Wall Street Journal
April 21, 2000
In the Paddies of Vietnam,By ROBERT FRANK
Americans Land in Quagmire
Staff Reporter of THE WALL STREET JOURNAL
CAN THO, Vietnam -- When U.S. companies parachuted back into Vietnam in 1994, the popular slogan was: "Vietnam is no longer a war. It's a market." Try telling that to corporate veterans like Richard McCombs.
Two years ago, Mr. McCombs packed up his belongings in the former Saigon, waved goodbye to his Vietnamese friends and boarded a plane back to the U.S. His multimillion-dollar effort to build a rice business in the Mekong delta -- one of the first and most prominent U.S. ventures in Vietnam -- had collapsed. His local business partners had become enemies, the police were threatening to put his employees in prison, and the Communist Party attacked his company as the latest example of American imperialism.
Even now, American Rice Inc., the company Mr. McCombs worked for, and the Vietnamese government continue to fight over the liquidation of the company's in-country assets. Sitting over a bowl of Vietnamese chicken soup in his house near San Francisco recently, the soft-spoken Mr. McCombs tries to make sense of his three-year ordeal.
"I ask myself, 'Could I have done things differently?' " he says. "I'm not sure of the answer. But I do know that Vietnam is not ready to allow foreign businesses to be successful."
Twenty-five years ago this month, the last American soldiers and diplomats beat a chaotic retreat from Vietnam. Now, a second American withdrawal is on. After hundreds of American businesspeople piled into Vietnam in the mid-1990s, spending more than $1 billion on everything from auto factories and cola bottlers to power plants and steak houses, many are calling it quits amid heavy losses. U.S. investment has dropped more than 80% since 1996, to $127 million last year. U.S. companies that haven't closed altogether are cutting back their business and pulling out expatriate staff.
The problems that did in American Rice are the same ones threatening many U.S. companies in Vietnam today -- poor legal protection, hostile joint-venture partners, heavy bureaucracy and a deep-seated suspicion of capitalism and foreign interests. Despite incremental legal reforms in Vietnam, Moody's Investor Service last month pointed to the country's "hesitance to allow further foreign participation in the economy" as a threat to progress.
Some of the corporate casualties: Chrysler Corp., now part of DaimlerChrysler, shelved plans for a $189 million automobile assembly plant after the Vietnam government decided to allow 14 auto makers to set up shop in the country, instead of the original three. Ford Motor Co. built a $102 million joint-venture factory with the capacity to make 14,000 cars a year. Last year it sold 400. Procter & Gamble Co. has racked up more than $30 million in losses since it set up shop, and PepsiCo is bleeding cash.
The once-lively community of American expatriates has also dried up. Keith Nolan, a guitar player who once belted out funk tunes in the bars of Ho Chi Minh City (formerly Saigon), got tired of singing to empty chairs and recently moved to Bangkok. "Most of our gigs were going-away parties," he sighs.
Investors from plenty of other countries, such as Taiwan, Korea and Japan, are also hurting in Vietnam. Companies bear part of the blame; yes, Vietnam has 77 million people, but does it make sense to try to sell $20,000 cars to people with an average income of $300 a year?