U.S. firms move quickly as Vietnam embargo ends

February 05, 1994|By Ian Johnson | Ian Johnson,New York Bureau of The Sun

NEW YORK -- The Vietnam War may still evoke bitter memories for millions of Americans, but many U.S. businesses had little time for sentiment yesterday as they moved aggressively to take advantage of the end of trade sanctions.

President Clinton's announcement Thursday that the United States would lift its 19-year trade embargo triggered a blizzard of long-planned business deals in Vietnam, one of Southeast Asia's fastest-growing economies.

More than 40 companies were prepared for the announcement, and most immediately moved to open or expand offices in the Communist country.

"This is a significant opportunity for U.S. banks. Vietnam is a rapidly expanding economy and could be one of the next Malaysia- or Thailand-type success stories," said Ken Campbell, a spokesman for Citibank, which had prepared for the announcement by establishing a representative office in Hanoi last year.

With Mr. Clinton's announcement, Citibank can now upgrade the office to a branch and begin lending money to companies active in Vietnam, Mr. Campbell said. The New York-based bank began that process yesterday and will have operations open shortly, he said.

Other companies were even faster to take advantage of the new trading opportunities. Pepsi started bottling its cola in Vietnam just hours after Mr. Clinton's announcement.

But some organizations were less enthusiastic about the development. Veterans' groups warned of a possible boycott of businesses that dived into the Vietnam market, while economists predicted that business would not be as rosy as imagined.

"Business issues played a disproportionate role in the decision. There was always talk of losing out business to other countries, but I don't see how American business is losing out when it's just a country with a per capita income of $200," said Phil Budahn of the American Legion.

Some experts agree that Vietnam is hardly an economic powerhouse.

"This is like China was 15 years ago. It's starting a serious reform program, but you've got to remember that big money is only just starting to be made in China now," said Tom Tull, an investment adviser specializing in Asian economies for Gulfstream Global Investors.

Mr. Tull, a Vietnam veteran, said he empathized with those who want to avoid investing because of the war, but said he supports investment. At some point the war has to be put behind the

United States, he said, adding that more economic contact could help open the country politically.

And despite Vietnam's low standard of living and fledgling economic reforms, Mr. Tull said, opportunities for business exist.

One reason, he said, is that the Vietnamese government and foreign companies building factories in Vietnam will need manufacturing equipment and energy supplies.

This opens the way for heavy equipment companies like Caterpillar Inc. and General Electric Co.

In addition, Vietnam's per capital income may be deceptive. Although usually cited as about $200, no systematic economic survey of the country has been made, and the figure is considered a low estimate. And like the Chinese, who also have a low per capita income, the Vietnamese may actually have more money to spend on consumer goods than the figures estimate because they are big savers and pay little for housing and food.

"People are buying things. Stores are filled with televisions, air conditioners and fans," said Virginia Foote, chairwoman of the U.S.-Vietnam Trade Council. "There are private homes going up all over the country."

On top of that is a dynamic ethnic Chinese population centered in Ho Chi Minh City, formerly Saigon. Chinese from Hong Kong, Taiwan, Singapore and the People's Republic of China are investing heavily in that part of the country, helping to boost the standard of living and creating further opportunities for other businesses.

The World Bank estimates the economy will grow between 7 and 9 percent this year after growing 7 percent last year. Inflation is low for a developing country, at 5 to 6 percent. Foreign trade, while small by developed-country standards, was $5 billion last year and is due to grow 40 percent to $7 billion this year, according to the U.S.-Vietnam Trade Council.

Pepsi said that sort of economic growth translates into 20 percent annual growth in the soft drink business. Vietnamese citizens will be able to afford the products because Pepsi is selling a small bottle for 12 cents to 15 cents instead of the 60 cents for imported colas. Pepsi plans to increase its bottling capacity in Vietnam to perhaps 20 million a year, double its current capacity.

The New York-based beverage and fast food company had laid the groundwork for its quick entrance into the market by coming to an agreement last month with International Beverages Co., Vietnam's largest bottling company.

Shortly after Pepsi announced that it had started production, Coca-Cola Co. said it was rushing materials to Vietnam and would start importing Coke from neighboring countries.

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