Business in Vietnam
The American business community in Vietnam
Jackson Vanik Amendment
Bilateral Trade Agreement
If full reconciliation is to be achieved, it must be based on building
strong economic ties between the United States and Vietnam. Ten years
ago, Vietnam's doors were closed to establishing links with capitalist
countries. Today Hanoi recognizes how important those ties are if the
quality of life of the Vietnamese people is to be improved. The transition
from a central-planning to a market-oriented economic system has not been
began with Doi Moi, the open-door policy enacted in 1986, which
paved the way for radical economic reforms. By the first quarter of 1993,
foreign investments in the Vietnamese economy totaled over $3 billion,
more than double the figure of only two years prior. Vietnam was dubbed
"the next Asian tiger"; spirits rode high. A building boom began:
five-star hotels and business centers sprang up in Ho Chi Minh City and
Hanoi. Countries lined up to bid on massive infrastructure projects such
as rural electrification, building roads and bridges, and oil and gas
exploration. But in 1997 a devastating financial crisis spread throughout
Asia. This recession, coupled with Vietnam's slow pace of economic reform,
has made investors skeptical.
Vietnam's policy makers
respond to criticism over their unwillingness to move quickly by stressing
the need to maintain stability. They see both the Asian financial crisis
and Eastern Europe's political instability as examples of what happens
when change--either economic or political--comes too rapidly. A sense
of fierce independence coupled with a fear of social unrest have stalled
Vietnam's earlier thrust for rapid reform. Deputy Prime Minister Nguyen
Manh Cam told foreign investors in June, 1999 that " slow and stable
has to be more preferable than a fast step up, then a collapse. "
American business community in Vietnam.
With the lifting of the U.S. trade embargo in 1994, American companies
were finally able to invest in Vietnam. The United States now ranks eighth
among Vietnam's top foreign investors with 70 licensed projects worth
$1.4 billion. Ambassador Peterson said, "This is just the tip of
the iceberg." The Vietnamese have an historical preference and admiration
for American products and technology. Vietnam's commercial potential for
American companies is enormous.
It's been a difficult
market for the Americans. Asian, European and Australian competitors had
had an enviable head start. Even today American investment in the country
is only four percent of the total foreign investment. American companies
are handicapped on two additional fronts: Asian business practices in
which bribes and under-the-table deals are common, and their own government
which has set up legislative hurdles such as the annual waiver of the
Jackson Vanik Amendment. American companies are often
characterized as inflexible, believing business can only be done the American
way. Yet those companies willing to take a risk and invest for the long
term in Vietnam may reap the benefits of their gamble.
is Jackson-Vanik and why is the waiver of this amendment important to
American Business ?
Introduced in Congress during the 1970s to promote the emigration of Jews
from the Soviet Union, the Jackson-Vanik amendment prevents the U.S. Administration
from giving government trade and investment funding to countries which
do not allow their citizens unhindered freedom to travel abroad and to
emigrate. This legislation significantly influences relations between
the United States and Vietnam. Every year the U.S. President must decide
whether to waive the Jackson Vanik Amendment. It is then sent to Congress,
which can either uphold his sanction or turn it down by a two-third vote.
Without the Jackson
Vanik Waiver, American projects in Vietnam cannot access loans from the
Export-Import Bank of the United States (EX-IM) or the Overseas Private
Investment Corporation (OPIC). This places American companies at a severe
disadvantage to foreign competitors who receive government support for
their projects in Vietnam.
continue to tell the Vietnamese that capitalism and a free market
is essentially the freedom to do two things. Freedom to succeed and
freedom to fail and they have to learn that. They have to learn how
to become competitive. And who best to teach them that then America."
The United States and Vietnam have been negotiating a Bilateral Trade
Agreement for nearly three years. On July 25, 1999, the two nations shook
hands on an "agreement in principle"; a formal agreement which must still
be approved by the U.S. Congress and the Vietnam National Assembly could
be in place by Fall, 1999. Under US law, the United States cannot extend
Normal Trade Relations to countries in transition like Vietnam without
a Bilateral Trade Agreement (BTA). The purpose of the Agreement is to
ensure trade rules are clear, to stimulate and increase trade, and to
help Vietnam achieve economic integration, including membership in the
World Trade Organization (WTO).
offers these comments on its importance:
Bilateral Trade Agreement will yield significant economic benefits to
both nations. Vietnam's exporters will have access to the massive U.S.
market on a competitive basis, greatly enhancing Vietnam's ability to
export and to attract foreign investment. This will lead to the development
of new industries which in turn will create new jobs for the Vietnamese
people and improve the quality of life in Vietnam. Many U.S. companies
and individuals in a large variety of industries have expressed interest
in doing business in Vietnam. This Agreement will send a positive signal
to them about Vietnam's commitment to integrating into the world economy.
And, of major significance, implementation of the U.S.-Vietnam Bilateral
Trade Agreement will mark the normalization of our two countries' economic
Vietnam Business Journal
business in Vietnam
American Chamber of Commerce