American Firms Poised for Deals with Vietnam If Embargo is Lifted

December 13, 1992|By STEVE BURKHOLDER

NEW YORK. — William G. Bardel, a Lehman Brothers managing director with broad experience in Asia, uses the term "domino effect" to describe what would happen if -- or when -- the United States removes its 17-year-old trade embargo on Vietnam.

It's an ironic use of the phrase, but it may be apt, according to the appraisals of observers who, like Mr. Bardel, are watching and waiting alongside market-hungry corporate executives for the lifting of the U.S. embargo on the populous southeast Asian nation.

"If the United States opens up, then we'll have a lot of follow-on consequences for the rest of the world," Mr. Bardel, who oversees Lehman's government advisory activities in the Far East, said in a recent interview.

An end to the ban is seen as a crucial step toward Vietnam's potential economic transformation into what one expert in international finance calls the "next Asian dragon." Throughout the United States, corporations, deal makers and business consultants are waiting on the current or future occupant of the White House to end the embargo and so open what is expected to be a lucrative market for U.S. goods and services.

Normalization of trade relations has been linked by both President Bush and President-elect Clinton to satisfactory cooperation from Vietnam on the issue of American prisoners of war and missing in action from the war that ended in 1975.

Last month, two U.S. senators who visited Vietnam, John Kerry, D-Mass., and Thomas A. Daschle, D-S.D., urged President Bush to ease the trade boycott. Mr. Kerry, chairman of the Senate Select Committee on POW-MIA Affairs, concluded that the delegation he headed had received "significant" cooperation from the Hanoi government in determining the fate of 2,265 Americans for whom there still is no accounting in the Indochina war.

Vietnam's foreign investment policies, begun in 1987 and amended in 1990, are considered by Mr. Bardel and others to be among the most liberal and attractive in Asia. They allow even totally foreign-owned operations to operate in Vietnam. And, significantly, Vietnam has demanded that its state-owned enterprises show profits and seems poised to carry out widespread privatization.

Oil is one of several of Vietnam's natural resources that the Vietnamese government offers as ripe for development with a foreign role. Others include coal, iron ore, bauxite, gold and gems. Vietnam also is seen by American analysts as having strong potential as a market for or producer of telecommunications gear, aircraft, farm equipment, pharmaceuticals, shoes and soft drinks.

Vietnamese officials are not subtle in driving home their argument that U.S. firms are missing out.

"American oil companies may be disappointed on seeing that the Dai Hung -- Big Bear -- oil field is starting to be explored at the first stages without U.S. participation," Vietnam's ambassador to the United Nations, Trinh Xuan Lang, said at a conference last month at the World Trade Institute, an educational arm of the Port Authority of New York and New Jersey. Mr. Lang said that Russia recently invested about $150 million in an oil project with its long-time Southeast Asian ally.

The U.S. embargo has put a pinch on the multi-nation lending agencies, some of which finance long-term commercial development projects, Sesto Vecchi, who has practiced law in Vietnam for eight years, said at the conference.

"This has been a very serious limitation in terms of Vietnam's ability to attract foreign investment," said Mr. Vecchi, a partner in the New York and Bangkok offices of Kaplan, Russin, Vecchi & Kirkwood.

Vietnam, with a population of 67 million people, not only has shown a willingness to open its doors wide to trade with outsiders. It also has done remarkably well in turning away from the economic crisis and near famine of several years ago, even as it exercised the fiscal restraint and inflation control so valued by the IMF, according to one expert on the Vietnamese economy.

David Dollar, the World Bank's senior economist for Vietnam, said at the conference that Vietnam has undergone a swift transition from a socialist command economy to a market model. In 1987, the Hanoi government faced hyperinflation and appeared not to be able to feed its own people, he said.

In the face of that, Vietnam carried out "a very radical price liberalization" and a massive devaluation, Mr. Dollar said. It exercised fiscal restraint to bring inflation under control.

"Vietnam has been able to grow consistently" -- at a rate of 6 percent a year with moderate inflation and with virtually no international aid, he added. Mr. Dollar called that a "remarkable stabilization achievement," in contrast to the experience of Eastern Europe, which continues to suffer economic problems despite massive aid.

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