Vietnam: A lesson in patience (Financial Times)

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

VIETNAM: A LESSON IN PATIENCE: Companies are finding they need
much more time just getting to know the Vietnamese business environment

By Jeremy Grant, Financial Times
07/08/97
The Financial Post

Dudley Bates, chief representative of Guardian Royal Exchange PLC in
Vietnam, has what the company's personnel folk like to call a "grey-haired
posting."

This is a compliment. When the company was deciding what sort of person
would be best to open its first office there, his age, 53, was what counted.
In Vietnam, like other Confucian-influenced countries in Asia, age commands
respect. And that, Guardian believed, would give Bates a head start in
wooing bureaucrats and winning business.

"The objective was to bring gravitas, to indicate respect to the Ministry
of Finance," he says. His office is decorated with two framed photographs:
one of the British monarch and one of "Uncle Ho," Vietnam's former
president, with his trademark grey goatee.

Bates' appointment indicates the importance the company attached to the
posting. However, in common with many other investors, Guardian has found
Vietnam a tough market. The problems include a tangled legal system,
confused and inefficient bureaucracy, corruption and a weak banking system.
Nor have decades of communist rule helped to instill a sense of commercialism.

Guardian expected to be operating a life assurance joint venture with
a local partner by the end of last year. But that is unlikely for another
two to three years, Bates says, because Hanoi is dawdling over how far
to open up to foreign insurers.

The company is reviewing its staffing needs, as are scores of other investors
whose business expectations have not been met. Among those to have recalled
or reassigned country heads are Polaroid Corp., British construction
companies John Laing PLC and the Keir Group, Barclays Bank PLC and Chrysler
Corp.

Did investors misjudge Vietnam's potential, and if so, how can they avoid
making the same mistake with other emerging markets? And what lessons
are there for companies looking at staffing needs for such markets?

Arno Tomowski was until recently resident representative in Hanoi for
Fried. Krupp AG Hoesch-Krupp, the German industrial conglomerate. Business
did not progress as expected after he arrived in 1995, and he now handles
Vietnam from Jakarta. He says too many investors were affected by the
hype on Vietnam as the region's next "Asian tiger," rather than solid
analysis of potential. "After six months here I got the impression that
many foreigners had a more emotional reaction than a rational assessment."

He draws a parallel with the former east Germany. West German companies
piled into the formerly communist east when the Berlin wall fell in 1990;
when they realized the economy was in far worse shape than first thought,
it was too late.

Companies need to spend more time on the ground getting to know the Vietnamese
business environment, according to Volker Miss, chief representative
for Allianz Zersicherungs AG, the German insurer. "One of the main mistakes
people make is basing their decision to open a business in Vietnam on
a number of short visits. It takes much more than that to learn about
business in this country."

The art of getting to know the local environment has been particularly
well applied by the Japanese trading houses, such as Mitsubishi Corp.,
Tomen Corp., Mitsui & Co. Ltd. and Nichimen Corp. Their approach to emerging
markets is to establish a low-key presence early on, spending the first
year or so gathering information and networking. That has started to
pay dividends in Vietnam. The past 12 months have seen the trading houses
spring into action, snapping up lucrative contracts in infrastructure
and trading.

Another problem is that companies are inherently ill-disposed to bad
news about their chosen prospects. Says Miss: "Once they make a commitment
to an area like Southeast Asia, they announce it in the media, they tell
their shareholders. That makes it difficult for them to back down if
certain marketplaces do not live up to expectations."

That attitude is often fed by country representatives themselves. In
Vietnam, many admit privately that the outlook for their businesses is
bleak. But few dare to report back candidly to headquarters.

"You don't want to give negative news. Otherwise people are going to
ask `is he the right person for the job?' " says one western executive.

The result is that headquarters receives a distorted picture, fuelling
unrealistic expectations, says Miss. "The western business culture is
still not open enough to look at negative news or failures as part of
the learning process. We {westerners} want results and we want them fast."

Given the constraints, picking the right people for emerging markets
positions is clearly difficult. In Vietnam, much has been learned only
through hindsight.

Bates believes companies should think twice about sending in senior staff;
he emphasizes a lack of recreational facilities for senior executives
and their families, and the strain of waiting for things to turn good.
"There is not much that a person of my years can do {here}. To get through
the frustrating parts, you have got to know it is good for your career."

The obvious alternative would be to choose younger executives, more able
to weather the hardships and keen to gain exposure in their organizations.
"A lot of people come here to make a name for themselves. It is part
of a career push," says Rachel Edilson of Inter-Icat, a Hanoi-based
recruitment consultancy.

The choice will largely depend on whether companies take a long- or short-term
view. In Vietnam, where many companies have switched their focus from
making money to containing costs, some say there is an argument for fielding
mature staff with a nose for drumming up business in tricky environments.

Says Tony Foster, chief representative for Freshfields, the London-based
law firm: "If you are doing it as a cost exercise, sending in a young
executive may make sense, but if you're trying to make money it may be
a false economy."