VN Business news (Apr 5-6) (2)

[Dam Son <son@fermi.phys.washington.edu>]

Vietnam Economy Decelerating Deputy P.M. Says: Report 
Vietnam Licenses Park Project 
Vietnam's IT Yellow Brick Road Is Long & Winding 
Vietnam's sub-contracted export output receives boost 


Vietnam Economy Decelerating Deputy P.M. Says: Report 

Hanoi (DJ) -- Portions of Vietnam's economy are decelerating and the
nation's financial system isn't as healthy as it should be, Deputy
Prime Minister Phan Van Khai warned members of the National Assembly,
according to an official media report Friday.

In a speech assessing the challenges the government faces in 1997,
Khai said, 'production and business in some areas are slowing down,'
the newspaper Quan Doi Nhan Dan (People's Army) said.

Khai didn't specify the extent of this slowdown, but did say it mostly
affects the processing industries. 'Basically, the goods made at home
are uncompetitive in terms of price, quality and marketing,' he said.
Additionally, productivity is low.

Vietnam's gross domestic product expanded 9.3% in 1996, and the
government has forecast a similar increase for 1997. But a low level
of inflation, reports of stockpiles of commodities like steel and
cement as well as anecdotal evidence of bad loan problems at banks
have led some analysts to conclude an economic slowdown might be
underway.

Khai is among the first senior government officials to speak directly
of a deceleration.

Deputy Prime Minister Khai said that Vietnam can find ways to improve
industrial competitiveness and productivity, 'the growth of the
economy will be affected not only in 1997 but also years ahead.'

Khai identified Vietnam's trade deficit and the health of its banking
system as two other large issues the government must address.

'The trade deficit has increased rapidly beyond the safe line,' he
said.

In 1996, Vietnam had a trade gap of nearly $4.0 billion, or about 17%
of gross domestic product. The government has estimated the gap in the
first quarter at $935 million, and the Ministry of Trade has projected
it at $1.1 billion in the second quarter, according to an official
media report.

'It is necessary to work out basic measures to boost exports,' Khai
told members of the National Assembly.

Regarding the banking system, Khai characterized the level of overdue
loans as 'high' and said the government is prepared to intervene 'in a
timely manner to help the payment capability of banks,' including
private joint-stock banks.

Several highly-publicized corruption scandals and anecdotal evidence
of overdue-loan problems at several joint-stock banks have raised
concerns about the overall condition of Vietnam's banks in recent
months.

While not commenting on the extent of problems, Khai said the
government 'has instructed to solve this issue quickly but carefully
to avoid unfavorable changes in economic activity and social
psychology.'
  ___________________________________

Vietnam Licenses Park Project 

Hanoi (WSJ) -- Vietnam licensed the first portion of what is planned
to be a $1 billion industrial park and port project in the northern
city of Haiphong, the project's developers said.

The license will allow Dinh Vu Development Joint Venture Co. to
develop a 982-hectare industrial park on a peninsula just outside the
city, the company said.

Construction of the $80 million, 164-hectare first phase of the
industrial park will begin immediately. Lots are expected to be
available early next year.

Foreign participants in Dinh Vu Development are American International
Group Inc., a U.S. insurer; Asian Infrastructure Development Ltd., a
Thai infrastructure concern; and International Port & Engineering
Management NV, a Belgian port developer. Collectively, they hold 70%
of the project; state-owned HP Transenco holds the rest.
  ___________________________________

Vietnam's IT Yellow Brick Road Is Long & Winding 

Newsbytes News Network

HONGKONG -- In most countries, when techies gripe about poor
infrastructure, they mean accident-prone fiber-optic cables or costly
ISDN (integrated service digital network) connections. Not in Vietnam,
however, where the lack of even adequate roads and railways can put a
dampener on telecoms business.

According to Oudone Chandaran, Digital Vietnam's sales manager,
transporting computers from Hanoi to Ho Chi Minh City takes about 46
hours. "It is not very expensive and it's quite safe, but at an
average speed of about 55 kilometres per hour, it is very slow."

But these are the sorts of hassles that foreign multinationals like
IBM, Compaq and Digital are willing to put up with in order to get a
toehold. The Vietnamese computer market is growing explosively for
some firms, simply fast for others.

Vietnam revenues for Hewlett-Packard grew 150 per cent in the third
quarter of last year, making it the fastest-growing ASEAN country for
HP last year.

Fujitsu, meanwhile, started a Vietnamese subsidiary in January of this
year which is assembling 400,000 PC boards a month. Computer Products
of Vietnam will upgrade its manufacturing capacity to two million
boards a month soon.

The biggest problem, companies say, is the decrepit transportation and
communications infrastructure. Although there is now a fiber-optic
cable linking Hanoi and Saigon, until recently, Vietnam had one of the
fewest penetration levels for telephony in the world.

Instead of the high-speed leased lines and virtual private networks to
which they are usually accustomed, Digital PCs use normal telephone
lines, which are limited to about 9600 baud. "This is not enough for
most of the work," Chandaran said.

Digital opened its first office in Hanoi, then a year later, in Ho Chi
Minh City, in March 1996. Chandaran noted that most northern
Vietnamese buyers were government-related, while in the south they
were usually "commercial-industrial."

Apart from the poor transportation and communications infrastructure,
there is a severe lack of trained manpower. Chandaran said that fully
one-third of his time was spent on training sales teams and business
partners. "So we spend a lot of time on training staff in different
fields, because we have accepted the challenge to hire more and more
Vietnamese."

Chandaran said that in developing countries like Vietnam, half of a
company's time was spent, "actually selling the benefits of
computerisation. Only after that can we start selling computers."

The current typical PC configuration is a 100 megahertz (MHz) Pentium
equipped with 8 or 16 megabytes (MB) of memory, a 1.2 gigabyte (GB)
hard disk, and perhaps a CD ROM plus a sound card, according to Nguyen
Thanh Binh, executive director of a local computer company in Saigon,
Computer Supplies and Services.

Most newly installed PCs are based on clone components coming from
Taiwan -- the five percent customs duties on parts encourages assembly
within the country by Nguyen's firm. The end cost? About the same as
in Bangkok -- around US$800.

Shane Cummings, IBM's marketing manager, estimated that clones
represented one third to one half of the total PC market.

Digital's Chandaran, meanwhile, said the computer market in Vietnam
was still 80 percent PC-based, although in the next three years he saw
that changing to 50-50, with servers becoming increasingly important.
But computers are often under-used, he added, with some PCs not used
more than about 30 per cent of the time -- "since the companies
probably only bought them to use WinWord or Excel," he explained.

Nguyen added that not only do PC computer buyers want machines at the
lowest prices -- they also expected free technical support, as well as
training, both of which required skilled manpower in short supply in
Vietnam.

While PCs and clones do represent a healthy, growing market, the
multinationals see the big money in the future being spent on services
-- providing networking solutions. About 75 percent of its sales in
the past two years were to government organisations, Digital's
Chandaran said.

"The PC business is still very strong, and still the main business,
but we are moving more into WANs (wide area networks) and the server
business," he added.

IBM's Cummings agrees. "Although today Vietnam is still primarily a PC
and LAN-based market, there is now an enormous push by the government
to upgrade their systems," he said.

But the big profits that computer companies were seeking -- and making
elsewhere -- will not come so easily in Vietnam. "A lot of companies
originally thought of Vietnam as the new El Dorado, feeling that the
economy would move very fast, and that they would make a lot of money
very quickly," Chandaran said.

"But after two years of working here, we know it isn't quite like
that," he added.

Yet IBM's Cummings is guardedly positive. "We see Vietnam as having
great potential, although it is very hard to know just how accurate
all the forecasts are," he said.

"But the government is very strongly behind information technology as
a necessary part of the country's development, and this has made
Vietnam very favourable for investment by IT organisations. Moreover,
there is no indication that this will change at all," he added.
  ___________________________________

Vietnam's sub-contracted export output receives boost 

Hanoi (VNA) -- Sub-contracted export commodity production is getting a
boost with expanded markets and diversified goods, according to the
Trade Ministry.

'In 1996, Vietnam earned $US1.206 billion from sub-contracted export
commodity manufacturing, making up 16.6 per cent of the national
export volume,' the ministry said.

Main items remain garments and footwear which grossed more than
$US817.4 million and $US500 million last year, respectively.

These items show a rise by 28 per cent in number and 66 per cent in
value over 1995 and are about to increase by more than 20 per cent
this year over 1996.

Vietnam's sub-contracted goods have found a stable niche in many
foreign markets such as Japan, South Korea, Taiwan, EU member states,
the United States, Canada and Southeast Asian countries, according to
the ministry.

Together with the growth of export turnover, sub-contracted commodity
manufacturing has provided stable jobs for tens of thousands of
people, mostly youths in urban and rural areas across the country.

More than 600,000 people are now working in the garment and footwear
sector alone with monthly incomes averaging VND 400,000-600,000
($US35-55) per month while more and more people are getting into
handbag making, embroidery, electronic assembly, stainless steel
product manufacturing, foodstuff canning as well as toy and sport gear
production.

At present, many Vietnamese enterprises and joint ventures have won a
good reputation from famous world garment and footwear producers such
as Pierre Cardin, Nike and Reebok.

Of late, the Saigon garment company No. 3 and Tien Long company Ltd
have received orders from the Fashion Garment Co Ltd in the United
States.

Additionally, some businesses have been contracted to manufacture
high-tech goods such as video and cassette magnetic heads and
loudspeakers from Sae Young company in South Korea and electronic kits
and pagers from various famous world telecommunication corporations.
In the last four months of 1996, Fujitsu grossed $US113 million from
exporting computer components made here.

Unlike the first years of sub-contracted export commodity production,
many Vietnamese enterprises and companies have now sought raw
materials available in the country and have also installed
sophisticated production lines to manufacture sub-contracted goods in
order to gain more profits and generate more jobs for local people.

In the footwear sector, only 30 per cent of the materials and chemical
additives have been imported to produce form-A leather shoes for EU,
Canada and Norway. In garment making, many textile companies such as
Thanh Cong, Thang Loi and Phong Phu, etc, have supplied all kinds of
cloth for garment making based on technical indicators and designed
given by foreign partners.

In addition to such traditional items as garments, footwear and
electronics, numerous enterprises and companies have become involved
in making complicated and highly-skilled articles such as sleeping
bags, tents, skiing outfits and cotton animals in efforts to diversify
sub-contracted goods for exports.

According to Deputy Trade Minister Mai Van Dau, the prices of
sub-contracted goods, control of raw materials and machinery imports
and treatment of waste materials and deformed products are among the
outstanding problems being confronted by sub-contracted export
commodity producers in Vietnam at present.

The Trade Ministry is preparing a draft regulation on sub-contracted
export commodity production with the involvement of the Ministries of
Trade and Finance, the Customs Office and other concerned ministries
and government offices in order to remove obstacles hindering the
growth of sub-contracted goods manufacture.
  ___________________________________