From: vinsight@netcom.com (Vietnam Insight)
Subject: VI: The uncertainty of investment in VN
Originator: daemon@media-lab.media.mit.edu
Reply-To: vinsight@netcom.com
Organization: SCV Relay
Date: Wed, 11 Nov 1992 18:43:52 GMT



*************
A Warning to Foreign Investors
************


    On many occasions, we have argued against foreign investment on moral 
grounds.  Moral arguments are not, however, the only ones that can be 
made against investment in Vietnam.  For now, we will set aside moral
considerations, and look at the issue of investment in Vietnam strictly 
from the perspective of a business decision.

    There is one overriding consideration when deciding whether or not to 
invest in a country: stability.  Before sinking millions of dollars into 
a country, the investor wants to be confident that the situation will not 
change unpredictably and radically.  This stability can come in many 
forms, two of which we will cover in this article: political stability 
and stability of policy.  Everyone knows what political stability is.  
Stability of policy is the likelihood that current government policies 
will continue in the future.  So how does Vietnam rate ?

STABILITY OF POLICY:

Hanoi currently has an Open Door policy.  Investment laws have been
liberalized, there are some economic reforms being made, and the 
government is encouraging foreign investment.  On the surface, it sounds 
like a great investment opportunity.

Unfortunately, there have been developments in Vietnam which should
greatly concern potential foreign investors.  A power struggle between 
hard liners and more pragmatic elements has been raging in Hanoi for many 
years now.  With the fall of the Soviet Union, the struggle has become 
more desperate, with the hard liners gaining the upper hand.  There is 
every indication that Hanoi is having second thoughts about its Open
Door policy.

The official daily Quan Doi Nhan Dan (People's Army) of August 20 said
that foreign investment in Vietnam is an economic weapon used by enemies 
of Socialism to undermine the regime. According to Quan Doi Nhan Dan, the 
three strategic steps in this scheme are a)invest b)saturate Vietnam 
market with foreign goods c)make loans. In hostile rhetoric of the type 
typically reserved for domestic consumption, these foreign businessmen 
and activities are portrayed as being a "guise to establish contact 
between reactionary elements in and outside Vietnam". It warns that 
wherever goods can penetrate, politics can follow suite.

These remarks are by no means isolated. In fact, the rhetoric from
Hanoi has become increasingly shrill as of late.

The army paper editorialized repeatedly on the theme in the past
months, warning on August 20 that foreign investment could bring into 
Vietnam "espionage, AIDS, and pamphlets calling for subversion."

A week later defense minister Doan Khue, a leading member of the
Politburo, told a Congress of the Army's Young Communists to keep faith 
that "Capitalism will be eradicated and replaced by socialism."

Words like that do not do much to inspire confidence in the permanence
of the Open Door policy. This brings up an important question: what will
happen if (or more likely, when) Hanoi slams the door ?  Anyone with
investments will be out of luck.  Hanoi will nationalize them, and the
rightful owners will have no effective recourse.  They could always go
to the World Court, but that body is a toothless tiger whose decisions
cannot be enforced, and everyone, including Hanoi, knows it.

POLITICAL STABILITY:

The regime in Hanoi does not have much time left.  In view of recent
events, it is obvious that Communist regimes such as the one in Hanoi are 
doomed.  The question is: how will it fall ?  We would all want it to be 
peaceful like in Eastern Europe.

Unfortunately, there is no guarantee that the fall will be peaceful,
especially with Hanoi's vehement unwillingness to relinquish its power.
The only thing that IS certain, is that Hanoi will fall, and likely
sometime in the near future.

If you are an investor, this should concern you. Do you really want to
invest now in a country which could have a revolution at any time ?  Even 
if it is peaceful, and your investments are not destroyed, the rules will 
change radically once a new government is in place.  This is not the kind
of environment investors are looking for.

SUMMING UP:

In short, the Hanoi regime is a dying dictatorship whose days are
numbered.  In its decline, it is likely (and shows every indication) to 
make drastic and unpredictable policy changes in a desperate attempt to 
cling to power.  Furthermore, once it does fall, there are no guarantees 
that current foreign investments will not be harmed in the process, 
victims of "collateral damage".  Basically, investing now is a game of 
economic Russian Roulette.

So, what should investors do ?

Wait until Hanoi collapses and the dust settles in Vietnam.  There is
nothing wrong with sending people over now to scout for possible future 
opportunities, and in fact, doing so would be a good idea. In other 
words, look now, invest later. Unstable governments are a bad investment,
and people interested in doing business in Vietnam should invest in her 
future, not her past.


-- 
Vietnam Insight (vinsight@netcom.com)
Chan Tran, editor