VN Business news (May 9-10)

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

May 10: New US ambassador to Vietnam faces battle to draw investors 
May 09: U.S. businesses struggle for Vietnam foothold 
May 09: U.S-Vietnam: McDonald's "Happy Meals" Make Workers Sad 
May 09: Vietnam-Thailand joint commission meets in Hanoi 
May 09: U.S. Ambassador to Vietnam Faces Dissent and Exodus among Businesses
May 09: Vietnam sees trade deal with U.S. as soon as August 


New US ambassador to Vietnam faces battle to draw investors 

WASHINGTON (AFP) - Pete Peterson, the first US ambassador to Hanoi, is
battling to increase US investment in Vietnam after two top US
companies recently scrapped major investment projects.

Last week Chrysler announced that it would not build a
192-million-dollar auto assembly plant in Vietnam. Five months
earlier, Occidental Chemical dropped plans to build a
109-million-dollar plastics factory there.

In backing out, both companies said Vietnamese officials had approved
similar projects that would create competition after assuring them
that it would restrict manufacturing in those areas.

Yet another major project bit the dust last year when US investors
failed to make a down payment on a 234-million-dollar beach resort,
prompting Vietnamese authorities to yank its license.

Those stumbles have not spooked other companies eager to woo 76
million potential consumers and take advantage of an inexpensive
workforce.

"We're here for the long term," said Keith Budge, country manager of
the US software company Oracle. The firm, which is doing business in a
new eight-story building, predicts it will double its 56-member staff
by next year.

Peterson's arrival on Friday came nearly 21 months after the opening
of the US embassy in Hanoi. His counterpart, Vietnam's ambassador to
Washington Le Van Bang, took his post on Tuesday.

On Saturday Peterson is scheduled to hold meetings with staff at the
US embassy, which opened two years ago and now has the largest
personnel of any foreign diplomatic mission here.

The new envoy -- who said he will focus on accounting for the 1,589 US
military personnel still listed as missing in action -- is expected to
keep a low profile during his first weeks on the job.

No official receptions are planned by either the US community or the
Vietnamese until after he presents his credentials to the Vietnamese
Foreign Ministry within the next few days.

Peterson's arrival, coming more than 22 years after the end of the
Vietnam War, was a symbolic return for the man who was jailed,
interrogated and tortured as a prisoner-of-war (POW) for more than
six-and-a-half years, including time he spent in the infamous "Hanoi
Hilton" Hoa Lo prison.

It was Peterson's experience that made him an inspired choice as the
first US ambassador to Hanoi, observers here say.

"With his background, every message will carry the certain knowledge
that here is a former prisoner who has returned to the belly of the
beast," said Sesto Vecchi, a US lawyer who practised in the former
Saigon during the war and returned to that city, renamed Ho Chi Minh
City, in 1994.

Peterson's greatest challenge, another observer said, may be to
overcome the official tensions remaining between the two former
enemies even as the Vietnamese people and the estimated 4,000 US
expatriates show no rancor toward each other.

"At some point, the Vietnamese government has got to get past the idea
that everything the US does is designed to topple the government or
effect radical change," said Michael Scown, an attorney in Ho Chi Minh
City. "And the US government has got to get over its lingering
mistrust that stems from the war."
                 ___________________________________


U.S. businesses struggle for Vietnam foothold 

Mercury News Vietnam Bureau

HANOI -- The downtown Chrysler Corp. showroom that once displayed a
shiny silver Jeep stands empty. The company's American manager has
relocated to Bangkok and the French Colonial villa housing his office
is for rent.

``They will move out in a few days,'' said Mrs. Nghia, the landlady,
as she surveyed a clutter of glossy Chrysler brochures.

Just an hour away, though, another of the Big Three is building a
factory that is rising from the farmland like a mirage. The Ford Motor
Co. plans to assemble trucks and vans here beginning this fall.

``We're on track, on target, on time, on budget,'' said Murray
Gilbert, the Australian country manager for Ford.

As U.S. companies struggle to succeed in this emerging market, few
examples better illustrate Vietnam's promise and pitfalls than the
antithetical choices of Ford and Chrysler.

Last week, Ford began moving engineers and technicians to the factory
in Hai Duong, halfway between Hanoi and the port city of Haiphong. At
the same time, Chrysler confirmed its withdrawal from Vietnam,
claiming the government broke a pledge to limit the number of foreign
companies assembling cars for the tiny local market.

en Chrysler received approval in 1995, ``the government promised it
was going to grant only four licenses,'' said Jodi Armstrong, a
spokeswoman in Chrysler's Asia-Pacific office in Singapore. ``The
bottom line is that the government has issued 14 licenses to
manufacturers from all walks of life.''

Some of those 14 companies are also market leaders such as Toyota
Motor Corp. and Mercedes-Benz A.G., although General Motors Corp. does
not plan to enter the Vietnamese market. That kind of competition
changed Chrysler's mind about the potential payoff of getting into
Vietnam's market early. Some investors believe the pullout proves that
Vietnam's stalled transition from a command economy to a market system
remains too great a gamble for Americans. Unpredictable policy changes
like tripling the number of vehicle joint ventures raises the risk.

Others point to the Ford factory as proof that patient U.S. companies
willing to weather the transition will be in position to reap profits
in the world's 12th most populous country.

``No one knows why Chrysler was cautious and Ford was decisive and
bold,'' said an American observer familiar with both operations.
``Ford made up its mind that it would have a position here and would
not be outflanked by anyone. Chrysler decided there was too much
risk.''

Significantly, the $192 million in pledged investment made Chrysler's
proposed Jeep assembly plant outside Ho Chi Minh City the largest U.S.
project in Vietnam, accounting for one-fourth of total investment.

The cancellation moves Ford's $103 million in pledged investment into
the top spot.

But Ford and the remaining 12 auto companies, all of which will
assemble cars from imported knockdown kits, must compete for a small
customer base. For now, production is strictly for domestic
consumption, but in the future, the companies may export to other
parts of Asia.

The average annual income in Vietnam is $300 with 80 percent of the
population living in the countryside. Most people use bicycles,
pedicabs or motorbikes for transportation. Fewer than 30,000 new
vehicles were sold last year and the market is expected to grow to
about 60,000 by the year 2000, industry analysts said.

The Chrysler factory could have assembled 17,000. Capacity at the Ford
factory is 14,000. All joint ventures in operation would be able to
assemble 180,000 vehicles annually.

``When you start splitting the Vietnamese market, you are talking
about a very small piece of the pie,'' said Chrysler's Armstrong.
``The bottom line is that we want to be profitable.''

Like other U.S. companies here, Chrysler quickly overspent its
start-up budget because of the high cost of rents, telecommunications
and license approvals, said sources familiar with its operation. They
estimate the company spent about $2 million before its pullout,
including bringing in Chairman Robert Eaton for a meeting with Prime
Minister Vo Van Kiet.

``All companies are bleeding money here,'' said an American investor
in Hanoi who did not want to be identified.

Gilbert, who in the 1970s oversaw a start-up Ford factory in Taiwan,
said he is operating within 4 percent of his budget.

He credits his experience in Taiwan during its development phase with
preparing him for Vietnam. ``Some people try to do things too quickly
for the natural process in a country,'' Gilbert said. ``You have to
get used to the pace of doing business.''

For starters, the 35-mile commute from Hanoi to the factory can take
90 minutes on a two-lane road.

The 70-acre site sits amid rice paddies alongside the main north-south
railroad line. Ambassador Pete Peterson, who arrives today, was among
U.S. fighter pilots attempting to bomb that rail line during the war.
He was shot down and captured in this province.

After Ford picked the site, it hired a Vietnamese military team to
remove leftover ordnance, including anti-aircraft rounds and hand
grenades.

he modern factory includes facilities unknown in Vietnamese plants,
such as men's and women's showers and a spacious, sunlit canteen. The
company is advertising for local workers. Some already have traveled
overseas for training.

At the Chrysler office, an office worker said she is job hunting. But
the company still must tie up loose ends, including acceptance of its
withdrawal by the Ministry of Planning and Investment.

An official with Chrysler's Vietnamese joint venture partner told the
government-run Vietnam Investment Review tabloid this week that it had
not been informed of the pullout. He called his company's efforts
``considerable,'' while suggesting Chrysler had spent little money.

Armstrong said Chrysler did notify the Vietnamese partner of its plan
to withdraw. ``Until the market starts to grow and expand, we're going
to put Vietnam on the back burner,'' she said.

Gilbert would not comment on Chrysler. Challenges for Ford remain
formidable, however. Admitted Gilbert: ``We still have to sell cars.''
                 ___________________________________


U.S-Vietnam: McDonald's "Happy Meals" Make Workers Sad

By Farhan Haq
Inter Press Service

NEW YORK, May 09 (IPS) -- Labor monitoring groups say that the health
and rights of hundreds of young Vietnamese women who make toys
distributed by McDonald's, the world's largest retail food chain, have
been severely violated.

The mainly young, female workforce at Keyhinge Toys, a Hong Kong-owned
factory in Da Nang City, Vietnam are forced to work every day for nine
to 10 hours daily, making toys that serve as prizes for McDonald's
"Happy Meals," says the National Labor Committee, a New York-based
labor rights group.

But the Keyhinge workers suffer from wages below minimum levels, and
health conditions so bad that 220 of the workers fell seriously ill
last Feb. 21, from what one study concludes was acetone poisoning.

According to a study conducted by the Hong Kong-based Asia Monitor
Research Center (AMRC) at the factory last month, many Keyhinge
workers earn only an "apprenticeship" salary of 700 dong (or 6 U.S.
cents) an hour, far below Vietnam's legal minimum wage.

Many other workers are only paid 1000 dong, (8 cents), an hour,
according to the Vietnamese newspaper Lao Dong (Labor).

In Vietnamese cities outside of Hanoi and Ho Chi Minh City, the
minimum wage for workers in foreign industries amounts to some $35 a
month; the two largest cities have minimum wages of $50 a month.

The AMRC estimates that a "living wage" adequate to pay for a worker's
housing, meals, and transport would come to about $65 a month --
nearly four times what a Keyhinge worker can make, even if she works
10 hours a day for an entire month.

Yet low wages are not the workers' worst problem, the study alleges.
The study "found that workers were exposed to high amounts of acetone
pollution in the air. In particular, the workers employed in the
painting section of the toy factory are exposed to extremely high
levels of acetone."

Experts have found that prolonged exposure to acetone, a colourless
liquid that works as a solvent, can lead to dizziness, nausea,
headaches and unconsciousness. It may also affect women's menstrual
cycles. Ninety percent of the roughly 1,000 Keyhinge workers are women
between the ages of 17 and 20, the study adds.

In the Feb. 21 incident, the AMRC says, 220 workers were forced to
stop work because of acetone poisoning, which caused 25 workers to
collapse. Three were later admitted to the hospital for emergency
treatment after passing out, the study notes.

The next day, the group adds, some 200 other workers were abruptly
dismissed by Keyhinge's management, in an apparent dispute over
working conditions following the incident.

Chen Wei Qing, deputy director of Keyhinge, later said the workers had
been sent home "temporarily" as a result of a misunderstanding, and
150 workers resumed their jobs on Feb. 24, with 50 others promised to
return by March 6. However, the AMRC could not confirm whether all the
dismissed workers had in fact returned by March 6.

Groups concerned with the health problems, dismissals, and low wages
have taken up the issue not only with Keyhinge, which is wholly owned
by Hong Kong entrepreneurs, but with McDonald's and with M-B Sales, a
Chicago-based contractor which hired Keyhinge to make toys for
McDonald's.

"We believe that in order to undertake concrete measures to rectify
these problems, it is necessary for McDonald's (to) cooperate directly
with occupational health and safety specialists (and local
groups)...in the independent monitoring of its factories," Chan Ka
Wai, a member of the Hong Kong Christian Industrial Committee, wrote
in a letter to McDonald's Hong Kong branch.

McDonald's Restaurants in Hong Kong, however, responded by claiming
that M-B Sales is responsible for all working conditions in its
Chinese and Vietnamese factories. A McDonald's spokesperson told The
Boston Globe that "these are unsubstantiated allegations half a world
away," and described the acetone exposure as "an isolated incident."

An M-B Sales spokeswoman in Chicago told IPS that, although it
contracts for apparel manufacturing overseas, the company is not
involved in toy manufacturing anywhere in the world.

However, Paul Neppes, a senior vice president for M-B Sales in Hong
Kong, met last month with a coalition of groups calling for the safe
production of toys, and assured them, in Chan's words, that "M-B Sales
will look into some of the issues raised."

Charles Kernaghan, director of the National Labor Committee, says that
McDonald's is following a typical pattern by placing the blame on its
contractors and the Keyhinge subcontractor, while denying any
involvement in labor violations. "We've seen this a million times with
companies," he argues.

He adds that the popular Happy Meals promotional campaign -- in which
the toys manufactured in Vietnam and China accompany child-sized meals
-- "should not be based on teenaged girls in Vietnam being forced to
work 70 hours a week, earning just 6 cents an hour and breathing
dangerous poisons."
                 ___________________________________


Vietnam-Thailand joint commission meets in Hanoi 

HANOI (AFP) - A meeting of the Vietnam-Thailand inter-government
economic commission opened here Friday, press reports said.

Thai deputy foreign minister Pitak Intrawithayanunt and Vietnamese
counterpart Vu Khoan attended the meeting expected to discuss ways to
boost bilateral trade which is hoped to reach one billion dollars this
year.

The two countries will also discuss exchange of goods in transit via
Laos.

A separate meeting of the Vietnam-Thailand joint commission on fishing
and maritime order will be held in Hanoi Saturday to discuss ways to
boost joint maritime patrol between the two countries.

The two countries are now working on a draft accord detailing the
patrols, the Vietnam News Agency (VNA) reported earlier.

The idea of having two navies jointly patrolling the area, which
covers about 7,000 square kilometres was reconfirmed during the visit
in March to Vietnam by Thai prime minister Chavalit Yongchaiyudh.

Navies from both countries have periodically arrested fisherman who
have strayed into each other's territorial waters.
                 ___________________________________


U.S. Ambassador to Vietnam Faces Dissent and Exodus among
Businesses

By Kristin Huckshorn
San Jose Mercury News, Calif.

HANOI-- When Pete Peterson arrives today to begin his tenure as U.S.
ambassador to Vietnam, he will find both an American community and a
bilateral relationship in need of strong leadership and a healing
touch. Among the problems facing him:

Total U.S. investment is in a free fall with two blue-chip companies
abandoning major projects, including Chrysler's pullout last week.
Preliminary talks on a bilateral trade pact reveal such a vast gap
between Vietnam and the United States that no accord is expected
before late 1998.

The small U.S. business contingent in Hanoi is riddled with internal
dissent.

And Peterson's own one-year wait for U.S. Senate confirmation
following his nomination by President Clinton highlights the political
baggage still handicapping renewed ties with communist Vietnam.

Against that backdrop, Americans in Vietnam want Peterson, a former
prisoner of war, to take on an ambitious role, playing ambassador,
advocate, therapist and peacemaker.

"People are vesting huge hopes in him," said an American businessman
in Hanoi who did not want his name used. "And that is an indication of
how most Americans view the way things are going here."

Peterson joins an American community estimated at 4,000, including 700
in Hanoi and about 3,000 in Ho Chi Minh City. That compares with
35,000 Americans living in nearby Hong Kong.

The community is expanding, albeit slowly. Three years ago, after the
United States lifted its trade embargo, a Chamber of Commerce formed
in Hanoi with five members. Today, it counts about 200 members. But
after a growth spurt in 1995, only 13 new companies joined last year.

The Ho Chi Minh City chapter, which counts 280 members, is enjoying
steadier expansion largely because the former Saigon operated as a
market economy during the war and remains Vietnam's economic engine.

U.S. citizens who arrived six years ago remember both cities as
frontiers with drab streets, few shops and no American products. "I
will never forget the day `Nescafe' hit town," said Robert Watts, a
computer programmer.

Steve Bruny, a consultant from Fresno who came to Hanoi in 1991, at
first told Vietnamese he was Canadian. "I was embarrassed to say I was
an American," he said. "I did not know how people would react."

Today, from backpackers to embassy officials, Americans report a
remarkable lack of hostility from ordinary Vietnamese. "There is no
bitterness or anger," said Chuck Searcy, director of a U.S.-funded
humanitarian project providing prosthetics for war victims and
children.

But almost two years after the Clinton administration restored
diplomatic relations, mutual distrust still colors official contacts.

"At some point, the Vietnamese government has got to get past the idea
that everything the U.S. does is designed to topple the government or
effect radical change," said Michael Scown, an attorney in Ho Chi Minh
City. "And the U.S. government has got to get over its lingering
mistrust that stems from the war."

Among Vietnamese officials, early enthusiasm toward America's return
is giving way to frustration over slow expansion of political and
economic ties. The president of Vietnam's Chamber of Commerce and
Industry, Doan Duy Thanh, said at a recent gathering that economic
links "have not met our expectations and wishes."

Conversely, U.S. investors criticize Vietnamese leaders for failing to
accelerate economic reform and reduce red tape, and for pervasive
corruption and indecisiveness. Numerous business people, including
non-Americans, privately admit they are scaling back until Vietnam
moves its nascent legal and tax systems toward regional standards and
a more vibrant consumer or export market emerges.

The bleak mood is confirmed by numbers. There are now 61 projects
worth less than $600 million in pledged investment, compared with $1.3
billion in pledged capital eight months ago. That ranks the United
States about 13th overall -- down from sixth just 10 months ago.

Since then, three significant projects have collapsed. Chrysler Corp.
announced it is dropping plans for a $192 million auto assembly plant,
the largest U.S. project in Vietnam. That follows the pullout five
months ago by Occidental Chemical, which was slated to build a $109
million plastics factory. Both companies complained Vietnam licensed
competing projects despite promising to limit manufacturing in those
sectors.

Additionally, a $234 million beach resort project lost its license
last fall when the American investors could not produce a scheduled
down payment. But at least four major U.S. projects are in the
pipeline, said an American with an intimate knowledge of investment in
Vietnam.

A potential market of 76 million consumers, as well as a literate,
low-wage workforce, justifies the risks, some business people said.
"We're here for the long term," said Keith Budge, country manager of
software company Oracle Corp. The company just took over a new
eight-story building and plans to double its staff of 56 within one
year.

In fact, many American investors are as critical of their own
government's policies here as they are of Vietnam's.

The U.S. government has not opened a consulate in Ho Chi Minh City and
continues denying access to financing from institutions like the
Export-Import Bank because Vietnam does not allow free emigration.

Those two issues could become early triumphs for Peterson. He
reportedly is lobbying former colleagues in Congress to approve money
for the consulate, and is pushing the administration for a waiver of
the legislation that ties the free movement of people to some trade
benefits to non-market economies.

Peterson also must unite a divided U.S. business community in Hanoi.
The Chamber of Commerce has spent several meetings bickering over
personal differences. So much hostility surrounded the last officers'
election that non-Americans were recruited to count ballots. One
embassy official called the trend "counterproductive, to say the
least."

Peterson faces a more formidable battle in convincing Vietnamese
leaders that only fundamental reform can produce a trade pact
acceptable to Congress.

Indeed, those negotiations could "raise conflicts and create such a
negative backlash" from Vietnamese officials that the talks would harm
bilateral relations, said Michael Samuels, a former deputy U.S. trade
representative.

Considering the challenges facing Peterson, one investor offered a
suggestion: "What we need is a combination of Mother Teresa and
Superman. I hope he is bringing his cape."
                 ___________________________________


Vietnam sees trade deal with U.S. as soon as August 

Hanoi(Reuter) - Vietnam's official news agency said on Friday that
experts involved in trade negotiations between Hanoi and Washington
believe an agreement is likely to be reached in August.

``The two countries are likely to reach agreement on commerce and the
most-favoured nation (MFN) status by August this year, say experts
involved in the negotiations,'' the Vietnam News Agency (VNA) said.

The agency also said that the two countries had reached a draft
agreement on trade.

However, a U.S. diplomat in Hanoi said the agency was clearly
referring to the fact that the United States had presented Vietnam
with its draft of an eventual agreement.

``That is the only thing that has happened,'' he said, adding that he
was both surprised and delighted to hear that Vietnam was thinking of
agreeing to the draft's terms so soon.

VNA's report was issued shortly after the arrival of the United
States' first ambassador to unified Vietnam, Douglas ``Pete''
Peterson, who said he hoped a trade deal would be agreed soon.

Progress on the accord, which would lead to the MFN trading status
that Vietnam so desperately wants, has been slow since the two
countries normalised relations in mid-1995.

Washington has urged Hanoi to quicken reform, liberalising both its
trade and investment regimes. Vietnam has countered that the United
States should soften its demands on a country still stricken by
poverty.

Two small but symbolic steps towards an accord were taken recently
when Hanoi agreed to repay the United States debts which it inherited
from the former government of South Vietnam and when the two sides
agreed on a treaty on copyright protection.

VNA said that despite the absence of a trade agreement, two-way trade
between Vietnam and the United States had expanded to more than $1
billion in 1996 from $225 million in 1994.

However, it said that the delay in MFN status was a major obstacle to
further development of trade.

``The delay in awarding Vietnam the MFN status by the U.S. has caused
difficulties for Vietnamese businesses in competition with other
countries on the U.S. market and losses to U.S. business interests and
investors...'' it said.
                 ___________________________________