In the six years since the U.S. established diplomatic relations with Vietnam, the outlook for U.S. businesses there has improved consistently. Now, with last December's implementation of the Bilateral Trade Agreement, the opportunities for U.S. businesses expanded dramatically. That doesn't mean that conducting business in Hanoi is as easy as it is in Hanover or Hartford, but Western business concepts are beginning to be embraced and regulations are becoming increasingly transparent.

"Compared with the mid-1990s, it is now much easier to operate in Vietnam," says Chris Helzer, director of government affairs, Southeast Asia, Nike, in Hanoi. "The government is becoming easier to work with as it gets more experienced in attracting and retaining foreign investment." Jason Liu, general manager of Ford Vietnam in Hanoi, agrees. "The Vietnam government has a positive attitude in working with enterprises in policy development," Liu says. "Government policy is transforming--particularly after the ratification of the U.S.-Vietnam Bilateral Trade Agreement."

Under that agreement, "The U.S. gets increased market access for industrial and agricultural goods, WTO-level protection for U.S. intellectual property, market access for services, protection for U.S. investments and increased transparency in the Vietnamese government," says Adam Sitkoff, executive director of AmCham Hanoi (the American Chamber of Commerce in Hanoi.) The change is so notable Sitkoff predicts, "Vietnam has the potential to become a key American trading partner in the very near future."

Notice the word "partner." It implies a relationship between countries and also between businesses. Perhaps nowhere in Asia is the concept of forming business relationships as strong as in Vietnam. The reason is cultural as well as practical.

According to John McMillan, PhD, professor of international management and economics at the Stanford Graduate School of Business in Stanford, Calif., "Entrepreneurial Vietnamese firms are more willing to trust foreign firms than other small Vietnamese companies." The reasons, he says, are that, "large firms care more about their reputations, are more trustworthy and have better recourse to Vietnamese courts."

The 259 private business owners McMillan surveyed in Vietnam said they selected their partners and customers based upon reputation and information gathered at teahouses and bars regarding financial backgrounds, reliability and personalities. An unscrupulous business could find itself blacklisted by an entire industry, based upon teahouse conversation. These informal checks and balances create a business ethic that helps the market work with relying upon the judicial system. A good customer isn't necessarily the one that pays a high price for your goods, but one who is honest and honors his commitments, McMillan says.

"The major challenge here has been the ability of government officials to understand the laws and their intent," Helzer says. "Additionally, interpretation and enforcement of rules and regulations is inconsistent and varies greatly in the different cities and provinces across the country." That's changing somewhat, as regulations become more transparent.

Implementation of the Bilateral Trade Agreement, along with preparations to join the World Trade Organization, is easing the inconsistencies and causing the Vietnamese to change many of their laws, with active input from the private sector. "New regulations and policies are now updated on the website," Liu says. Additionally, according to trade advisor Tom Travis of Sandler & Travis Trade Advisory Services in Rosenburg, Pa., "A grant was made to an Australian law firm to translate all Vietnamese laws into English."

And, Helzer says, "Trade organizations, such as the U.S.-Vietnam Trade Council, do a good job of keeping their members updated on changes to the legal system." Nonetheless, Liu says, "Ford Vietnam maintains a long-lasting relationship with the associated ministries and a full exposure to the news clippings." Likewise, at Oracle, "We have tax consultants and lawyers who track these developments and provide us with updates on a regular basis," says Stuart Buttar, regional director of market development, South Asia.

But, as in any nation, sometimes there are glitches. When Oracle, "experienced some issues" with the taxation laws, it was able to work with the Department of Taxation to clarify them. "Over all, we're seeing continued improvements in this area," Buttar says. Nonetheless, Liu adds, "Policy transparency and a sense of urgency might require some acceleration."

In any developing nation, corruption is one of the major obstacles to doing business. Buttar says he has seen "significant improvements during the past few years," in that area. "We haven't had too many encounters although there were a few occasions where our shipments were delayed at customs because of our refusal to engage in corrupt practices."

"Vietnam is much less corrupt than many of its neighbors," Helzer says. But personal relationships still play a role in getting things done. For example, government salaries are low so officials lack the incentive to be helpful. "Additionally, many officials seek second jobs to supplement their incomes. Personal relationships can overcome these challenges, and it is very possible to operate in Vietnam without facing corruption if these relationships exist," Helzer says.

The problem has been a lack of managers [as role models] in the workplace. Now, as "an increasing number of Vietnamese workers have benefited from the experience of and training from working with foreign enterprises, more local talent is being groomed," Buttar says. "There also is a growing number of international MBA graduates who have work experience both inside and outside of Vietnam who can assume managerial roles and responsibilities in the Vietnamese marketplace."

Don't expect to operate quite the same way in Vietnam as in other nations, though. "Decisions are generally made from consensus and often very slowly," Buttar says. Thus, "time-frame estimates should be cautions and conservative." As Ford's Liu says, companies interested in operating in Vietnam should, "come in with a robust business model and solid policy with some flexibility." That's good advice in any market.

Sidebar: AmCham Vietnam

The American Chamber of Commerce in Vietnam was founded in 1994 and currently operates out of two offices--Hanoi and Ho Chi Minh City (Saigon). The Chamber's primary objectives include promoting American business in Vietnam through the development of commercial relations between U.S. and Vietnamese companies.

With more than 700 members, including American Express Bank, Coca-Cola, Ernst & Young and Microsoft, the non-profit AmCham is the largest foreign business association in Vietnam.

For more information, contact Adam Sitkoff, executive director of AmCham Hanoi, at 84-4-934-4493. E-mail: amchamhn@pressclub.netam.vn. Or check out the WWW site at : http://www.amchamhanoi.com/

Links

• AmCham Hanoi