Vietnam...News from The Globe and Mail
Is Vietnam destined to become next China?By GEOFFREY YORK
00:00 EDT Friday, April 29, 2005 Page B1
HO CHI MINH CITY -- More than 25 years after fleeing Vietnam and seeking haven in Canada as a refugee, Dan On has discovered the perfect place to run a profitable business: back in Vietnam.
The 45-year-old Canadian entrepreneur, who runs a factory in southern Vietnam that packages cashews and trail-mix products for export to North America, has watched his revenue soar dramatically since 1999 when he started.
His sales were $10-million (U.S.) two years ago, grew to $14-million last year, and should reach $18-million this year.
It's one small example of the capitalist vitality of a Communist country that once had a reputation old-guard socialism.
On the eve of tomorrow's 30th anniversary of the American defeat in Vietnam, many investors are touting Vietnam as the next China -- a country with lower wages and more energetic entrepreneurs than its giant northern neighbour.
Powered by an annual growth rate of 7 to 8 per cent for the past several years, including 7.5-per-cent projected expansion this year, Vietnam has become one of the world's fastest-growing economies. Hundreds of Canadian investors are among the thousands of Westerners who have poured into the country.
"The business climate in Vietnam is better than in China," says Mr. On, who participated in joint ventures in China but found them less successful than his Vietnam factory. "The productivity of the workers is higher here, and it's easier for me to discipline them. The country is dynamic and young."
Most of his 250 workers earn about $80 a month for shelling and grading cashews. "Their fingers are small and very fast," he says. "They move like magic -- faster than Chinese workers. People here can still live on $2 a day. And they don't steal from us."
Red tape and corruption have not entirely disappeared. Two years ago, Vietnamese officials delayed his shipments to enforce obscure labelling rules until he paid a "consulting" fee to a middleman.
Intermediaries have approached him to suggest backroom deals to "save taxes" if he would split the savings with them. His export tax rebate has been delayed for five months by officials who seem to want a slice of the money.
Yet the bureaucratic entanglements are diminishing. Next year, Mr. On will consolidate his subcontracted operations into a single company with 1,500 employees. And the former refugee is now spending six months of every year in the country he once fled. "Vietnam is a very good place to be," he says.
Vietnam launched its economic reforms in 1986, but there was much backsliding in the 1990s. Its economy did not seem to reach the takeoff point until the past two or three years, following a trade deal with the United States in 2001. With the country preparing to enter the World Trade Organization by mid-2006, most analysts now believe that Vietnam is only a few years behind China on the capitalist path.
Canada's trade with Vietnam has been booming.
Exports to Vietnam -- primarily wheat, machinery and wood pulp -- have almost doubled in the past two years, climbing to $109-million (Canadian) last year from $60-million in 2002.
Canada was the fifth-biggest foreign investor in Vietnam last year, chiefly as a result of a $147-million (U.S.) investment in a tungsten mine by a joint venture headed by Tiberon Minerals Ltd. of Toronto. The mine in northern Vietnam, the largest mining project in Vietnamese history, could produce 9 per cent of the world's tungsten supply after it begins production next year.
Talisman Energy Inc., the Calgary-based oil company, is now earning 10 per cent of its global production from an offshore project shared between Vietnam and Malaysia. This week it signed a contract with Vietnam to develop another offshore project -- its fourth in Vietnam since entering the country in 2001.
"We're bullish to expand here," said Bryan Little, head of Talisman's office in Ho Chi Minh City.
"Vietnam can be bureaucratic and difficult, and it takes a long time to get approvals. But they do make decisions and you can move ahead. It is steadily improving and streamlining."
Gary Dawson, president of the Canadian Chamber of Commerce in Vietnam, created one of the first travel insurance businesses in Vietnam in 2003 and is expanding into health insurance in June. "In Canada you have to fight for a little bit of growth, but in Vietnam the rules aren't written and you can help to write the rules," he says. "It's a new frontier, and anything is possible. The doors are open."
With its creaky infrastructure and socialist legacy, Vietnam is finding it hard to keep pace with the rapid economic growth. Electricity shortages are reaching a crisis point. Traffic jams are increasingly common. There are shortages of top-quality office space in Ho Chi Minh City, the commercial capital, and the government is building new suburbs to ease the pressure on the clogged downtown streets.
Andrew Tsang, a Canadian dentist who is building a chain of Western-standard dental clinics in Vietnam, says his clinic in Ho Chi Minh City suffers up to five power cuts per week, sometimes for the whole day. Still he is buoyant about the business prospects.
"There's a buzz of excitement here. Things are moving so fast. I think this will be one of the strongest countries in the region soon."
Some investors are daunted by the murky rules and opaque legal system, which allow arbitrary crackdowns on anyone. Ron Sparling, a Canadian who is a part-owner of a wine bar in Ho Chi Minh City, recalls how the police wanted to tear down the bar's Halloween decorations in 2003 because they were "devil worship."
Rachel De Salis, a Montrealer who helps run a graphic design agency here, says she had to get stamps and signatures on thousands of papers to register the agency as a foreign enterprise.
"We know people who gave up because they couldn't be bothered with the paperwork."
But she persevered and gained the registration, and now her agency is financially successful with more than 20 clients. "Aside from the paperwork, we were surprised how smooth it was," she said.