A bounding with potential, the economy in Viet
Nam thrives amid a patchwork
commercial
code. With laws that are still developing, uncertainty sometimes exists
in a
land where commercial law and order can be scarce. Such a climate
should not
come as any surprise, considering that Vietnam
endured isolation for years following the war.
Washington
imposed a trade embargo. Furthermore, it forbade investment in and
travel to
the country. Washington
also
prevented Viet Nam
from joining the United Nations until 1977. Thwarted by external
forces, Viet Nam
simultaneously coped with internal
turmoil as the Communist government operated to rid all indications of
capitalism from the newly formed Socialist Republic of Viet Nam.
In the late 1980's, as the cloud of economic oppressiveness
began to recede, a glimmer of hope emerged as Viet
Nam made steps to start opening its
economy with
a restructuring plan. Washington
followed suit by ending its trade embargo in 1994 and establishing
diplomatic
relations 1995.
Firms conducting business in Viet
Nam face an array of legal
challenges—more
specifically, a gap exists between laws and practice, with laws
changing on a
frequent basis. Exacerbating matters, the central government is not
very
strong, while the courts lack independence. Disputes between two
companies
incorporated in Viet Nam
must be referred to a Vietnamese court or arbitration. The governing
law must
be Vietnamese law.
"This raises a significant concern to foreign
investors
as Vietnamese judges and arbitrators do not have much commercial
experience,"
said Tran Anh Duc, a Vietnamese lawyer from Ha Noi and a member of the
Ha Noi
bar whose role is to advise on all legal issues in Viet Nam, including
the
review of contracts and the structuring of business arrangements in
Viet Nam.
According to Tran, judgments from foreign courts are
not
normally enforced in Viet Nam.
When a party to a contract is located outside Viet
Nam, people normally prefer to refer
their
dispute to arbitration outside Viet Nam.
"Arbitration in Singapore,
Hong Kong or London
has become more popular for international transactions with an
expectation that
foreign arbitral awards would be enforced in Viet
Nam in accordance with New York
Convention
on Recognition of Foreign Arbitral Awards," said Tran. "As the laws of Viet
Nam
have
not fully developed, there always exist certain risks that may affect
the
enforceability of contracts in Viet Nam."
The legal uncertainty that pervades the economy may
account
in part for the fact that foreign investment reached its peak in 1995
and 1996,
and then dropped off in subsequent years. After several quiet years,
though,
foreign investment appears to be on the rise once again. Sponsors of
many projects
delayed due to the Asian Financial Project are returning to Viet
Nam, particularly hotel and real
estate
projects.
Many new investors are going to Viet
Nam to explore the market, especially
business
delegates from the U.S.
and Japan.
While foreigners went to Viet Nam
with big projects in 1995-1996, they invest mainly in small and medium
projects
now. Domestic business is likewise booming in Viet
Nam. In 2004, the U.S.
and Viet Nam
did roughly $6 billion in business. Viet
Nam
exports textiles, shoes, shrimp, pepper, rice, various agricultural
products, furniture,
and some computer software. It buys Boeing airplanes, wheat, and
factory machinery. Viet Nam
is
increasingly becoming an oil- and gas- exporting country as well.
"I often travel with American companies to Ha
Noi and Ho Chi Minh City,"
said Runckel. "Most are
surprised by the level of economic vitality, by how much building is
going
on."
The biggest difference in the courts is the
quality of
judges and the amount of training that they have. As a result, the cost
of lawyers
and litigating is less expensive. Intellectual property infringement is
a big
problem in Viet Nam,
too. The court proceeding is troublesome, time-consuming, and does not
afford sufficient
protection.
"The main problem is the big gap between the law and
the practice," conceded Tran. "To be a success in Viet
Nam, you need to be very flexible and
patient."
In spite of its legal challenges, Viet
Nam competes effectively as a low-cost
alternative to China.
Labor costs are relatively low in Viet
Nam,
with an unskilled laborer earning $85-$100 per month plus benefits. Viet
Nam is joining the World Trade
Organization,
and it is opening its market to the world. Viet
Nam is also amending business laws,
ranging
from the Foreign Investment Law, Commercial Law, and Civil Code. These
new laws
will make conducting business much easier in Viet
Nam.
Today, Viet Nam
continues to develop at a rapid pace. It is also developing from a very
low base.
In 1987, the Vietnamese government implemented doi moi, or renovation,
a policy
that really took off with the lifting of the U.S.
trade embargo. The economic acceleration began to occur in 1994-1995.
The vast
majority of Fortune 500 companies have a presence in Viet
Nam today.
"There is still much to be done," Runckel said
with optimism. Viet
Nam is
still a very rural, poor country.
- Nha JULY I AUGUST 2005
