February 25, 2010
Tour of Ho Chi Minh City
John greeted us at the hotel and took us around a quick city tour before our meeting with the U.S. Commercial Services. After coming from Hong Kong and comparing the two cities there was no doubt that Ho Chi Minh was the emerging economy. I was truly surprised by the poor infrastructure throughout the city. Outside of our Caravelle Hotel, the streets and sidewalks of Ho Chi Minh were in desperate need of repair. Most sidewalks were torn up in places and the roads have no traffic signs or lights. The Vietnamese ride around the city on scooters and somehow figure out their own traffic patterns. We were amazed at the number of scooters and how they moved in and out of the city streets...and sometimes even sidewalks! More than once I thought I might get run over walking down a sidewalk! In addition to the streets and sidewalks we also took special note of the electricity situation. On most street corners we found several power lines tied together and also saw workers fixing several posts.
Caravelle Hotel
John, our tour guide
Typical traffic in Ho Chi Minh City
Electric wiring on the streets of Ho Chi Minh City
Chinese temple in Vietnam
U.S. Commercial Services Visit
The first business meeting in Vietnam was with Dave Avern, Commercial Officer for the U.S. Consulate Commercial Services. This meeting was a great way to start the Vietnam trip and learn about the intricacies of Vietnamese business. Dave explained to us that the role of his office is to assist U.S. companies that want to export products and services in Vietnam. Currently 13 billion is exported from Vietnam to the U.S. in comparison to only 3 billion that is exported from the U.S. to Vietnam. Trade in Vietnam kicked off in 2001 when the U.S.-Vietnam bilateral trade agreement was implemented and has grown from 1.7 billion in 2001 to 16 billion in 2008. Vietnam has particularly grown in the last 3 years and many of the buildings that we saw in Ho Chi Minh City were built within those 3 years. Poverty in Vietnam has also improved; today about 13% live under poverty, however in 1995 75% lived under poverty. The emerging economy of Vietnam provides much opportunity and the U.S. Consulate is present in Ho Chi Minh City to help foster opportunity between the U.S. and Vietnam. In particular, the need in Vietnam for training and management services provides an opportunity for more established economies such as the U.S. to come in and provide those services.
Dave also talked to us about understanding the Vietnamese culture for U.S. companies wanting to do business with Vietnam. The Vietnamese culture is one built on consensus and relationship building. U.S. business partners need to understand this and not expect decisions to be made in the same way that they would when dealing with U.S. companies. Additonally, face to face meetings are important in Vietnam.
Doing business in Vietnam does not come without challenges. The lack of infrastructure in Vietnam is a major challenge. Many roads still need to be built connecting cities. If this is accomplished it will help with trade throughout North and South Vietnam. Public transportation is also lacking in Vietnam, however Dave thought within the next 20 years the Japanese are likely to provide funding and build public transportation for the Vietnamese. Additionally, there are power generation issues. Dave mentioned that the power in Ho Chi Minh City will go down every other evening. I can see why after seeing the electrical lines throughout the city.
Another challenge U.S. companies must address is the Vietnamese government. Corruption is a major issue within the Vietnamese government and is often found in the form of bribery. The U.S. Foreign Corrupt Practices Act (FCPA) prohibits U.S. companies from engaging in bribery, kickbacks, and other corrupt acts. The FCPA can often put U.S. companies at a disadvantage when they are trying to form relationships with Vietnamese businesses.
The communist government poses challenges because of the controls placed over business, media, and real estate. All of the media in Vietnam is under government control to include newspapers, Internet sites, and even individual bloggers. Dave told us that the government was recently prosecuting bloggers if they posted personal beliefs differing from the government's policies. The government also requires approval for any event held in which more than 12 Vietnamese people are attending. This requirement applies to business events as well, and can often hold up the progress of event planning. The controls over real estate are another challenge for business wishing to set up in Vietnam. Until recently no foreigners were able to own real estate in Vietnam. This appears to be changing and will offer more opportunity for U.S. companies to develop resorts and hotels.
Another challenge is the lack of credit card usage in Vietnam. The Vietnamese are cash based and do not have nor do any business with credit cards. This can create challenges for international businesses in terms of exchanging currencies, however these challenges have been overcome by working with local Vietnamese banks. Because of the lack of credit in Vietnam, E-Commerce has not grown and probably will not until more credit is established.
The Vietnamese government realizes the challenges that their regulations have created and the impact to the growth of the economy. They have recently engaged in dialog with businesses to give relief on some of the stringent regulations. The government has established the "Project 30" program in which Vietnamese businesses have compiled a list of the thirty worst regulations that hinder business growth in Vietnam.
Nike Shoe Factory Visit (Ching Luh Co., Ltd.)
The next stop was the Nike Shoe Factory - Ching Luh Co. During our visit we first met with Larry Levi, Production Operation Director for Nike and Kelly, from Ching Luh. They gave us a presentation providing details about Nike's Asia and Vietnam operations, their consumer markets, and their future outlook for growth in Vietnam. We were also given a tour of the factory and we were able to see the entire shoe production process.
It was evident in the presentations and tour that Nike and Ching Luh have formed excellent working relationships that allow for efficient production processes. Larry explained to us that the Ching Luh factory fills Nike's manufacturing needs since Nike is not in the manufacturing business and is more of a development and marketing company. We quickly realized how important this partnership was when we were told that 70% of Nike's production is done in Asia and 90% of Nike's footwear is made in Asia! Nike's presence in Vietnam has been beneficial and provides the community with many jobs. Within the factory location we visited Nike employs 112 Vietnamese staff and 17 ex patriots.
The tour of the factory was a great experience and really made the visit complete for me. We were able to walk through the entire production process and see how a Nike shoe is made from the raw materials all the way to the assembly. Along the production line we noticed red and green signs that were strategically placed at specific points along critical chains. We talked to our tour guide about the critical chain in the production line and found out that the shoe factory learned this concept from Toyota.
The conditions of the factory were interesting to me. While I found the conditions to be below standards, it seemed that the workers were very content. The factory did not have air condition, however the workers seemed fine with this and most of them were in long pants and open toed shoes with socks or stockings on. I was surprised to see they were not required to wear close toed shoes. Another thing I took note of was that they were all standing and very few had the option to sit on a chair or stool. The workers in the factory were predominately female and the floor managers were predominately male. The workers were extremely focused and were not interacting with other workers, unless the job required them to do so. We asked the tour guide what shoe they were working on and found out it was a summer model called the Dart VIII. I plan to look for that shoe once it hits the retail stores in the summer months.
Outside the Ching Luh Shoe factory
Vietnamese Water Puppet Show
Later that evening we went to see a traditional Vietnamese water puppet show at the Golden Dragon Theatre. It was an interesting act of puppetry with musicians that played instruments and sang in Vietnamese. While we couldn't understand the songs, we were able to follow along with the acts of the show. It seemed to be a popular event, as the theatre was full.
Opening act of the water puppet show
After the show we were ready for dinner and made our way over to La Camargue Restaurant where we had our first Vietnamese - French dinner. The French influence was evident in the food - it was very good and seemed authentic. We had typical French dishes such as french onion soup, braised beef with potato, and excellent fresh baked bread.
Dinner at La Camargue Restaurant
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