Vietnam Seeks to Lure New Investment


HO CHI MINH CITY, Vietnam -- Relaxing in the garden of his walled villa near the Saigon River, Tran Bach Dang sounds more like a baron of industry than a veteran Marxist revolutionary.

Dang -- a novelist and playwright who once commanded Communist forces in this city, the former capital of South Vietnam -- has investment on his mind.

Tran Bach Dang

"On November 25, 1988, we signed a $2.1 billion contract for a factory to make paper pulp from eucalyptus trees," he says. "In '95 we'll begin building a paper factory. By the year 2000 our paper production will be equal to Thailand's."

Because the eucalyptus can grow in marshes and other wastelands, it can be planted without crowding out rice, vegetables or other valuable crops.

"In five years, a eucalyptus tree will grow as big around as a man can reach," Dang says.

He races enthusiastically through a list of projects Vietnam hopes to work out with foreign investors.

Some -- like a $4 billion scheme that would see an Italian company building a road from Ho Chi Minh City deep into the Mekong Delta, replacing creaky ferries across the two branches of the Mekong River with bridges -- sound fanciful.

But the August 1988 issue of the Ho Chi Minh City monthly Phap Luat -- Law -- published a long list of more modest investments made since 1986. It said that in the first six months after Vietnam announced its new foreign investment code last January, contracts had been signed for projects worth more than $120 million.

The investors come from Japan and Singapore, Hong Kong and the Soviet Union. The projects range from a car rental agency to a ship repair yard, from a garment factory to plants processing shrimp and pineapples for export.

Vietnamese leaders look to foreign investment to provide jobs, to earn hard currencies, to bring in new technology and to soak up excess capacity in the nation's factories, which now operate at just half their capacity on average.

The 1988 investment law is far more liberal than the 1977 code, which attracted few partners from the capitalist world. The new law allows foreign investors to own as much as 100 percent of an enterprise and says investment projects, which are to be protected from nationalization, may be set up for as long as 20 years.

Vietnam also offers labor costs below those of most countries in the region. Monthly pay of 100,000 dong -- generous by current Vietnamese standards -- amounts to less than $25 at the most favorable official exchange rate. One British firm already has moved a window frame factory from Thailand to Vietnam to take advantage of the lower labor costs.

But diplomatic analysts in Bangkok doubt the new code and favorable labor costs will be enough to prompt a rush of investment.

Vietnam has little track record working with foreign investors. And its military involvement in neighboring Cambodia adds an element of uncertainty. That uncertainty is compounded by the fact that the United States has urged economic isolation of Vietnam until its troops are out of Cambodia.

"One has to know what return can be expected and what kinds of troubles and costs have to be paid," says a Japanese observer. "In the Indochinese countries, almost all factors are unpredictable."

Japanese businessmen who have dealt with the Vietnamese, he says, have the impression the Vietnamese are rigid and bureaucratic, and that it is very hard to get them to understand the concept of economic efficiency.

"Despite their words, the government officials actually dealing with matters move very slowly," the observer says. Optimistic promises can vanish in a bureaucratic maze.

Another drawback -- one Vietnamese economists recognize -- is the country's lack of infrastructure. Its electric supply is inadequate, there are few good roads, and port facilities are limited.

One way to minimize these problems, Vietnamese planners believe, is to set up export processing zones in areas where facilities are relatively good. Dang mentions the port cities of Hai Phong, Danang, Vung Tau and Ho Chi Minh City as well as Phu Quoc Island in the Gulf of Thailand.

While it waits for investment from the capitalist world, Vietnam is gaining some experience in producing goods for the world market through joint ventures with the Soviet Union and Eastern Europe.

The Hanoi Leather Shoe Factory makes mostly sneakers -- an increasing number of them for export.

At the Hanoi Leather Shoe Factory, on the outskirts of the Vietnamese capital, most of the 2,000 workers are busy cutting and sewing the tops for sports shoes. Director Pham Ngoc Tue says the tops will be exported to the Soviet Union and East Germany, where soles will be attached.

An agreement with East Germany has provided three-year technical training courses in Germany for some workers and new machinery for the plant, including Seiko sewing machines and special trimmers to taper the edges of the padded cloth used in the shoe tops.

As the product quality has improved, plant managers have begun to look to markets outside the Soviet bloc. Already, Tue says, there have been discussions with South Korean businessmen.

Vietnam also freezes increasing quantities of shrimp and pineapple, which find ready markets in Japan and the Soviet Far East.

Workers unload pineapples at the dock of the Frozen Fruit and Vegetable Enterprise in Can Tho.

Factories like the Frozen Fruit and Vegetable Enterprise in Can Tho have stimulated the growth of pineapple plantations in the surrounding countryside. And its earnings, mostly from sales to the Soviet Union, have allowed it to pay off government loans the factory used to buy modern Japanese quick freezers and cold storage lockers.

But the products of plants like these combined with other exports, such as high-quality coal mined in the North, leave Vietnam with total exports worth less than $1 billion a year.

To make real gains, Vietnam will need larger doses of advanced technology, Dang says.

Vietnam, for example, produces rubber. But if it just sells raw rubber, it will earn little for its efforts.

"We need to process the rubber," Dang says, "To make the tires here."

Vietnam is beginning to produce oil from offshore wells east of Vung Tau, but the depressed world oil market has robbed the black gold of much of its glitter.

"You can't eat oil," Dang says. "You have to eat by oil -- make fertilizer and petrochemicals."

By the end of the century, he says, Vietnam could be producing 20 million tons of oil a year, or about 147 million barrels.

"If we turn that into petrochemical products, it could be a source of wealth," Dang says. But the country must find a way to industrialize. "Otherwise we will just be a colony exporting raw materials."

Text copyright © 1989 The News-Journal, Daytona Beach, Florida

Published Jan. 13, 1989

Photographs copyright © 1989 John Spragens, Jr.

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