Thu Khoa Huan St., located in the first district of Ho Chi Minh City, is a narrow street less than six meters wide, but in the past few years it has been plied daily by a flood of large tourist buses.
That's because the street is home to the most important stop for most groups of Taiwan businesspeople visiting Vietnam to explore investment opportunities--the Ho Chi Minh City office of the China External Trade Development Council (CETRA).
There are "ten groups a day, with 10 to 40 people per group," says Huang Chie-yien, the office's deputy director, who is in charge of receiving them.
Taiwan businesspeople have melded for some time into every nook and cranny of the city. Some can be seen tooling along in Cadillacs and Mercedes or slipping in and out of fancy villas, nightclubs and five-star tourist-class hotels--and some busily supervising work, their sleeves rolled up, at construction sites or in earsplitting factories around the country. In the city's fifth and sixth districts, which are as bustling as Taipei's Wanhua night market, they are even easier to spot, sitting on benches and talking business or toting briefcases, shuttling through the crowds.
New investment darling: Taiwan businesspeople have long been noted for their quick wits and fast reflexes. In recent years they have begun moving certain businesses that are no longer profitable in Taiwan overseas, seizing a place of their own in the Southeast Asian investment market. But the pace of their advance on Vietnam seems particularly rapid.
According to Vietnam's National Cooperation and Investment Council, the total foreign investment approved under the country's Foreign Investment Law, enacted in 1988, is nearly US$2.7 billion, of which the R.O.C. accounts for more than US$600 million, putting it in first place.
Actually, that figure is far behind Taiwan's in-vestment in mainland China and other countries in Southeast Asia. In Malaysia, for instance, where it is also the number-one foreign investor, its in-vestment between 1986 and 1991 totaled nearly US$5 billion. However, R.O.C. investment in Thailand, Malaysia, Indonesia and other countries in Southeast Asia has tapered off recently, while that in Vietnam has shown straight-line growth of more than 10 percent a year. Vietnam clearly has become the new darling of Taiwan businesspeople.
Basically, the current wave of investors is part of a larger flow of labor-intensive, downstream industries offshore because of high production costs at home. Textiles, footwear and food processing are the prime movers.
Smart and hard working: Ten times larger than Taiwan in area (330,000 square kilometers) and three times larger in population (65 million), Vietnam is potentially rich in agriculture, forestry, fishery, livestock and minerals and has long been renowned as a rice, rubber and coffee producer. It is the third largest rice exporter in the world and second to none among Southeast Asian countries in terms of its resources.
Labor resources, in particular. Per capita income is just US$200 a year, making labor costs com-parable to those of Indonesia. Pay for a factory worker runs from US$35 to 50 a month. And as for their quality, the common evaluation of Taiwan businesspeople is--intelligent and hard-working, in total contrast to workers in Indonesia, Thailand and Malaysia, who overvalue leisure, prefer to enjoy life and "take off as soon as they get paid."
L.J. Lee, vice president of the Warson Development and Investment Co., who went to Vietnam more than 30 years ago as an engineer in a textile mill, was impressed by the sewing skills of the local female workers: "They have agile hands and are quick on the uptake. They pick things up as soon as they're taught."
Years later, the situation is much the same. At the Sun Kuan Joint Venture Co., which came to Vietnam three years ago to set up a factory for manufacturing beach slippers, all one sees in the workshops, which are filled with the odor of foam plastic, are petite factory workers sitting quietly and deftly sewing away. "Most Vietnamese girls can do a little sewing, and their skill with a sewing machine is just as good as that of women workers in Taiwan," says Henry Su, the firm's deputy general manager.
In addition, an unemployment rate in excess of 20 percent means that job opportunities are highly cherished. Foreign firms, with their good pay and abundant benefits, are especially attractive and thus able to hire workers of fairly high quality.
More than a fifth of the 500-plus employees at Sun Kuan Co. are college graduates, and their average educational level is high school. "A few workers have been fired over the past couple of years, but nobody has quit," Su says. The factory achieved full production its very first year, turning out more than two million pairs of slippers during the busy season.
Getting across in Taiwanese: Similarity in cultural background is another plus attracting Taiwan businesspeople to Vietnam.
The first impression many travelers from Taiwan have when they arrive in Vietnam is often, "How come it's so much like Taiwan?" Vietnam and China have long and deep ties. Vietnam was considered a part of Chinese territory for as long as a thousand years, going back to the Chin and Han Dynasties, just before the Christian era. The people share similar habits and customs with us, such as celebrating the lunar new year, steaming rice in bamboo leaves on the Dragon Boat Festival, eating moon cakes on the Mid Autumn Festival, burning incense to the Buddha on the first and fifteenth of each lunar month . . . even the script and the language have been deeply influenced by Chinese.
Throughout the period of Chinese domination, classical Chinese was the country's official language and the main vehicle for philosophy, poetry and history, being replaced by Vietnamese only in the 15th century. The script remained Chinese right up to the early 20th century, when the present romanized system was adopted.
The Chinese coloring of Vietnam was diluted under French colonial rule, when the Chinese language and culture were suppressed, but large numbers of ethnic Chinese immigrated there earlier this century because of war and unrest at home. Before reunification in 1975, there were around a million ethnic Chinese in Saigon, fully one fourth of its population, and even though many fled the subsequent imposition of communism, around 400,000 or 500,000 still remain in what is now Ho Chi Minh City.
Ethnic Chinese have played an important role as intermediaries in helping Taiwan businesspeople break into Vietnam. The language barrier is the most common problem Taiwan businesspeople face when investing overseas, but that has been relieved to a considerable extent thanks to the many ethnic Chinese who serve as translators. On the streets of the Chinese section--the fifth and sixth districts--of Ho Chi Minh City, businesspeople can even "get their meaning across in Taiwanese" because there are so many immigrants from Fukien Province, who speak the same dialect, enabling them to charge off and talk business on their own.
Late start, large strides: Compared with most other countries in Southeast Asia, Vietnam is a rather special case because of its background as a socialist country, and that has given pause to some Taiwan businesspeople.
Politically, Vietnam has suffered a hard fate, undergoing 83 years of colonization, 25 years of civil war and 17 years of communist rule. In the international sphere, it has been subject to U.S. imposed trade sanctions for over a decade, and the breakup of its socialist partners the Soviet Union and the countries of Eastern Europe has left it practically isolated.
When the Vietnamese government realized that it couldn't keep letting the country "slip toward poverty with their eyes closed" and decided to shift their efforts from the battlefield to the marketplace, Taiwan businesspeople, who were sick of anti- Chinese sentiment in other countries of Southeast Asia and the policy flip-flops of the Chinese Communists, sat up and took note.
"Vietnam's economic reform policy is modeled on that of the Chinese Communists, but it's more thorough and bold," indicates Hsieh Tzung-lin, an associate researcher in the Mainland Economic Research Institute of the Chung Hua Institution for Economic Research.
The Chinese Communists, for instance, moved partially toward free markets while still maintaining the economic planning of a communist system. Commodity prices and exchange rates are still government controlled, unable to adjust in accordance with market efficiency.
"When Vietnam initiated economic reforms, it freed up prices, interest rates and exchange rates all in one fell swoop, going thoroughly free market," Hsieh says, comparing the two. Inflation hit 1,000 percent at first, but by 1989--except for electricity, shipping, postage and fuel -- commodity prices, including that of rice, had stabilized, and inflation last year fell to below 30 percent.
Business trips spur tourism: "Inflation is still pretty high, but they've done a great job. Very few countries could have achieved what they have in a short four years." It's a point Huang Chie-yien never forgets to stress when introducing the Vietnam investment environment to businesspeople from Taiwan.
CETRA has played a major role in Vietnam's opening ever since it began, organizing tour groups to explore trade possibilities and participating in the main trade show in Ho Chi Minh City, the Quangtrung Fair. This November it set out on its own and sponsored a trade show with more than 30 firms from Taiwan that was comparable in scale and prestige with Quangtrung.
R.O.C.-Vietnam diplomatic relations have been spurred by the pickup in economic dealings. Late this year the Ministry of Foreign Affairs set up an office in Hanoi, the political capital, and another in Ho Chi Minh City, the business capital. Direct air links were opened in September, the four weekly flights bringing Vietnam 500 to 600 Taiwan tourists a week.
Rich in cash and lavish spenders, the visitors have not only brought technology and capital to local factories but have also stimulated commercial businesses. Huge neon signs for karaoke parlors and seafood restaurants are a new addition to the Ho Chi Minh City street scene in the past year or two. Vung Tan, a seaside resort about a three hour's drive away, becomes a gourmet heaven for Taiwan visitors as soon as summer arrives. "You people are going to eat up all our seafood pretty soon," a local jokes.
Doubling costs: Still, a different system means different customs and ways of doing things. Foreign investors inevitably have to spend some time adjusting and feeling things out.
Besides the problems that commonly plague countries with retarded economic development, such as poor public infrastructure (utilities, communication, transportation and shipping), legal flaws and administrative inefficiency, the difficulty most commonly encountered by Taiwan businesspeople in Vietnam is failing to get a hold on costs and the progress of work.
Under the Foreign Investment Law, foreign investments in Vietnam are categorized into three types: sole investments, joint ventures and contracted cooperation. The first type is for export production only or for factories capable of upgrading local industry standards. Review is strict and investors are excluded from tax exemptions, tax reductions or other financial benefits. As a result, most people opt for the last two kinds.
However, almost all Vietnamese firms are state run, so that "the people you work with have no decision-making power. They're always running off for directions from their superiors," according to Tsao Chen-ya, general manager of the Yao Teh Group, a real estate and construction firm that built the first glass-wall office high-rise in Vietnam. "When they hold a meeting with you, they take out a notebook and pencil, jot down your questions, go back to report and give you a response the next time around."
All the back and forth more than doubles meetings. For businesspeople accustomed to treasuring time and seizing business opportunities, the delay means wasted costs and lost profit. The Yao Teh Group, which had intended to open a tourist resort in a prime scenic area, has had to slow down and put its plan on hold.
Firms investing in Vietnam often run up against temporary work stoppages or cost overruns because their cooperating partners are tight on capital. When Ve Wong Corp., which owned a factory making monosodium glutamate and instant noodles before the Communists took power, returned to Vietnam last year, they picked and chose and finally decided to run a joint operation with the Ho Chi City Food Co. They originally planned on finishing the factory in a year, but since their partner was short on capital, they had to extend construction another year.
That's why Huang Chi-yien urges Taiwan businesspeople who visit his center to make sure they find out what their partner's financial situation is and "double your estimate of time and cost."
Costly shortcuts: Of course, some Taiwan businesspeople look for shortcuts, increasing their risk.
Vietnamese law stipulates that foreigners may not buy land, for instance--they have to rent it or enter into joint operation with the owner. Rents have soared recently and rental periods usually run only 20 years, so some Taiwan businesspeople have tried to find locals to serve as figureheads and buy land under their names. The result is that "some of them have been found out by the Vietnamese government. Their investments have been expropriated and they've been blacklisted," Huang says. Others have been duped by their figureheads, who bought farmland that cannot be converted to industrial use.
Similar situations frequently occur in cooperative ventures. To avoid paying the 10 to 40 percent operating task, many Taiwan businesspeople hire a Vietnamese to register and set up the company, while they serve under the name of advisors. "If they're not careful, the company gets gobbled up by their partner," says Lai Wu-yung, who is involved in the travel industry. He has a friend that happened to. Since his friend had violated the law first, he had no basis to take his partner to court. It made him so angry he had a heart attack and returned to Taiwan. Lai warns businesspeople who cooperate with locals: Don't forget to go to court and get it notarized that it's really your business.
To smooth things out, some Taiwan investors have even adopted the expedient measure of entering into "joint marriage ventures"--taking a Vietnamese wife. Bigamy is not a crime in Vietnam, and given the twin pressures of loneliness over-seas and "business considerations," quite a few have actually gone down this treacherous "primrose path."
Gold in the streets, but traps all around: Failing to perform a careful evaluation of the market and the investment climate beforehand has caused more than a few Taiwan businesses to trip up. Fish farming is a prime example. Looking greedily on the unpolluted water and the lengthy Vietnamese coastline of more than 1,000 kilometers, some fish farmers happily trooped off there expecting to build a second spring. "We raised fish and shrimp for six months, but the ponds were plum empty," one of them laments. It turns out that the locals were just too poor and had simply walked off with the food at hand.
A lumber exporting firm had to pay for a costly education in the local market situation as well. Vietnam has been slow to exploit its forestry resources and still has many precious virgin forests, which have attracted logging companies like flies. As soon as he arrived, the businessman in question bought a stand of fine timber at a low price and eagerly had it shipped back to Taiwan. It was only after they cut it open that they found it was laced with bullets. It turns out that the area had been the scene of fierce fighting during the Vietnam War. The bark had healed over but the bullets had remained stuck inside, making the whole batch worthless.
Examples like this are too numerous to count. Businesspeople with experience say the Vietnam market "looks like the streets are covered with gold but actually they're full of traps."
If that's the case, why do so many of them stick it out and why are so many new ones scrambling to get in? "We're stuck--in for a penny, in for a pound," some say, but Chang Hsien-wen, general manager of the Tan Thuan Export Processing Zone, analyzes that, "everyone wants to get in first and grab the market." Vietnam's average economic growth rate of nine percent a year and its market potential of 65 million people is a huge magnet.
Foundation work: Given that frame of mind, smaller firms slip in wherever they can, while the well-heeled larger ones, such as Central Trading Development Co., take an even more active approach. One of its investments is the Tan Thuan Export Processing Zone, which is modeled on the Kaohsiung Export Processing Zone and occupies more than 300 hectares. It has set up the Hua Sheng Co. of Vietnam, which is responsible for its investments there, and it has even bigger plans in mind, such as building 17 kilometers of high-speed roads, facilitating the development of five coastal communities, building a 6.75 million watt electric power plant and creating a 60,000 hectare timberland.
To consolidate their investments and get a better grip on what they're doing, many Taiwan businesspeople have made in-depth plans to adjust to local life. Learning Vietnamese is the first task.
Seven o'clock in the evening is when most Vietnamese sit in a doorway or at street side drinking coffee and chatting. But that's just when two Taiwan employees of Ve Wong Corp., having grabbed a shower and a quick bite to eat after work, sit down at a conference table with their teacher and repeat "I want a cup of coffee" and other sentences in Vietnamese. "Learning the language is not only for making it easier to live here but also in preparation for managing workers later on," says white-haired Peng Shuang-ying, administrative manager, who tirelessly does his homework each night.
Vietnam has no lack of ethnic Chinese translators, but "with all the investment from Hong Kong and Taiwan in the past few years, they're in high demand. There have a lot of job opportunities and they skip around a lot," Henry Su says. "It's better to learn the language yourself, so you can communicate with the workers directly when you have to."
Plow deeply for a rich harvest: The hard ship has its rewards. "When I came to Vietnam three years ago," Su continues, "I was still in my twenties, and the general manager and the vice manager of a company in the same line were in their early thirties. The three of us designed and completed the whole thing--construction of the factories, arrangement of the work flow and purchasing of equipment and facilities, everything from desk chairs to exhaust pipes and dust bins. The sense of accomplishment is really fantastic."
Putting down roots to achieve growth. Overcoming difficulties to create a sense of accomplishment. These are the tenets that give heart to most Taiwan businesspeople in Vietnam, who climb up despite being knocked down and are bolder with each set back. Isn't that a reappearance of the spirit that has led the Republic of China over the past 40 years to create its economic miracle?
[Picture Caption]
The first glass-walled high-rise in Ho Chi Minh City was built by a firm from Taiwan. Is there going to be a repeat of the Taiwan experience?
Taiwan products had entered the Vietnamese market even before reunification.
A hodgepodge of motorcycles, bicycles and pedicabs--look familiar?
The streets of Ho Chi Minh City are bustling with economic activity.
Steep inflation has severely depreciated the currency, making counting money quite a chore.
A growing economy and greater job opportunities have meant an increase in the number of motorcycles, the main means of transportation for workers.
Abundant and low-cost labor is one of the main reasons Taiwan businesses are going to Vietnam.
Vietnam has moved from the battlefield to the marketplace and joined the Asian economic race. Here a guard with a loaded rifle stands watch in front of a factory.
Low-rent land has allowed Taiwan firms to devote large sums to building factory facilities.
Vietnamese female workers are dexterous and hard working, reminiscent of their counterparts in Taiwan.
The five-man team from Ve Wong who went back to Vietnam to set up a factory are full of confidence that they can win back the company's market share.
The wife of Vice President L. J. Lee of the Warson Development and Investment Co. is his valued companion in Vietnam.
Taiwan businesspeople introduced Vietnam to karaoke. Here a few of them get together with local ethnic Chinese to celebrate Double Ten, the R.O.C. national day.
A growing economy and greater job opportunities have meant an increase in the number of motorcycles, the main means of transportation for workers.
Abundant and low-cost labor is one of the main reasons Taiwan businesses are going to Vietnam.
Vietnam has moved from the battlefield to the marketplace and joined the Asian economic race. Here a guard with a loaded rifle stands watch in front of a factory.
Low-rent land has allowed Taiwan firms to devote large sums to building factory facilities.
Vietnamese female workers are dexterous and hard working, reminiscent of their counterparts in Taiwan.
The five-man team from Ve Wong who went back to Vietnam to set up a factory are full of confidence that they can win back the company's market share.
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