In some cases, profit taxes a re even lower 10% and the periods of profit tax exempt ion and reduction longer 4 years.. Third, the rvisii also deals with thre e issues regrdifr import ta
Trang 1F O R E IG N D IR E C T IN V E S T M E N T IN V IE T N A M
T H E C A S E O F A M E R I C A N F I R M S
In r e c en t year s A me ri can firms have
rapidly increased t h e i r pre sen ce among
foreign firms i n V ie tnam By 1999,
American i n v e s t m e n t w as a m o n g the top
ten l a r ge st in Vietnam By t h e e nd of 2003,
th ere were about 400 A me r i c a n firms in
Vietnam with a total r e g i s t e r e d capital
a m o u n t i n g to US$1308 million, accounting
for 3.54% of the total r e g i s t e r e d FDI in
Vi et nam (MPI report, S e p t e m b e r 2003)
However, co mp ar ed with o t h e r foreign
investors in Vi etnam, A me r i c a n investors
do not a p p e a r to be very successful and
they w e n t out of t he top te n l arge st in
Vi et nam by th e end of 2003 T he ratio of
d is burs ed to r eg is ter ed c ap it a l is very
small, only about 26%, a n d recently some
American firms in V i e t n a m h a ve .had to
either w ithdraw their c a p ita l or increase
t he ir capital The se p h e n o m e n a indicate
not only a g r e at loss on t h e p a r t of
d i s a dv a nt a ge to V i e tn am Th e y ha ve h a d a
notably negative psychological impact on
ot he r foreign firms a n d in ve st o rs who were
i nt er es t ed in inve st i ng i n Vi et nam
T he above s i t u a t i o n h a s raised
i m p o r t a n t questi ons a b o ut t h e n a t u r e of
V i e t n a m ’s FBI regime a n d r e l a t e d policies
and th e evolving s t ra teg ic re sponse s of
° D r , Faculty of Economics, Vietnam National University, Hanoi
P h u n g X u a n N h a
overseas-based t r a n s n a t i o n a l corporations (TNCs), especially American ones? W h a t const rai ns a n d o th e r challenges ha ve the
V ie tnames e a u t h o r i t i e s imposed on American firms? Have t h e American firms made bad j u d g m e n t ’s or is th e Vie tnames e
b us in es s e n v i r o n m e n t to blame? From th e
s t a nd po i n t of A me ri can investors, w h a t
a d v an t a g e s a r e t h e re to invest in V i e t n a m 9 How ha ve g ov e r n m e n t policies a nd practices affected t he i r b us in es s strategies, both a t time of e n tr y a nd d u ri n g
s u b se q ue n t operation? These questions are especially i m p o r t a n t in the context of the recently signed bilateral t r a d e
a g r e e m e n t b e tw ee n Vie tn am and the Uni te d States
The proposed s t u d y exami nes the interact ions b e tw ee n V i e t n a m ’ FDI regime and r e la ted policies a n d the overseas
i nv e s t m en t s t r a t eg i es of American firms It also a nal yz es the s t r e ng t hs and
we ak n es se s of American firms in comparison with o t h e r foreign firms in Vietnam, especially t hos e of J a p a n
I V ie t n a m ’s FD I p o l i c i e s a n d o v e r s e a s
- b a s e d s t r a t e g i e s o f A m e r i c a n firm s
In line with its b r o a d e r program ol economic reform, th e Na tional Assembly o]
16
Trang 2F o r e i g n d ir e c t i n v e s tm e n t in V ie tn a m 17
the Socialist Republic of V ie t na m has
passed t he Foreign I n v e s t m e n t Law in
Vietnam (De ce mbe r 29, 1987) The law
basically a d d r e s s e d t he w e a k ne ss e s of the
1977 r e g ul a ti on a n d provided more
favorable conditions for foreign investors
in Vietnam At the t ime of issuance, the
law was e v a l u a t e d to be a t tr a c t i v e when
compar ed with s imi la r laws of other
regional countries
Unlike t he 1977 regulation, t he 1987
law g u a r a n t e e d not to confiscate and
nationalize legally owned a s se ts of foreign
investors It also c ommi tt ed to provide
equal and fair t r e a t m e n t s to foreign
investors T h e r e a re no m a x i m u m limits on
t he capital s h a r e c on tr ib u te d by the
j o i nt - v e nt u r e e n t e r p r i s e s b u t the
mi ni mu m m us t not be below 30% of the
invested capital Th e law also allowed
i n ve s t m en t forms which are t he n
p re v al en t regionally a n d internationally:
th e bu si nes s cooperation c on tr a ct (BCC),
j o i n t - v e n t u r e e n t e r p r i s e (J/V) a n d 100%
[foreign c apit al e nt er pr is e Profit tax ra te s
a re much lower which v ary a r o u n d 15 -
125% of t he profit Moreover, foreign
invested e n t e r p r i s e s shal l be liable to
m a xi m um profit tax ex empt ion period of 2
iyears from t h a t b eg inni ng with profitable
^business, a n d a 50% profit tax reduction
du r i n g 2 s u b s e q u e n t years In some cases,
profit taxes a re even lower (10%) and the
periods of profit tax exempt ion and
reduction longer (4 years) F u r t h e r m o r e ,
the law p e r m i t s foreign invest ors to re mi t
profit home with t he tax r a t e of 5 to 10%
It is e v i de nt t h a t the Foreign
I n v e s t m e n t Law (1987) is a b r e a k t h r o u g h
w h e n c ompar ed with the 1977 regulation
It reflects the fact t h a t Vie tn am h a s ta ken
a more t r a n s p a r e n t , more p ra gma tic conception about the role of FDI on the development process of national economy Nevert heles s, a f te r an imple me nt at ion period, the law h a s revealed a n u m b e r of
c o n st r ai nt s , c a u s in g troubles to foreign investors For exampl e, t h e law does not allow private sector to directly e n t e r
b u s i n e s s cooperation with foreign investors Domestic investors therefore have to group to become a j o in t- v en tu r e side while foreign investors have to do the
s am e t hi n g to become a foreign side The law does not p e rmi t to account inte re st s paid on loans as costs C ontribution to equity by V i e t n a m e s e side is chiefly land
us e right In addition, o t h e r document s
s u pp o r t i n g t h e i m p l e m e n t a t i o n of t he law were not issued a d e q ua t e l y in a timely
m a n n e r For exampl e, the Decree No 139
by t he M in is t er Council which provides
d etai led ins tr uc ti on on t h e law was only issued 10 m o n t h s af te r the o the r economic laws h a d been issued, m a k in g t he foreign
in v e s t m e n t legal f r a me w or k in Vietnam inc onsi ste nt a n d risky
In 1990, t he Foreign I n v e s t m e n t Law
wa s revised with i m p o r t a n t c hange s m ad e Most notable of all are: liabilities limited
c o mpan ies or s h a r e h o l d e r c ompani es are allowed to c ooperate with foreign investors (excluding some special cases); profit tax privileges a ccompanies with some specific conditions (technology tra ns fe r, proportion
Tap ( hi Khoa học DHQGHN Kinh t c - Luật, T XX So 2 2004
Trang 30 ??o»ds produced for export, volume of
1;bur etc.); i n t e r e s t s a r e accounted as
ijV’.\sment costs Despite the se changes,
tie 1 vised law failed to get rid of such
lm-titions as: i n v e s t m e n t forms not being
civerified, the abse nc e of the stipulation
01 tie c o m pe ns a ti on of the Vietnamese
(0\<*nrnent in case it c au se s d a m a g e s to
tie capital a n d a s s e t s of foreign investors,
t'O itrict control on b a n k account of
fire lịa invest ed compani es, un sui ta bl e
p’oe<t duration Hence, t he National
/ssenblv of V i e t n a m h a d to revise the
IIV »n foreign investm ent for the second
tmi Q December 1992 Th e a m e n d m e n t s
aid s u p p l e m e n t s cover the following
palters: definition of V i et n a m e s e side
(■'Hating of one or more bu si nes ses of
dff'r *nt economic sectors, e st ab li s hme nt
0 '>port processing zones (EPZ) a nd
l'.isn>ss activities in EPZ, the revised law
1^92 s more concrete a n d focusing in some
cfcftuions Pa r ti c ul a rl y, it also provides
r g i l ' t i o n s on ne w types of a t t r a c t i n g and
C'H r i m t i n g i n v e s t m e n t capital Since
a l on g t he course of revising and
(>rrpbting laws a n d o t h e r document s
rgAiling foreign i n v e st m e nt in Vietnam,
r gil itions on the r e p a t r i a t i o n of
ivfS’m e n t c ap i t a l or profits t en d to be
iciei singly strict a nd complicated As a
1‘Silt worries have been raised among
1 viSbrs since 1995-1996, a n d the n u mb e r
( ) re je cts a p pr o v e d w e n t down
(»nũ(erably at t he end of 1996
ỉn o r d e r to solve the above problems
fie n a k e the law more attract ive, in
lo^eiiber 1996, t h e N a t i o n al Assembly of
V i e t n a m a do pt ed t he ne w law on foreign
i n v e s t m e n t by basically a m e n d i n g and
s u p p l e m e n t i n g t h e law on foreign invest ment 1987 a n d its two revisions in
1990 a n d 1992 In addition, t he Na tional
A s s em bl y h a s also revised a n d adopted
m a n y i m p o r t a n t laws such as commerci al law, c o m p a n y law, law oil private
c o m p a n i e s , etc
Key a m e n d m e n t s ma d e u n d e r this revision include t he followings: i n v e s t m e n t privi leges a re l inke d with developrrrent
o r i e n t a t i o n s of t he economy, foreign
i n v e s t o r s a r e allowed to c on tr ib u te capital
in D ong (V ie t na me se c urrency) which h as foreign c u rr e n c y origin, B ui ld- Op er at ion -
T r a n s f e r (ROT) form is diversified with BTC) a n d Bui I d - T r a n s f e r (BT); more
a u t o n o m y given to foreign enter pris es ;
i n v e s t m e n t e n c o u r a g e m e n t a r e a s are
e n l a r g e d (hospital, training ); licensing process is s h o r t e n e d a n d simplified; s t at e
m a n a g e m e n t on foreign i n v e st m en t is more d e c e n tr a li z ed a n d concrete
r e g u l a t i o n s on t h e a r e a s a n d fields where foreign i n v e s t m e n t is encour aged; areas
a n d fields w h e r e foreign i n v e s t m e n t is
re s tr ic t ed; new r e g u l a t i o n s on the
r e d u ct io n a n d e x e m p t i o n of profit tax, for
e x a m p l e , profit t a x c an be e x e mp t e d for at
mo s t 4-8 years; e x e m p t i o n of import duties
on m a c h i n e r y a n d t r a n s p o r t vehicles
sp ecified for in v e s tm e n t projects; reduction
a n d Exemption of r e n t s on land, w a t e r anc
se a a r e a u s ed in i n v e s t m e n t projects undei
t he form of BOT, BTO, BT; investmenl projects in m o u n t a i n o u s , remote anc
h a r d - u p a re as ; r e g u la t i o ns or
Tap ( hi Khoa hot D H Q G H N Kinli rế - Lnậỉ T XX So 2 200*
Trang 4F o r e i g n di reel in v e st m e n I in V i e t n a m
diversification of i n v e s t m e n t forms;
legalization of i n d u s t r i a l zones; li mi t in g
the use of c o n s e n s u s voting in m a k i n g
decisions t h r o u g h t h e B oar d of
M a n a g e m e n t ; r e d u c i n g the t i m e for
e v a l u a t i n g a n d l i ce nsi ng to 60 days
Toge the r wi th t h e s e c h an ge s , a raft of
decrees a n d r e g u l a t i o n s h a s be en
a n n o un ce d to provide specific g u i d a nc e on
the i m p l e m e n t a t i o n of t he law
Recently, u n d e r t h e p r e s s u r e of a s h a r p
drop in FDI in V i e t n a m a n d of a n
increasing c o m p et i ti on from i m p r o v e m e n t s
of i n v e s t m e n t e n v i r o n m e n t s in regional
countries, t h e foreign investment, law h a s
been revised for t h e forth ti me in J u n e ,
2000 The l a t e s t r evis ion h a s i nc lude d two
new articles a n d r e v is e d 20 a rt ic le s in t he
light of de vel opi ng a n d e x p a n d i n g t he
st ip ul at ion of t h e p r e v a i l i n g i n v e s t m e n t
law The revision ma i n l y d ea ls w i t h t h r e e
issue a reas Fir stl y, it includes t he
re gu la tio ns w hi ch help to mi ni mi ze
difficulties, trou b les an d operation risk s of
foreign in ve st ed c o mp a n i e s Th e revisions
ar e on such i s s u e s a s foreign c u r re n c y
balance, o p e n i n g of b a n k a cc o un t in
foreign cou nt ri es, u s e of l a n d a s collater al
for b a n k loans, l a n d c l ea ra nc e, w i t h o u t
recourse principle, g u a r a n t e e bv t he
g ov e r n me n t a n d a p pl ic at io n of foreign
laws In t hi s revision, t h e law h a s been
revised in a wa y t h a t e n l a r g e s the
a ut on omy of foreign in ve st e d c apit al The
direct intervention of the go ve rn me nt on
day-to-day o perations of e nt er pr is es is
removed, s ett ing up a legal f ramework for
both domestic a n d foreign e nt er pri ses to be
suitable w i t h ' international prstict Changes are also ma de on ccnsnss principle, a t ra ns f or m between i me^met
forms, s uspending operation and (OSỈÌĨ
foreign invested e nt er pri ses and e xp’atM
of business cooperation contact, allcH’a i o n f various funds a n d reserves, minimisaion f investment procedures Third, the rvisii also deals with thre e issues regrdifr import tax exemption, remittance ofprot abroad and loss transfer However, the> have not been a ny f u r t h e r guiding cii ulas since then Thus, investors are still noimiH interested in i nvest ing in Vietnam The traditional worry is t h a t the law is fail’ open and clear, while sub-laws try t< lirr incentives a nd m a k e it difficult to imp] me the law
In brief, t h e legal framework Í- foreign i n v e s t m e n t in Vietnan ;
c ha r ac t er iz ed w i t h t he foIl<w ÌA
di s ti ng ui s hi ng fe a tur es : t e mp or ar y ÍIVOỊ inconsistency, f a s t va ri abl e regulation
di scr imination ( b e tw e en foreign firrrs ai local compani es), n o n - t r a n s p a r e n c e lc
i nt e rn a t i o n a l l a ws a n d practices I'he
c o ns tr a in t s h a v e eclipsed invesnie incentives a n d discour aged f»rei|
i n v e s t m e n t c api t al flowing into Vietnim
2 O v e r s e a s - b a s e d s t r a t e g i c
A m e r i c a n f i r m s
F ir ms h a v e b e e n able to s u s t a i n r a p
sales growth, r e d u c e product costs ai improve quality by e n t e r i n g new mỉrke
a n d s et t i n g up o p e r a t i o n s on abroa< T1 firms ha ve to choose t he most fiffceti
T ạ p c h i K h o u họ c D H Q G H N K in h t ế - L u ậ t T XX So 2 2004
Trang 5e n t r y mode s t r a t e g y so t h a t t h e y can
r e m a i n competitive a d v a n t a g e s on foreign
m a r k e t and g e n e r a t e additional profits
The a p p r op ri a te e n t r y s t ra t eg y of t he firms
n ormally considered from t he mode of
e n t r y and r e s u l t s of su per i or m a r k e t and
s t r at eg y can vary because of diff er ent
firms in different countries
According to the firm s t ud ie s (P or te r
1987; Woodcock, Be ami s h a n d Makino,
1994), the selection of an a p p r o p r i a t e e n t r y
mode s t r at egy is crucial and affects the
overall success of a n i n v e s t m e n t in the
foreign m a r k e t s The r e ce nt s t u d y
( Somkia t M a n s u m i t r c h a i , Mich ae l s
Minor a nd S a m e e r P r a s a d , 1999),
e x a m i n ed t h r e e e n t r y modes of Ame ri c an
a n d J a p a n e s e firms: s t a r t u p s (greenfield
inve st men ts ), acquisitions (the p u r c h a s e of
sufficient stock o f an already e x is t in g firm
in or de r to gain control) a n d j o i n t - v e n t u r e
The r es ults of t he s t u d y showed t h a t the
m e a n n u m b e r of s t a r t u p s of t h e u s firms
w as not h i g h e r t h a n t h a t of J a p a n e s e
firms, w h e r e a s t he m e an n u m b e r of
acquisitions of the US c omp an i es w as
g r e a t e r t h a n the m e a n n u m b e r of
acquisitions m a d e by J a p a n e s e firms And,
t he m e an n u m b e r of t h e u s j o i n t - v e n t u r e
was less t h a n t h a t of J a p a n e s e ones Thi s
s t u d y concluded t h a t t h e u s fir ms t e n d to
use acquisitions, followed by j o i n t - v e n t u r e
as p a r t of t h e i r e n t r y mode s t r a t eg y
S t a r t u p s seem to be t he l east a t t r a c t i v e
option J a p a n e s e firms, on t he o t h e r h a n d,
t e n d to prefer j o i n t - v e n t u r e s followed by
acquisitions Again, s t a r t u p s r e m a i n the
l e a s t - p r e f e r r e d option
B as ed on t h e r es u l t s of the s t u d y as
m e n t i o n e d above, it is clear t h a t Ame r ic an firms a r e still not a t t r a c t e d by t h e FDI policy of V i e t n a m , be ca us e the V ie t n a m ' s FDI policy t e n d to favor foreign fir ms to
i nv est in s t a r t u p s a n d j oi nt - v e n t u r e ,
w h e r e a s n ot p e r m i t or e n cou rage acquisitions Therefore, these policies are likely to e n c o u r a g e J a p a n e s e fir ms t h a n
t h a t of A m e r i c a n firms The fact t ha t ,
V i e t n a m ’s FDI policy h a s been
e m p h a s i z i n g t h e g r e a t e r local control of
o pe r a t i o n s of foreign firms, it likely to
r e s u l t in a h i g h e r proportion of joint-
v e n t u r e set up
The o t h e r r e s e a r c h works found t h a t
A m e ri c an a re more inclined to t a k e risks
t h a n t he J a p a n e s e (Hofstede, 1980) In
o r d e r to m i ni mi z e risk, J a p a n e s e fir ms are more likely t h a n Ame ri can firms to t e am
up wi th local c o m p a n i e s (Pan, 1994) a n d to
i n c r e m e n t a l l y i n v e s t in new m a r k e t s (Kagono, N o n a k a , S i k a k i b a r a a nd
O k u m u r a (1985) T h i s c h a r a c t e r is likely
to fit A m e r i c a n doing bus i nes s with the high ri sk y e n v i r o n m e n t in Vie tnam The work (Pan, 1994) also found t h a t t h e r e was
di ff er ent c h a r a c t e r in t he m a n a g e m e n t styles b e t w e e n J a p a n e s e a n d American firms J a p a n e s e m a n a g e r s prefer detailed
n e go t i at i o ns with pote ntia l pa r tn er s ,
w h e r e a s A m e r i c a n firms desire a fastei process, it m e a n s t h a t t he American firms
p re f er qui c ke r i m pl e me n ta t io n This
p e rs o na l it y c an g e n e r a t e problems foi Ame r ic an i nve st or s in V ie tnam, because il
is not e as y to find t he r i g ht local partners
in t he sho rt ti me with the current condition of V i e tn am
I (If) i III K h o a lìỌ( Đ H Q C H N K in h tẽ - L u ậ t T XX Sô 2 200 '
Trang 6F o r e ig n d ir e c t in v e s t m e n t in V i e t n a m 21
The n e x t i m p o r t a n t c h a r a c t e r s t h a t
need to be c o n s i de r e d a r e t he b u s i ne s s
strategy Th i s s t r a t e g y is i n c l ud i ng t he two
main aspects: p ro d uc t io n a n d m a r k e t i n g
activities (Cha rl es, Z e i s A h m a d A h m a d i a n ,
Hailu Reg as sa , 2000) B as e d on t h e r e s u l t s
of compet itive s t u d y b e t w e e n the
American, J a p a n e s e a n d E u r o p e a n firms,
these a u t h o r s c on cl ude d t h a t J a p a n e s e
firms did a q u a l i t y control of p r o d u c t s
b e t t er t h a n t h a t of A m e r i c a n a n d
E ur opea n firms, w h e r e a s t h i s is su e is
believed to be a n i m p o r t a n t c orp ora te
strategy T h e o t h e r s u r v e y found t h a t
board of di re ct or s of A m e r i c a n fir ms is not
concerned m u c h a b o u t q u al i t y issues
Many u s firms h a v e i n i t i a t e d q ua l i t y
progr ams, b u t t h e y also re p or t t h a t t he y
a re not being i m p l e m e n t e d properly Some
use quality a u d its t 0 a s s e s s the resu lts of
the ir p r o g r a m s (Bowles, 1993) In
Vietnam, c o n s u m e r ’s goods m a d e by
J a p a n e s e fi rms a r e likely to favor t h a n
those of A me r i c a n a n d E u r o p e a n firms
because of t h e r e p u t a t i o n a b o u t t he high
quality p r o du c t s of J a p a n e s e firms
M a r k e t i n g s t r a t e g y is ve ry important*
for the firms A n u m b e r of r e s e a r c h e r s
I found t h a t t h e r e we re d if f e r e n t c h a r a c t e r s
in this issue a m o n g A me r i c a n , J a p a n e s e
firms With a s t r o n g c h a r a c t e r of see ki ng
I for n a t u r a l r e s o u r ce s a n d low cost of
inputs, J a p a n e s e i n v e s t m e n t is considered
as " i n p u t - o r i e n t a t e d ” a n d t r a d e promotion
I Conversely, m a i n c h a r a c t e r of A m e r i c a n
investors is looking for t h e size of local
I m a r k e t a s “m a r k e t - o r i e n t a t e d ” a n d
I therefore it r e d u c e s a n i n t e r n a t i o n a l t r a d e
I T hi Khoa họi D H Q G H N , Kinh tê ■ Luật, T XX Sô 2 ,2 0 0 4
(Kojima, 1978) If t h is is accepted,
m a r k e t i n g s t r a t e g y of J a p a n e s e firms is more s u i t a bl e t h a n t h a t of American ones
in t he m a r k e t conditions of Vietnam Because t he c u rr e nt V i e t n a m ’s FDI policies a re a s tr ong s u pp o r t for foreign firms with t he high r a t e of exported
p roduc t s a n d t he local m a r k e t is smal l
However, in t he long t e rm , this s i tuation will be c h a n g e d t owa rd more liberalization
of FDI policies a n d t he increase of local
m a r k e t power This is an i m p or t an t reason
to k eep A m e r ic an i nve st ors stayi ng in
Vi et nam
The o t h e r c o n t e n t of m a r k e t i n g
s t r a t e g y is m a r k e t i n g activities They have been de fi ne d as factors of c u st o m e r
o r i en ta t io n, c ompet itor or ie nta tion a nd
i n t e r - f u n c t i o n a l coordination Some
r e s e a r c h e r s found t h a t J a p a n e s e firms were more c u s t u m e r s oriented in
c o mp ar i so n to Ame ri can or E ur op ea n
c o m p a n i e s a n d have t h u s been very successful in t he c ou nt ri es they have
i nv est ed into ( De shpa nde , Farley, and
W eb st er , 1993) In Vi e tn am , t his c h a r a c t e r
is reflected clearly, J a p a n e s e investors
s t rongly a d a p t t h e i r m a r k e t i n g to
compet itors, product specifications, etc., while A m e r ic an a n d E u r o p e a n ones often
t r a n s f e r “m a r k e t i n g technology” into
V i e t n a m with a little adapt at io n Therefore, m a n y of those technologies are not s u i t a bl e with V i e t na m es e c u l tu r e ( T r u n g Due a n d Tien Hai, 1999) Recently,
a n u m b e r of Ame ri can firms have been
Trang 7c h a ng i ng t he way of m a r k e t i n g for more
s ui ta bl e with V i e t na m es e c o n su me r s such
a s Ford, p &G, Motorola a nd Pepsi/IBC
Th e s t r a t eg y on c u st o m er s uppl ie rs is
also different be twee n American and
J a p a n e s e firms A re c en t s urvey found t h a t
t h e p erformance of i nt e rn a l s uppl ie rs is
di s appoi nting in t e r m s of quality, on- ti me
delivery, cost a n d cooperation Sur vey
re sul ts including w r i t t e n c o mme n ts
indicate t h a t Ame ri can firms are likely to
reduce the n u m b e r of s u pplie rs a n d prefer
to have single or d u a l suppliers It a p p e a r s
t h a t t h e c u s t o m e r - s u p p l i e r re la t io ns h ip is
d eep e ni ng (Hong Y Pa rk, c S u r e n d e r
Reddy, a n d Sa m S a r k a r , 2000) The
conclusion of s urve y sug ges te d t h a t the
c u s t o m e r - s u p p l i e r r e la t io ns hi p h a s been
d e e p en in g in recent years Buyer s are
wo rk in g with fewer suppliers The y do not
c h a n g e t h e ir sup pl ie rs frequently They
involve their suppliers at the early s ta g e of
pro du c t develop ment a nd s h a r e technology
a n d information And the technology is an
i m p o r t a n t factor in e s ta b li s hi ng buyer-
s u p p li e r relationships With th is c har ac te r,
it is no t easy for American firms to S £ t u p
t he c u s t o m e r - s u p p l i e r r e la t ion shi p in
V i e t n a m because almost local s u p p li e rs do
not satisfy the r e q u i r e m e n t s of American
firms Sub se qu en tl y, t he incentive of FDI
policies for foreign investors in e x pa n d i n g
b a c k w a r d a n d f or wa rd linkages is not
a t t r a c t i v e for Ame ric an firms
II T h e c o m p e t i t i v e a d v a n t a g e s o f
A m e r i c a n fir m s in V i e t n a m
After t he us g o v e r n m e n t left the
economic e mb ar g o a gai ns t V i e t n a m in
1994, m a n y A m e r i ca n investors quickly came to V i e t n a m a nd t here we re 30 American r e p r e s e n t a t i v e offices were
e st abl is he d w i t h i n one day after t h e first day of thi s e ven t (George c Herring, 1996) It showed t h a t an i n t e r e s t within the Ame ri can b u s i n e s s c ommu ni ty about
i nv e st me nt o pp o r t u n i t i e s in V i e tn am has ballooned However, as new comer among foreign investors, American firms n eed to
a w ar e t h e i r c ompet itive a d v a n t a g e s in Vietnam Thi s m a t t e r should be considered
in the two aspects: b u s i ne s s e n vi ronme nt and c ontesability of t he firms
1 The b u s i n e s s e n v i r o n m e n t
The b u s i n e s s e n v i r o n m e n t c a n be unde rs tood t h a t it includes all factors that influence a b u s i n e s s process of invest ors Among these factors, we will focus on some main factors r e l a t i n g to the competitive
a d v a nt a g es of American firms in Vietnarr such a s gove rnme nt policies, transportation costs, socio- c u l t u r a l similarities and/oi differences bet wee n Vie tnam and countriei
of foreign investors, a nd customs of loca consumers
Among homo g o ve r nm e nt policies, th<
US g ov e r n m e n t h a s b een the lowest t< support economic e n g a g e m e n t witl
support h a s developed only slowly sinc<
the s t a r t of doirnoi (economic reform)
1986 However, it still r e ma i ns quit*
limited a n d only in the forms 0
h u m a n i t a r i a n aid Th e u s a m b a s s a d o r t Vietnam, Mr Pe te Peterson, in t h interview with t he V i e tn am Economi
Tụp ch i K ho tt họ c Đ H Q G H N K itih té ■ L u iif T XX So 2 20(‘
Trang 8F o r e i g n d ir e c t i n v e s t m e n t in V i e t n a m 2 3
Times, said “we a r e fo rbi dd en to give any
a m o u n t of d e v e l o p m e n t aid for the
Socialist Republic of V i e t n a m A nd we j u s t
only provide t h e h u m a n i t a r i a n aid, with
(VET/Suppl eme nt, J u l y 1997) So, t he u s
governm ent still does not provide export
and i n v e s t m e n t i n s u r a n c e s for Ame ri can
firms in V i e t n a m In opposition, for
J a p a n e s e i nve st or s, t h e i r g o v e r n m e n t
strongly s u p p o r t e d t h e m to V i e t n a m by
giving i n v e s t m e n t i n s u r a n c e s for J a p a n e s e
investors a n d p r ov id in g a lot of
Moreover, u n li ke with t h e u s g o ve r n me n t ,
the J a p a n e s e g o v e r n m e n t often links t h e i r
development aid with i m p r o v e m e n t s of
i n v e s t m e n t co ndi ti ons for J a p a n e s e
investors in V i e t n a m (ODA r eport, IMP
2000) The re fore , t h e s e policies strongly
promot ed J a p a n e s e fi rms to Vie tn am
Thus, A m e r ic an fi rms h a v e less
competitive a d v a n t a g e s t h a n J a p a n e s e
ones in Vi e tna m
From t he V i e t n a m ’s g o v e r n m e n t
policies, t h e r e is no d i s cr i m i n at i o n
b et wee n foreign invest ors T h e r e s u l t s of
recent s u rve y s h o w e d t h a t a n u m b e r of
I American a n d J a p a n e s e m a n a g e r s
I r es ponded mostly t he s a m e r a t e s of
a ns w e r s in receiving t h e s a m e i n v e s t m e n t
incentives a n d p e r f o r m a n c e r e q u i r e m e n t s
I from V i e t n a m e s e g o v e r n m e n t (Mark
Masson, 1998) H owev er , in t e r m of e n t r y
s tra tegy, due to i n v e s t m e n t inc ent iv es of
V i e tn am focus on t h e p romot i on of export
a nd b a c k w a r d - f o r w a r d l inkages, so
I J a p a n e s e fir ms a r e likely to more
competitive a d v a n t a g e s t h a n American companies
Although all foreign investors are
t r e a t e d equally, b u t in t e r m of political viewpoint, the V i e tn am g ov er nme nt is still careful with Ame ric an firms, especially those invest ing in t he key industrial
Therefore, in practice, m a n y American investors have been facing with obstacles
of u n w r i t t e n policies Thi s problem was reflected in the advices of Mr Ly Q u a n g Dieu, former p ri me m in i s t e r of Singapore,
to V i et nam g ov e r n m e n t as follow “you are
t r e a t i n g t he American investors as like aồ the w a r time You invite t h e m coming but
at t he s am e time, you also a m b u s h them
As t he result, the y w i t h d r a w t h e ir capital out of V ie t na m (Do Due Dinh, 2000)
Recently, t he V ie t n a m - U S bilateral
tr ad e a g r e e m e n t h a s been signed, many American invest ors hope that it will create the favorable conditions for t h e m in compet ing with o t h e r foreign firms in Vietnam It is, however, possible to
s uggest t he se c h an g e s are smal l (in the
s ho rt run) because t he us g ov er nme nt still does not provide t he neces sary i ns ura nce s
Nevert heless, in the long run, American firms ma y h a v e more competitive
a dv a n t a g e s in a n u m b e r of economic
energies a n d oil a n d gas industries
T r a n s p o r t a t i o n costs are very
i m p o r t a n t issues for t he firms The fact
Tap chí Khoa học D H Q G H N Kinh tc - Luật, T XX So 2 2004
Trang 9that, a lmo st all J a p a n e s e firms in Vi e tn am
are relocated w it hi n a region, w he r e a s
American com p a n ies com ing from a long
distance, th e re f or e t r a n s p o r t a t i o n costs of
Japanese firm s are likely to lower than
that of A m er ic an companies No netheles s,
this a d v a n t a g e h a s been c h a n g i n g since
the Asian financial crisis in 1.997 and the
event of S e p t e m b e r 11, 2001 because of
many A me ri can firms comes to V i e t n a m
frcm the relocation of t h e i r production
network in the Asia (Nguyen Mi nh Long,
2000)
The differences a n d s imilarities in
socio- c u l t u r a l issues be t we en Vi e tna m
and c ountries of foreign invest ors are also
very i m p o r t a n t for i nc r ea si ng or r educing
the competitive a d v a n t a g e s of foreign
firms in Vie tnam In t h e se issues,
American invest ors a r e likely to ha ve less
competitive a d v a n t a g e s t h a n J a p a n e s e an d
Asian investors, because the socio-cultural
characters of t h e se invest ors a r e quite
similarities with t h a t of V i e t n a m e s e people
Do Due Dinh, 1999) F o r ' example,
Japanese a n d A si an invest ors often h ave
gcoc experiences (personal relationships,
patiổiit a n d indirect words) in c o n t a c t ’ng
w ứ Vietnam g ove rnm en t officials and
[oca p a rt n e r s , while A me ri can investors
piefer to s t r a i g h t f o r w a r d a n d quick ways
111 working with V i e t n a m e s e p a r t n e r s Yet,
this c h a r a c t e r is likely to not s u it a b l e with
Vetnamese culture
In t e r m of c o n s u m e r customs,
AntTJCan products are known as high
q ia it / and durable goods, therefore they
aie interest ed by V i e t n a m e s e consumers
Yet, t h e de sig n a n d ways of produc t delivery a r e n o t s u it a bl e with t h e t a s t e
an d b u y i n g w ay of V ie t n a m e s e people In
c o n t r a s t , J a p a n e s e p r o du c t mostly satisfies the r e q u i r e m e n t s of V i e t n a m e s e
c o n s u m e r s , in whic h especially a b o u t the
r e p u t a t i o n of q u a l i ty a n d de si gn s of t h e ir products It c an be sai d t h a t , in t h e s h o r t
r u n , A me r i c a n fir ms a r e not likely to ha ve the c omp et i ti ve a d v a n t a g e s on the
c o n s u m e r c u st o m s in V ie t na m, especially
in c o m p ar i so n w it h J a p a n e s e compani es
2 C o n t e s t a b i l i t y o f t h e f i r m s
Th e concept of “c o nt es t ab il it y”
e m p h a s i z e s t h e role t h a t potential
c o mpet ition plays in disciplining the
b e h a v i o r of f ir ms (WIR, 1997) It consists
of m a i n factors such as finance, technology (including R&D), a n d m a n a g e r i a l method
In t hi s p a r t , we will anal yz e w h a t
c on te st a bi li ty of Ame ri can firms in
Vi et nam
A me r i c a n inve st ors h a v e been
c onsi de re d as a g r e at pote ntia l in financial sources a m o n g foreign invest ors in the world Th ere fo re , th e y h a v e more
c ompet itive a d v a n t a g e s t h a n o t h e r foreign firms in i m p l e m e n t a t i o n of t h e i r long t e r m
b u s i n e s s s t r a t e g y in Vi et nam In the fact
t h a t , t h e r e a r e m a n y American firms, such
as Ford, p & G, Coca-Cola a n d IBC, who
we re a cc ept ing h e a v y financial loses in
s h o r t t e r m 1 so t h a t t h e y w a n t to obtain a
la r g e r pro por tion of local m a r k e t and monopoly positions in V i e t n a m in the long
te rm A lmos t all A me ri c an investors are looking for long t e r m profits r a t h e r t h a n
Tạp ( hí Khoa học ĐHQGHN, Kinlt t ế - Luật T XX, S ố 2, 2004
Trang 10F o r e ig n d i r e c t in v e s t m e n t in V i e t n a m 2 5
s hort t e r m i n t e r e s t s in V i e t n a m The
s urvey r e s u l t s of A M C H A M a n d J E T R O
(1996) s ho we d t h a t 80% of Ame r ic an
m a n a g e r s a cc ept ed not prof itabl e in the
short ru n O n t h e o t h e r h a n d , 56% of thos e
expected to p rof itabi lity in t h e long r un
The r e s ul t s of firm s t u d y c o n du ct e d by
IWE in 2000 also s t r o n gl y s u p p o r t e d this
trend
Unlike wi th o t h e r foreign investors,
US firms often t r a n s f e r high technologies
to recipient c o u n t r i e s in o r d e r to obta in
monopoly p os itions of n e w m a r k e t T hu s ,
American i nv e s t o r s h a v e more c ompet itive
a d v a n t a g e s in t he h i - t e c h i n d u s t r i e s in
Vietnam such as t e l e co mm un i c at i o ns ,
energies, oil & gas a n d i nf or mat i on
technology T h e s e a d v a n t a g e s will be
s tro ng er a f t e r t h e b i l a t e r a l t r a d e
a g r e e m e n t fully i m p l e m e n t e d And this
f eature h as b e e n a p p r a i s e d is t h a t t h a t
“American fi r ms a r e s t r o n g ones; they
have high technol ogies a n d g r e a t pot e nt ia l
financial r esources, so t h e y h a v e s t r o ng
competitive a d v a n t a g e s in V i e t n a m ”
( Thomas O ’Dore - R e p r e s e n t a t i v e of
CIGNA a n d p r e s i d e n t of A MC H AM in
Hanoi)
Co mp a ri s on wi th o t h e r Asian
investors, m a n a g e r i a l m e t h o d (control
me cha ni s ms ) of A m e r i c a n in ve st o rs is not
likely to be c o n s i d e r e d a s compet itive
a d v a n t a g e s in V i e t n a m According to the
recent s t u d i e s s h o we d t h a t A m e r i c a n firms
often b ri ng t h e i r m o d e r n m a n a g e r i a l
tech ni ques into V i e t n a m (IWE, 2000 a n d
Le D a n h Doa nh , 2001) T h e s e t e c h ni q u es
are highly c h a r a c t e r i z e d by u s i n g the
mod e rn communi cat i on s y st e m- t e l e p h o n e calls, e-mail, i n t e r n e t c onnections or
c o m p ut e r files in t h e i r control m e c h a n i s m s ( Sar ah Boehle, 2000), w h e r e a s t h e s e factors are still very poor a n d high cost in Vietnam
On the o t h e r ha nd, t he m a n a g e r i a l
me thod used in Ame ri can f ir ms ill m a r k e t economies is still new to V ie t n a m because
of the differences in i ns t it ut ion al , orga niz ati onal a n d c u l tu ra l e n v i r on me n t Consequently, it may not be acceptable to the Vie t na me se employees ( m a na g er s ) a n d
re qu ir es e xtensive t r a i n i n g of local employees before they can be effectively used Therefore, the introduction of Such
t echni ques ma y be limited a n d costly or not function efficiently To t h a t extent
m a na ge r ia l me thod of American firrrm is not likely to compet e in Vietnam
In short, a m o n g foreign firms in Vietnam, Ame r ic an investors a re likely to have s t ro ng competitive a d v a n t a g e s in
coniesabilities a b o ut m a n a g e r i a l method However, in t he long ru n, A m e ri c an fi?ms will increase t h e i r contesability in comparison with o t h e r foreign competitors because of t he i m p r ov em e nt s of business
e n v i r o n m e n t in Vietnam
III C o n c l u s i o n s
This s t u d y h a s found a n u m b e r of
a n s w e r s as follows: first, V i e t n a m ’s TDI policies a re more incentives a n d i n discr imi na ti on a m o n g foreign investors However, t h e y are not synchr onous, stable
Tap ( I I I Khoa hạt Đ H Q G H N Kinh t ế - Luật T XX So 2, 2 0 0 4