VN business news (May 4-5)

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

May 05: Foreign investment in Vietnam: more projects, less capital 
May 04: US businesses still hamstrung in Vietnam 
May 04: Vietnam must avoid risks of premature stock market opening: official 
May 04: Finnish-built water purification plant opens in Hanoi
May 04: Isuzu, Itochu 50 million dollar Vietnam truck plant starts production 
May 04: Macau take-off point for cut-price breaks to Vietnam 
May 04: Vietnam's banks feel the Asian afflictions 


Foreign investment in Vietnam: more projects, less capital 

HANOI (AFP) - Approved foreign investment projects in Vietnam have
increased in number this year but have fallen in value compared to
last year, a report said Monday.

The number of foreign direct investment projects approved by the
government was 94 in the first four months of the year, compared with
70 in the same period of 1996, the Thanh Nien newspaper reported,
citing ministry of planning and investment statistics.

But total value of the approved projects was 13 percent less than
during the same period last year, falling to just over one billion
dollars, it said.

Actual foreign investment was nearly 550 million dollars this year,
nearly as much as the same period last year, the newspaper said.

Approved foreign investment projects in all of 1996 totaled 5.5
billion dollars last year, a drop from 7.4 billion in 1995.

Vietnam has approved 27 billion dollars in foreign investment projects
since its economic opening ten years ago, but only 25 percent of those
projects have been realized.
                 ___________________________________


US businesses still hamstrung in Vietnam 

By Frederik Balfour

HANOI (AFP) - When President Clinton lifted the economic embargo
against Hanoi more than two years ago, US business clamoured for a
place on Vietnam's dance card.

But initial infatuation has given way to a sober realisation that the
young debutante can be a tough partner, whose potential for
frustration and disillusionment is proving as strong as her charms.

And while US companies face the same headaches as any foreign investor
here -- a thicket of bureaucratic obstacles, a capricious legal system
and rampant corruption -- US companies say the absence of a trade
agreement and access to export finance programs makes it extra tough
to do business.

"The pace of economic normalisation has been slower than anyone had
hoped and has made for a more difficult environment. US companies are
still quite far behind," says Virginia Foote, the Hanoi-based
president of the US-Vietnam trade council, a private bilateral trade
association.

What's more, while businessmen here acknowledge the symbolic
importance of the arrival next Friday of Douglas "Pete" Peterson as
the first US ambassador to Hanoi -- he spent more than six years as a
prisoner of war in Hanoi during the Vietnam war -- the Vietnam
syndrome is not the issue.

"This is Vietnam, and that is part of the equation, but only a part,"
says Norris Hickerson, the Hanoi-based country manager of Digital
Equipment Corp International. His main concern is moving ahead on the
economic front.

So is Tony Salzman's. As president of V-Trac, the authorised dealer
for Caterpillar, Salzman says his business is hamstrung by the absence
of US Export Import Bank (Exim Bank) financing.

"It's a terrible impediment. The US is the only OECD country that
doesn't provide export financing support. The Finns, Brits,
Australians, French, and Germans all have government assistance," he
explains.

Salzman is not the only one having trouble competing.

US giants such as Boeing, United Technologies and AT and T have barely
made a dent in the Vietnamese market because financing is so hard to
obtain without Exim Bank, Overseas Private Investment Corporation
funding and other US government financing programs.

Because Vietnam is a communist country, these programs cannot be
unlocked unless President Clinton waives the Jackson Vannik amendment,
which requires Vietnam to show its citizens can freely emigrate.

That in turn would pave the way for most favoured nation (MFN) status
for Vietnam which would have knock-on effects for US businesses here.

Many companies are already preparing for that eventuality.

IBM, Motorola, Ford Motor Company, Mobil Oil, Coca Cola and other
Fortune 500 companies have returned here and have the financial muscle
and patience to wait for their investments to pay off.

But others have already reached the end of their tether.

Bank of America pulled out its expatriate manager in January, while
American Oil Company (Amoco) closed its doors at the end of 1996
altogether.

Chrysler looks likely to follow suit and has reportedly scrapped plans
to build a 192 million dollar joint venture plant which has yet to
break ground.

The largest US investment licenced to date, a 247-million-dollar joint
venture tourist resort at China Beach collapsed after bitter and
irreconcilable differences between Vietnamese and US partners.

This deal and the Chrysler project account for about 40 percent of the
1.1 billion in approved US investment so far.

"The danger is that people might lose interest and Vietnam better
watch to make sure the flame doesn't go out. If people don't think
projects will come to fruition, they will move to another country
where things can happen," says Digital's Hickerson.
                 ___________________________________


Vietnam must avoid risks of premature stock market opening:
official

HANOI (AFP) - Vietnam should avoid the pitfalls of rushing to launch a
stock market that have plagued other countries in the region, a cntral
bank official was quoted as saying Sunday.

Le Van Chau, deputy chairman of the State Bank of Vietnam and the
chairman of the Stock Market Preparation Committee, warned of the
dangers associated with creating a bourse before the country's
institutions were developed.

"If the management capacity is weak, then it can have huge
consequences to the economy. Many countries have suffered when stock
markets have been hastily constructed," he told the Nhan Dan daily.

An unregulated and ill-designed bourse would "be a good environment
for the emergence and development of speculative activity which could
have ripple effects causing long and horrible damage," he said.

Chau did not offer any timetable as to when Vietnam would be ready to
launch its own bourse, although he said a stock market was "the
natural and obvious product of building up the market mechanism."

"So far our economy has shown some demands and viability in order to
implement step-by-step and carefully the stock exchange.

"That is an acute an urgent requirement for investment capital for the
government," he added.

So far only 10 of the roughly 6,000 state-owned enterprises (SOEs)
have received permission to sell their shares.

"Unutilised capital in the society is not small but with our
prevailing financial and credit structure that cannot be converted
into long-term investment which obstructs the investment process for
restructuring the economy and enhancing competitiveness," Chau said.

In only one case has a company been authorised to raise foreign
capital. The company, Refrigeration Electrical Engineering Corp.
(REE), sold 30 percent of its shares to foreigners.

Five other companies are expected to receive permission to sell shares
to foreigners this year.

State-owned firms selling equity shares is seen as a way of raising
cheap capital, rather than a way of fundamentally changing their
structure. Most share offerings are made to employees and to other
SOEs, with only a small percentage sold to private investors.

Last week, Sacom, a telecommunications equipment maker which is owned
by state-run Vietnam Post and Telecommunications, said it plans to
raise 10.8 million dollars, but would only sell two percent of its
shares to the public.

Foreign analysts say that the opening of a stock market in Vietnam is
still several years off. The backward financial system cannot handle
the sophisticated demands of a bourse in Vietnam, where writing a
cheque is not even possible in most parts of the country.
                 ___________________________________


Finnish-built water purification plant opens in Hanoi 

HANOI (AFP) - A Finnish-built 10 million dollar water purification
plant supplying Hanoi came on stream Sunday, a Finnish official said.

The government of Finland has spent more than 100 million dollars in
providing drinking water to Vietnamese residents since 1985, a Finnish
diplomat said.

The new plant is one of eight new or rehabilitated facilities financed
by Finnish grants, and will provide an additional 40,000 cubic meters
(1.4 million cubic feet) of treated water, bringing total citywide
supply to 360,00O cubic meters (120.6 million cubic feet).

However the diplomat said while the delivery and quality of water from
the new plant would enable people to drink directly from taps, water
is often contaminated by the time it reaches homes because of illegal
connections to delivery systems.
                 ___________________________________


Isuzu, Itochu 50 million dollar Vietnam truck plant starts
production

HANOI (AFP) - A 50 million dollar joint-venture plant built by Isuzu
Motors Ltd. and Itochu Corp. in Ho Chi Minh City has begun producing
small trucks, an Itochu official said Sunday.

Itochu and Isuzu each have a 35 percent stake in the assembly project,
while a local partner controlled by the Ministry of Transport holds
the remaining 30 percent stake.

Fumimasa Ogawa, Itochu general director for Vietnam told AFP that
initial production will be a modest one or two hundred, two-tonne
trucks in the first year, although full capacity running at two shifts
is 10,000 units per year.

Ogawa said the slow ramp up to production was due to an overcrowded
market of auto makers in a tiny market.

"There are now 14 licenced truck and auto plants and still imports of
used cars are high," he said.

Total annual demand for all vehicles in Vietnam is estimated at just
20,000 in a country where the annual gross domestic product per capita
is only 270 dollars.

Isuzu will be vying for a share of the tiny market with other Japanese
auto giants Mitsubishi and Daihatsu and Mazda, who have already begun
production here, while Toyota is expected to begin full production
this fall. Nissan is also building a new plant. HANOI (AFP) - A
Finnish-built 10 million dollar water purification plant supplying
Hanoi came on stream Sunday, a Finnish official said.

The government of Finland has spent more than 100 million dollars in
providing drinking water to Vietnamese residents since 1985, a Finnish
diplomat said.

The new plant is one of eight new or rehabilitated facilities financed
by Finnish grants, and will provide an additional 40,000 cubic meters
(1.4 million cubic feet) of treated water, bringing total citywide
supply to 360,00O cubic meters (120.6 million cubic feet).

However the diplomat said while the delivery and quality of water from
the new plant would enable people to drink directly from taps, water
is often contaminated by the time it reaches homes because of illegal
connections to delivery systems.
                 ___________________________________


Macau take-off point for cut-price breaks to Vietnam 

South China Morning Post

LUXURY getaways to Vietnam's newest resort and Ho Chi Minh City are
now on cut-price offer through tours flying from Macau.

Packages from Hong Kong are on offer for as little as $4,090 for a
three-night break, or $4,490 for four nights.

The resort destination is the new French colonial-styled Furama Resort
at China Beach. Also included is a night at the Equatorial Hotel in Ho
Chi Minh.

The deal is on offer until December 28 to celebrate the opening of the
200-room deluxe resort managed by Hong Kong-based Majestic
International near Da Nang.

Prices are cheap because tours depart from Macau's new international
airport aboard a fledgling twice-weekly charter service introduced by
Pacific Airlines, Vietnam's second carrier.

Included in the package are round trip ferry tickets from Hong Kong to
the Portuguese enclave, a one-night stopover at the Equatorial Hotel
and round trip flights from Macau to Da Nang and Ho Chi Minh.

"The introductory offer for the new resort is an absolute bargain,"
said Lynn Grebstad, spokesman for the Majestic.

"The holiday costs little more than the US$350 price of a regular
ticket."

The resort was developed by Hong Kong-listed Furama Hotel Enterprises
in a joint venture with Danatours of Vietnam.

"It's the first international-standard luxury beach resort in Da Nang,
adding a dimension to the tourist industry in this relatively
undeveloped region of Vietnam," Ms Grebstad said.

Package bookings can be made through Majestic International Hotels in
Hong Kong (tel: 2848 7446).

The Hanoi Daewood Hotel has become the first hotel in Vietnam to join
the Leading Hotels of the World, the reservations and marketing
alliance of more than 300 luxury hotels in about 70 countries.

The hotel has 450 rooms and suites, fax and computer capabilities, a
health club and an indoor driving range with putting greens.
                 ___________________________________


Vietnam's banks feel the Asian afflictions 

South China Morning Post

Vietnam is an odd addition to the long list of emerging markets whose
banking systems are under strain; the economy is growing at a roaring
rate of more than 9 per cent for the third year running, foreign aid
and investment are flowing in and inflation is under control.

Yet Vietnam's banks are in trouble. As befits a "mixed economy" of a
communist core with market fringes, Vietnam is suffering from an
assortment of the various calamities that are afflicting banks
elsewhere in Asia.

For starters, there is a variant of the blight that has attacked
China's banks. Vietnam's state banks have stacked up loans to
state-owned enterprises. Inevitably, some loans have gone bad.

Since the four state-owned commercial banks account for 85 per cent of
total assets, this is the biggest potential minefield.

It is also the hardest to map.

Although some banks have allowed international accountancy firms to
audit their books, the auditors have few means to assess whether
borrowers will be able to repay.

Vietnam also has a South Korean-style scandal. In March, a court
upheld death sentences on four people for bribing officials including
the former head of a state bank.

Foreign analysts believe many similar cases of corruption have yet to
come to light.

Then, there are echoes of Thailand. As in Bangkok, many small and
under-capitalised financial institutions have over-extended themselves
in lending to a property market that has gone soggy.

Vietnam's whopping current account deficit (about 15 per cent of gross
domestic product) leaves it exposed to a sudden flight of capital, the
sort of worry that also has made Thai banks shaky.

The most immediate concern is more quirkily Vietnamese. In the past
five years, Vietnam has developed 54 small "joint-stock banks", some
of which are controlled by state firms state-owned companies.

These have found a clever way around credit ceilings imposed by the
central bank, preferring to "confirm", or guarantee, deferred letters
of credit issued by importers, many of whom seem to find other uses
for the cash they earn from selling the imports, leaving the banks to
make good.

The problem came to light in February, when one bank was revealed to
be months behind in meeting its guarantee to a South Korean company.

Most foreign bankers seem ready to give Vietnam the benefit of the
doubt, but what most frightens those wondering about the extent of its
banking crisis is the thought that maybe nobody knows.