding with powerful homeostatic forces that protect the political status quo.  And that means smart phone subscribers need to be careful what they express on their new devices.  As recently as last week, a 65-year-old former soldier named Ngo Hao was sentenced to 15 years in prison for activities aimed at overthrowing the people’s administration.

Vietnam’s Growing Partnerships Worldwide

Diplomats and business executives worldwide are scrambling to strengthen strategic partnerships with an eager Vietnam.  But one country seems less active than others as the competition heats up to win over the promising frontier market and capitalize on its young, educated, and entrepreneurial workforce: the USA.

Examples this month of how other countries are cooperating with Vietnam:

  • Indonesia is hosting  the Vietnam Festival in Jakarta this weekend, underscoring a transformative year that brought the first direct flights between Saigon and Jakarta, a bilateral meeting in Hanoi to cement a strategic partnership, a $5 billion bilateral trade target for 2015 (which has nearly been achieved already), and corporate partnerships such as the sale of the majority of Vietnam’s biggest cement company to Indonesia’s counterpart and Indonesia Ciputra Group’s $2 billion new city in Hanoi.
  • Uruguay has been cleared to export beef and lamb to Vietnam from 12 processing plants after the country recognized the high demand for meat in Vietnam; last year Uruguay exported nearly $1.6 billion of meat — but just $2 million to Vietnam — and that’s going to change.
  • Europe is lifting a year-old ban on the import of Vietnamese basil, sweet pepper, celery, bitter gourd and coriander as Vietnam expands its growing role as a global food supplier.
  • Russia and Belarus hosted Vietnam’s Prime Minister Dung to promote strategic partnerships, especially trade and  scientific/technological cooperation.  Two-way trade with Russia was $2.5 billion last year and with Belarus is expected to reach $1 billion by 2015.  Russia has 93 projects in Vietnam valued at $2 billion.
  • Italy hosted a Vietnamese delegation to celebrate the opening of a trade office in Tuscany, the latest in a bilateral 40-year diplomatic and trade relationship.

Every month, Vietnam continues to expand and refine its global network.  Nations and corporations that want to position themselves for the Southeast Asia market need to get and stay connected with Vietnam.

Coca-Cola’s Ugly Americanism in Vietnam

Coca-Cola is facing a boycott in Vietnam in response to reports the American company hasn’t paid any taxes over the past decade of exploiting consumers there.

Vietnamese media say Coca-Cola’s financial reports show $120 million in revenue and $129 million in expenses for 2010, for a loss of $9 million.  Since the company began its Vietnamese operations a decade ago, a $180 million cumulative loss has been reported.  Therefore, no corporate tax has been due.

The Vietnamese public doesn’t believe it.  The perception is that the company has used transfer pricing to take losses while continuing to make heavy investments to exploit Vietnamese consumers.  Local newspaper reports inflamed public opinion, while Coca-Cola was announcing a $300 million expansion plan for Vietnam over three years.

In addition to claims Coca-Cola evaded taxes while gaining Vietnam’s largest share of the soft drink market, the company got in hot water with local authorities in Danang for trying to add 4,700 square meters of land even though it hasn’t used all the land that already had been allocated.

And health authorities in Vietnam aren’t happy about rising obesity among children that they say is partly explained by consumption of Coca-Cola’s products.

Coca-Cola’s public relations nightmare in Vietnam is a problem for US businesses in general.  American investors need to be supportive — not just exploitive — partners in Vietnam.  That’s what sets them apart from China and others in one of the world’s most dynamic frontier markets.

How Vietnam Regulates Freedom

By definition, every nation has boundaries, including limits on free speech; you can say whatever you want on the Internet or elsewhere as long as you don’t break the law.

So it should be no surprise that Vietnam disagrees with a critical report issued this month by the US State Department as well as the European Parliament’s recent criticism of Vietnam’s record on free speech, press and association.

Yes, Vietnam has been putting pro-democracy bloggers in prison lately, but not because they were exercising their rights of free expression; it’s because they were breaking the law.  That is the essence of any government’s (including USA’s) point of view when citizens face sanctions for doing something of which the government disapproves.

Hanoi-based Voice of Vietnam radio interviewed  Nguyen Thanh Son, Vietnam’s  chief human rights officer, who said the critical human rights reports are false and biased.

“Vietnamese law clearly stipulates how human rights are ensured in the freedom of speech, assembly and association on the Internet,” he said.  “The country now has more than 700 print newspapers, 1,000 online newspapers and approximately 31 million Internet users.  These figures show that there is no limit to speech and Internet freedom in Vietnam.”

Then he added:

“Some Vietnamese citizens have made bad use of the rights to the freedom of speech in an attempt to destabilize the situation in the country.  They take advantage of websites to incite people and distort information about Party guidelines and policies and State laws regarding human rights.

“We have repeatedly told the US and Western nations that all law-breaking bloggers should be strictly dealt with.”

The reporter commented: “Freedom must be exercised within the law without infringing on others’ prestige or social security and order. Do you agree the freedom of speech in Vietnam is no exception?”

Son:  “I think so.  Freedom of speech, assembly and association on the Internet must be regulated by law in order to maintain social order and ensure security.”

Therefore, Vietnam (like all nations) faces a conundrum:  How do you regulate freedom?  If you regulate it, is it freedom?