Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, December 22, 1994 TAG: 9412220090
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: HANOI, VIETNAM LENGTH: Medium
As founder and president of the Vietnam-American Chamber of Commerce, Irwin Jay Robinson expected a warmer welcome from the cash-hungry Vietnamese.
Robinson had publicly opposed U.S. economic sanctions against Vietnam and had held a dinner in New York for Foreign Minister Nguyen Manh Cam. So when he asked members of Vietnam's own Chamber of Commerce and Industry to talk with a group of well-heeled American visitors, their refusal stunned him.
``I begged them to help me out,'' he said. Robinson called the effort ``a nightmare of frustration.''
Since Vietnam opened up to non-communist investors in the late 1980s, foreigners drawn by cheap labor, low inflation and fast economic growth have pledged to spend more than $10 billion here.
U.S. companies have committed $258 million of the total since Washington lifted its economic embargo on Vietnam in February.
But a large number of foreign investors share Robinson's bewilderment with the Vietnamese bureaucracy. They say maddening approval procedures, a shortage of laws and a rapacious attitude toward foreigners have slowed both sides' progress on the path to profit.
If Vietnam doesn't improve investment conditions soon, it risks falling further behind Thailand, Indonesia and other Southeast Asian nations in its quest for foreign capital.
The problems are easily identified.
When the World Hotel, a Hong Kong enterprise, opened in Ho Chi Minh City in October, its 541 rooms and 700 Vietnamese workers made it Vietnam's biggest. But a few days later, manager Nixon Chung received a tax bill for $2 million, far more than the $240,000 tax he expected.
The city used a different calculation to arrive at the higher amount, Chung said. He is disputing the bill, but other foreign companies have had the same experience.
The situation became worse when the city government blocked the new hotel from leasing its office and retail space beyond next April. Chung said it didn't matter that the hotel already had approval for longer leases from the country's highest authority for foreign investment, the State Committee for Cooperation and Investment.
As a result, Chung predicted, the new hotel will see little of the $1.4 million it expected in rental income during its first year.The state committee touts itself as the only place investors need apply for project licenses, but business people blame delays and higher costs on other authorities who interfere.
For example, BBI Investment Group, an American company, plans to build a $232 million resort on famed China Beach near the central city of Danang.
``We had to get comments from almost every single ministry I've ever heard of,'' said Stewart Stemple, BBI's director in Vietnam.
Businesses also have run up against Vietnam's inadequate laws.
The absence of a mortgage law means foreign banks cannot accept rights to use land as collateral for loans. The land itself belongs to the state and cannot be bought or sold, so many construction projects are languishing for lack of funds.
In addition, Vietnam won't have a mining law until at least next year. Thus, foreign companies exploring for minerals have no guarantee of obtaining investment licenses if they make a discovery, says Howard Feilding, the Vietnam manager for Australia's Portman Mining Ltd.
Investors acknowledge that conditions are getting better. Vietnamese technocrats realize the need to adopt Western accounting standards, and officials are improving the handling of bids for infrastructure projects.
Still, foreigners say many investments rest on unrealistic appraisals of their Vietnamese partners' contributions to joint ventures.
In such ventures, the local firm's share usually takes the form of land-use rights. Vietnamese often inflate land and property values to reach their desired 30 percent share in a project. Foreign partners play along.
``Basically, they realize they have to give away 30 percent,'' said Mark Lockwood, a lawyer with the U.S. firm Baker & Mc-Kenzie. ``That's the price of doing business.''
by CNB