On the Ground in Vietnam…

This week, we have the pleasure to introduce you to Doug Railton and Robert O'Neill of East Asia Global Alliance, a company based in Vietnam that specializes in helping businesses grow in the region. Together, they bring an exceptional and diverse level of skills and experience to the field, some of which they have been gracious to share with us…

On the Ground in Vietnam (Part 1)

International Man: Tell us a little bit about yourselves.

Doug Railton: I have worked for companies based in Hong Kong, Singapore, India, Thailand, and Indonesia for the last 30 years. I have developed manufacturing facilities throughout the region and have been further involved with those businesses in various capacities – ranging from software development to manufacturing processes.

I first fell in love with Asia in 1972 and have not gone back to the US since then in any meaningful way.

My background is in Naval Architecture and Marine Engineering, though I don't practice that any longer. Over the years my interest has moved more towards the business development side of opportunities in Asia. I find they are far more exciting than designing a high-speed motor yacht or something of that nature. I've gravitated toward projects ranging from telecommunications to real estate development to master planning to engineering and infrastructure projects. At this point, I am permanently relocated to Vietnam.

Robert O'Neill: Doug and I make quite a unique team. He has spent his career in Asia, and I have spent my career in California – building high-end restaurants and working in the food service industry. My first foray into Southeast Asia was just six years ago. So I am a great case-study of a Western businessman who saw an opportunity to come to Asia as an adult for the first time – learning to navigate the waters of Asian business opportunities while facing some stark cultural differences.

It has been a real pleasure and an exciting ride over the last six years. Frankly, I would not be successful without a seasoned and experienced partner like Doug.

IM: How did you end up meeting each other?

DR: That's a funny story. I had started a solar company in Oregon – specializing in hot water for residential and commercial use. Robert was in a solar company out of California looking to expand his market in Oregon. We met at a trade show.

We had dinner one night as competitors for one local Oregon market. He told me he was involved in a project in Vietnam – introducing some renewable resources and some related activities. He asked if I would be interested in helping him. I said I would make a trip to Vietnam to see what they had going on. I eventually stepped into the role of president of the company.

IM: Can you tell us a little bit about the East Asia Global Alliance?

DR: I originally had another company in this area. We had 11 shareholders, and we would assist companies coming to the region or looking for opportunities in the region. We would take them out, look for investors, and would help turn opportunities into businesses for them.

For a variety of reasons, mostly the attitude of American investors, we elected not to stay with that company. It was a company that was driven solely by profitability. It offered no redeeming features for social and economic development of the host country. That goes against what Robert and I stand for. So we left that company and maintained the basic core-type business.

We are in the business of developing enterprise. We help businesses come to Southeast Asia. We are also in the business of looking for opportunities, packaging them up, and taking them to the investment community. We've been doing this since 2005 in Vietnam and our focus has not changed. We are a consulting company that brings opportunities to investors, and brings investors and business opportunities into Vietnam.

RO: With every project review, the first question we are often asked is, “Where's the money going to come from?” Traditional banking resources are available, of course. But we tend to bring strategic alliance partners together from various regions that have like-minded business interests in an industry.

Investment dollars are much easier to attract and support in an emerging market when the principals from both sides have some skin in the game – it could be some technological advantage or a management skill set, for example. It creates a partnership.

IM: What are your criteria for identifying a potentially profitable project?

DR: It has to be a socially-responsible project for the company, the people, and the host country. It has to be a profitable project. Economically, it has to make sense.

Do we have any set criteria or checklist that we follow? No. The projects are all over the board. The opportunities are so diverse that you have to look at everything on a project-by-project, case-by-case basis and evaluate each one on the merits of the individual project.

One of the reasons that this area is so difficult to work in is that you are dealing with an uneven playing field. The ground is shaking under you all the time. But one basic criterion for us is that it has to be a socially-redeeming project for the people and the country that we are looking at.

IM: What kinds of projects have you done?

DR: One of the larger projects was a telephone company project that we did with the original company out of the US, and with a Russian company. It was the largest private telecom operation in Vietnam at the time. That drove a national asset into the hands of private industry, allowing for improved communication in rural areas, improved emergency service communication, as well as mobile services.

In another project we introduced a method of doing business on master planning to Vietnam which took into account sustainable development, economic drivers, phasing of the development and the historical and cultural sensitivities to ensure long term growth and prosperity. Historically, if you were to look at a master plan in Vietnam, you would see a pretty picture of an area that a master planning firm had done. They would say, “We're going to put roads here. We're going to put infrastructure here. We're going to put hospitals here,” and on and on without considering the practical issues needed for success over the length of the development.

What we introduced to Vietnam was the concept of deriving your master plan from economic principles. You have to have your economic drivers in place for any master plan to work. We have seen literally hundreds of projects over here in which the master planning has been flawed. For example, you might find a 5-star hotel located right next to a shrimp farm.

Our master plan was the largest master plan in Vietnam's history at the time it was done. It was very complex. It included 600 islands, and a landmass of about 66 square kilometers. We had an international airport. We had international sea traffic to contend with. We had transportation issues. We had islands that had no power. All of this had to be tied together in a socially-sound and economically-sound method for the people of Vietnam.

When we finished the project and introduced it to the appropriate Ministry, it received very high accolades. It was the best foreign master plan ever brought to Vietnam. When the Prime Minister signed off on it, he basically stated that we had set the bar for all others to follow.

That project drove business at all levels: it drove at the investment level; it drove at the infrastructure level; and it drove at the banking level. We have since used that method to work on a number of other master plans with our partner in Malaysia and in other parts of Southeast Asia.

We also assisted a group that wanted to manufacture bamboo bicycles. One of them had been racing bamboo bicycles for years. He wanted to take one into mainstream commerce. We helped craft his marketing ideas into a plan to take it to the real world. We asked ourselves, “How do you take this idea and make it into a profitable business, not just a hobby shop?”

We are now working on a very large telecom project in the Philippines – probably bigger than the one we worked on in Vietnam. It crosses a number of technology sectors. We have an international cable gateway that we're going to be putting in. And we have a national license for mobile. We are poised to roll out a large, diverse telecom company this year.

We also have some real estate developments – one very large one in the Philippines, a couple of large ones in Malaysia, and a couple of projects here in Vietnam. These are projects that enable us to bring in partners with relevant skills, vision, and experience.

We are very focused on the team that we put together for any given project. There are too many companies over here that are one-man shows. By the time we have formed our team, we are the dummies of the project; we seek out people who are smarter than us, more knowledgeable than us, and more experienced than we are to ensure the best outcome of the project.

IM: Where do you draw the financing for your projects other than strategic alliance partners. Banks? Other investors? Government?

DR: It's all project-specific. For example, for the telecom we did here in Vietnam, the funding came solely from our Russian investors. For the Philippine telecom project, we are looking for international investors. For the bamboo bicycle manufacturer, we sourced local funding to increase his production.

The real estate projects that we're working on – in the Philippines, Malaysia and Vietnam – are a combination of local funding and international funding. It really depends on the project.

If we are developing a project that is identified in the local Vietnamese tourism industry, we will likely be using local funding. If we are looking at a resort project, on the other hand, we likely will be seeking an international resort that's willing to invest, plus an international investment consortium.

We are also in the process of developing a private equity fund to finance some of our projects. There is no shortage of solid projects in this part of the world. The issue is how to package them up and take them to the investment community.

There are a lot of investors out there but if the decision-making process goes on for months, opportunities can be lost. So we are developing a PE fund, or funds, to go after funding some of our more interesting and time-sensitive projects.

IM: Staying on the investment theme for a moment… For the relatively passive foreign investor who's looking to park his money for a couple of years and earn a decent return, is there one market in the general area you'd recommend?

DR: In the Vietnam region we believe that the emerging low-income housing market is a good place for passive investment, but that's relatively unique to Vietnam. If we go to Malaysia, for example, it would be a much more sophisticated investor taking on the development of whole towns or the development of a whole community or a whole sector.

So yes, in Vietnam, passive investing is possible in low-income housing. The commercial market and the high-end villa market and high-end apartment market is over-saturated throughout Vietnam. Prices are down substantially because of that over-supply.

That'll wrap it up for today but in the second installment of this interview next week, our friends at East Asia Global Alliance will talk about how foreign investors might get involved in the market, some common mistakes foreigners make when entering the market, as well as general advice some action steps for those who would look to set up a business in that area of the world.

To read Part 2, click here.

[EA|GA is engaged in business consulting, development and investment services in many parts of the East-Asia region including Vietnam, Cambodia, the Philippines, Malaysia, China and Hong Kong. Services include property development, master planning, design and architecture, project management, investment consultation, business consultation and corporate services. For more information, visit them at http://ea-ga.com]

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