Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, July 12, 1995                   TAG: 9507140004
SECTION: BUSINESS                    PAGE: C-8   EDITION: METRO 
SOURCE: Bloomberg Business News
DATELINE: HANOI                                LENGTH: Medium

BUSINESS WON'T BE EASY, EVEN WITH NORMAL TIES

It won't make that field any less rugged.

``Whatever impediments and disincentives that already exist in Vietnam will remain,'' said Michael Hagan, Hanoi-based partner of law firm Coudert Brothers.

Full diplomatic relations, an embassy and commercial section will make it easier for U.S. companies to do business in what many expect will be Asia's next tiger economy. Vietnam's economy is already growing 9 percent annually.

Vietnam will still be rife with obstacles.

``The problems companies face in Vietnam in no way have anything to do with normalization,'' said Greg Craft, a Hanoi-based business consultant advising Ford Motor Co. and energy industry equipment supplier Dresser Industries.

The country remains largely undeveloped. Its infrastructure is antiquated and straining to cope with breakneck growth in an economy that is still largely agrarian. Its legal system is rudimentary.

Many U.S. investors won't feel completely at ease in Vietnam until the two sides agreed on investment treaties, tax accords and trade negotiations - and those are at least a year away, analysts said.

``I think most of the serious players are already here in Vietnam,'' said Al DeMattesis, chairman of the unofficial American Chamber of Commerce in Hanoi.

And those big players -- they include Coca-Cola Co., Pepsico Inc. and Gillette Co. -- aren't yet huge investors.

Direct foreign investment from America stands at only $555 million since the lifting of U.S. trade embargo in February 1994. That compares with nearly $13 billion worth of direct investment since Vietnam opened its doors to foreigners in 1989.

Reluctance also stems from the copious red tape that accompanies Vietnam's unspoiled surroundings. A property developer, for example, needs a foreign investment license and then up to 20 other land and building permits.

``Despite the government's public call for reform, there is still no one-stop shop for investors,'' said Hagan.

Lack of basic infrastructure also frustrates investors. New York builder Al DeMatteis recently scaled down plans for a $20 million beach resort on China Beach, near Da Nang, to a modest villa development for expatriates. Leon D. DeMatteis Construction Corp. developed and built the United Nations Plaza Towers in New York.

DeMatteis, who is also building an office tower on Hanoi's West Lake, cited lack of infrastructure and pending industrial parks as the reason why he's not prepared to make a heavy bet on Danang just yet.

Ray Goff, Anheuser-Busch president for Asia, described the investment environment here as ``difficult.'' After an 18-month search, the maker of Budweiser beer recently linked up with a foreign partner that's managed to set up in Vietnam. Goff said while Anheuser plans to eventually build a brewery in Vietnam, it could be a slow haul.

Normalization will help U.S. companies like Anheuser-Busch open financing avenues previously closed to them. With recognition companies can now qualify for financing assistance from the U.S. Export-Import Bank and the federal insurer Overseas Private Investment Corp.

America's largest long-distance phone company, AT&T Corp., for example, has provided telephone service to Vietnam since 1992 but has been unable to win lucrative telecommunications equipment contracts because of financing problems.

Earth-moving equipment supplier Caterpillar Inc., which has a joint venture in Vietnam called V-Trac, also believes financing will allow itself and other companies to compete with Japan, Korea and West European companies for business in Vietnam.

Others hope that normalization will speed up pending investment licenses. Chrysler Corp. and Ford Motor Co. are both competing to build vehicle assembly plants.