We'll continue today with a discussion started last week with American-born business professionals 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 – both locally born or those funded by foreign investors.
[In case you missed Part 1, click here.]
On the Ground in Vietnam (Part 2)
International Man: If a foreign investor wants to get involved in the market, how can he do so? Are there plays that he can do on the local stock market, or does he have to find a private firm that will let him invest?
Doug Railton: There are investment firms in Vietnam. And there are real estate brokerages in Vietnam, through which foreigners can participate in investment. The biggest problem of any foreigner in the country is determining who you're investing through.
Each investor must find a way to enter the market in a reliable way. You would not buy a house in the US without going to a real estate agent. You would not invest in large retirement investments without some kind of an investment counselor assisting you.
It is advisable to anyone entering this market from abroad to find a qualified person, or a group, familiar with the specific business arena. It's not just a matter of flipping through the Yellow Pages and picking Coldwell Banker or Remax. It's a far more complex situation when it comes to doing your investigative homework on who you want to work with, who you can trust, and who is reliable.
You also have to be able to answer some questions: Do they have the same investment attitude that you do? Will they look after your interests or are they going to look after their interests? It is a very complex situation.
That's where companies like ours come into play; we look out for their best interests.
IM: What are some of the common mistakes that foreign investors make when first entering the Vietnam market?
DR: I think the biggest mistake that companies make is trying to operate remotely. Sometimes we see a vice president of marketing who decides that the Vietnam market is a great place to market his widget.
He spends $25,000 to get over here and take a one-week tour of Vietnam, goes back an expert and says, “We're going to sell these widgets over there,” and attempts to do that. He makes three or four more trips in the next year, each costing about $25,000, and in the end they have virtually no success. We have seen this hundreds of times.
It's predominantly an American trait, unfortunately. Europeans are much savvier in investing and entering into a market such as Vietnam. We Americans tend to be arrogant. We Americans tend to know everything. Americans tend to believe that everything works here the way it does back home. It's a completely different playing field.
Companies, and small businesses, must establish a permanent presence if they are going to do any real business in Vietnam. That permanent presence can be an office of their own over here, or it can be established through a local company. A company like ours assists you in understanding the marketplace, shortens the time frame, does the follow-up when the executives leave the country, and ensures that all of those things are maintained to keep the momentum going forward.
In our initial development of this company we were involved with a gentleman who, over a period of 12 months, made 13 trips to Vietnam. Over the course of those 13 trips, he did not succeed in getting a single project under way. The problem was that the minute he'd get on an airplane out of Vietnam, it was “out of sight, out of mind.”
We have seen this pattern from large manufacturers to food distributors to franchisees who want to come in. At every level we see this attitude of, “I'm going to do a sweeping tour of Southeast Asia. I'm going to go home an expert, tell my company how to do this, and be a success.” We have not seen it work once.
IM: People have to be on the ground for it to work…
DR: It's a relationship issue in Vietnam – being there to answer the questions, being there to educate them. A lot of the concepts that we as foreigners are bringing into Vietnam are quite alien to their culture, and you have to educate them or you have to change your entry strategy to be more palatable to the Vietnamese culture. This is something that, again, we Americans are relatively insensitive to.
IM: Does that idea apply to other Southeast Asian countries? Is it really a matter of being on the ground, or is that something unique to Vietnam specifically?
DR: It's more unique to the emerging markets. If you take an area such as Singapore, it's a very well-developed market. You could drop a person from any major company in Singapore and they would be a success. That also holds true for Hong Kong or Shanghai.
Vietnam is an emerging market. There is tremendous opportunity over here, but you have to educate the people that you're working with, and you have to educate the people back in the United States in terms of how to work with people here in Vietnam.
The emerging market – whether it's Vietnam or Laos or Cambodia or now Myanmar – are all going to be difficult markets to service because they demand ongoing, hands-on attention.
IM: If one of our readers coming from, let's say the United States, was looking to start a business tomorrow in one of these emerging markets within southeast Asia, what specific first action steps would you recommend they take to hit the ground running?
DR: Get to know the local consulate. The consulate that we are working with in Vietnam is the first I've worked with in 35 years in Southeast Asia that I'm proud to be associated with. The staff knows what's going on. They are hungry to help American businesses.
They don't have a lot of resources to play with, but they will get incoming players in front of people like us to make that marriage happen. They will facilitate the establishment of a business relationship.
Newcomers can also approach other organizations – the Chambers of Commerce, for example.
But be sure you get some good advice.
For example, there's a company here now that is trying to establish a sales opportunity in Vietnam. But they were given some questionable legal advice – which has put them at a disadvantage.
Legal advice in Vietnam is such that in order for the law firm to offer an opinion, there has to be written law. For many of the issues that we contend with over here, there is no written law.
In America we have billions of laws and millions of lawyers to help us get through them. In Vietnam, the law is written to establish the ground rules. Specific issues may not be addressed, so how can a law firm write an opinion about this when there is no law written?
It's a gray area, and in this gray area there is a lot of opportunity – but it requires local guidance. It requires working with people who have a thorough understanding of the political and business climates, as well as intuition developed over years of being in this environment. If you skip this step, you will miss major opportunities.
IM: Any exciting opportunities on the horizon?
DR: We have a few very exciting telecom plays on the horizon right now – both in the Philippines and in Cambodia.
I think for the long-term there are certain countries in the tourism industry that are going to be phenomenal plays. Manufacturing is a strong play right now, as are infrastructure projects.
IM: Do you have any major concerns around the economic situation for Southeast Asia over the coming years? Are some of the high-growth economies like China going to sputter, and if so, is that going to have an impact on the investment climate within your area of expertise?
DR: If I could answer that question, I wouldn't be working today! [laughing]
Am I concerned about China? Absolutely. Whenever you see a country with the sustained growth that China has had for as long as they've had it, you must consider what happens if and when that bubble deflates.
I would much rather be situated in Asia when that bubble bursts, because the Asian economy and Asian attitudes are resilient and flexible. When there's a problem here, people fix the problem – it happens much more quickly than in it would in the US.
I do not know what is going to happen. But having lived here for as long as I have, I am confident that problems will be addressed appropriately and in a timely manner.
IM: Are there any final comments or anything else you'd like to add before we wrap it up?
DR: I don't think so. It's an exciting marketplace. But it's not for the average person to come over here and play. It takes some relatively deep pockets, and, more importantly, it takes a deep intellectual commitment to be able to work with people over here.
I'm proud to be an American and I'm proud of what we've done, but we Americans are not the only fish in the sea. America may be the biggest, but there are a lot of fish swimming alongside us that are our equals in intellectual capacity, in manufacturing capability, and in just about every other arena. We need to be aware of that and must learn to be a team player instead of a dominant player.
IM: Very good. Thank you both for taking some time today.
[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]