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Unformatted text preview: WWW CHAPTER 9 Culture in an Emerging Market: A Look at Vietrtetm MATT The plane circled over the skies of Ho Chi Minh City for a while. A number of pas- sengers, who must be homecoming overseas Vietnamese, or Viet kieus, looked very nervous and excited. They looked out the windows of the plane, some even standing up, pointing out to each other certain places they recognized on the land below—maybe a river, a bridge, a street, a pagoda, a building of the former Saigon that they had left behind a long, long time ago. The Boeing 727 of Malaysia Air Service (MAS) was almost full. Two-thirds of the passengers were Asians, there were a few Australians, and the rest were Westerners. l was unsure about how the Vietnamese people would welcome someone from a former enemy country that still maintains some trade sanctions 16 years after the war ended. i it Soon we landed at Tan Son Nhut Airport, which 20 years ago was one of the world’s busiest military airports. With fewer than 10 international flights landing daily, the international terminal still looked too small to accommodate some 200 to i Chapter 9 Culture in an Emerging Market: A Look at Vietnam 300 passengers at the same time. After almost half an hour dealing with the entry and immigration red tape, 1 finally picked up my suitcase, which had been unloaded by porters from small trucks and placed on the floor of a large lounge. Many passengers had some difficulty finding carts to carry their luggage to cus- toms. Vietnamese and other Asian passengers alike traveled with lots of luggage, including big cardboard boxes containing television sets, video heads, and the like. Obviously, the returning Vietnamese Australians must have gifts for their rel- atives to evidence their capitalistic living conditions in one of the world’s more advanced economies, and these foreign businessmen must also have something small (like cigarettes, bottles of wine) for their business hosts and big (like expen- sive household electronic goods) for their “girlfriends.” There were still some reminders that I was coming to a country that not so long ago was the fiercest battlefield since the end of the Second World War, where the most expensive lethal weapons from the Soviet Union and the United States were freely tested on a people who I’m not even sure understood what the war was all about. For the people who lived through such sophisticated American and Russian war technologies and the shrewdness of the Vietnamese communists, I felt sincere respect and compassion for all who survived nobly and for all those who died nobly too. My thoughts were jarred by the hard landing, although I preferred the hard landing nonetheless to continuing to hover above the airport. The view wasn’t any more novel after the fifth circling of the airport. john Rosenford, a British fellow who had been doing business in Southeast Asia for about a decade, met me at the airport. Rosenford and one of MedTech’s partners had crossed paths several years earlier through a common business deal with some others. They had kept in touch and still had some business dealings in common. He didn’t really look the part of president of Dragon Exploration, Inc., the parent company of Pathway Corp. Dressed in khakis and boots, he looked more like he had just come in from a jungle trek. Appearance aside, he was extremely knowledgeable about the local business scene. "Get to know all the American journalists who are covering this region. You can learn a lot from them,” he said. “Meeting them will be much more worthwhile than reading volumes of books," he added. Dragon Exploration is actually a Sydney—based company that had recently given birth to Pathway, the Vietnam affiliate. Dragon’s main business is the pharmaceutical industry, and its market is Southeast Asia. Rosenford had just returned from an international business round table conference held in Hanoi, a three—day event jointly sponsored by the privi— leged Economist magazine and rallying some 400 participants, both foreign and Vietnamese. In the capital of the “renovated” (yes, in Vietnam now, “0302' moi," or renovation, is the name of the game) Vietnam, some 150 foreign businessmen, journalists, and diplomats, mostly British and American, were honored guests of 115 116 Part | Matt and Jan senior government officials, led by none other than the aging but reform-minded, newly appointed Prime Minister Vo Van Kiet. Rosenford was greatly impressed by the Vietnamese government’s candor and efforts to reform. "They appear willing to open every door for us to explore,” Rosenford said. “They tell you that opportunities are ample but not yet identified, that the transition to a more open economy is causing some confusion.” Shortcomings were frankly acknowledged, he said, and they were likely to pro- vide cause for bargaining, seeking compromise and concessions from ;Vietnam. "You can easily complain about poor infrastructure, including inadequate roads, electrical power, water supply and communications," he added. “Telstra, a telecommunications firm from Australia, is winning contracts worth tens of mil- lions of dollars to make Vietnam reachable from the rest of the world. And, to some extent, you can trust the Vietnamese government's pledge to alleviate obsta- cles to doing business in Vietnam. You definitely get the impression that they are more pragmatic than communist,” Rosenford added. “The whole pharmaceutical industry, from drugs like aspirin, cold medicines, and vitamins of all sorts to medical instruments sells strongly in emerging mar— kets like Vietnam," he said. Rosenford estimated that Vietnam currently has an annual income per capita in the region of $200; if spending for medicines could amount to 3 percent of this income, then the pharmaceutical market would come to more than $400 million! My concern was less about consumer spending on medicines than it was about how much the government was willing to spend on medical supplies and .t I, instruments for their clinics and hospitals. It would be the government that would r. be our primary client, not individual consumers. Rosenford mentioned that the i 4 domestic pharmaceutical industry is small and obsolete. Clearly, any competition for our products would come from outside Vietnam. It was always the same in developing countries. The first company to gain favor with the present govern— ment usually has a clear inside edge to gain and keep a monopoly. In developing countries, these things are always so intertwined with politics. And right now, the American government isn’t exactly the first country to reach out to Vietnam. Japan has done a better job of that. France has especially maintained a very friendly eco— nomic posture toward Vietnam and was very quick to regain a foothold in their 3 ' economy. The United States, it seems——at least on the surface—is always standing behind principles. Personally, I think the biggest principle it is standing behind for f not dropping all trade sanctions is the fact that the United States was embarrassed by the war. The American International Chamber of Commerce in Hong Kong has strongly urged first Bush and then Clinton to lift the trade embargo against Vietnam before it is too late. Rosenford believed it is a golden opportunity for both foreign pharmaceutical traders and investors in new manufacturing facilities. “How about Pathway and MedTech joining together in a joint venture in Vietnam to import pharmaceutical Chapter 9 Culture in an Emerging Market: A Look at Vietnam and medical supplies products into this market and subsequently setting up a manufacturing firm for your surgical instruments?” he suggested. Admittedly, his words sounded convincing. He had an ongoing business in Saigon, something like a trade—related representative office, and it was going quite well apparently. His company was selling medicines and buying “just about anything,” including garments and leather shoes, in return, just to have a balance of liquidity. I shared Rosenford’s genuine excitement, but a decision to join him would require negotiations and a more solid basis about the market than just his word. Rosenford introduced me to Ian Hughes, Rosenford’s number one man in Ho Chi Minh. From then on, my time was spent with Hughes. Hughes was an ami— able guy in his mid-305. He had on jeans and a light pink shirt with the sleeves rolled up to his elbows. He greeted me in a warm and friendly manner, and very soon, we were in his Isuzu Trooper on our way to Thu Duc, a suburban district some ten to twelve miles from Saigon, where his office and the Pathway house were located. Even by Asian standards, the roads of Saigon are quite narrow, many with only two main lanes—one up and one down. In fact, there might be more lanes, but unruly motorbike and bicycle riders seem to have effaced all the road lines so there aren’t any clear markings. Driving was definitely a thrilling experience. On sidewalks, you could also observe a pervasive invasion of street vendors, newsstands, tobacconists with small carts, refreshment stalls, or even eating places. Lots of people loiter on the sidewalks. Housing construction and public works are almost everywhere. Smoke, dust, and dumps of litter contribute to the high degree of air pollution in this city. Hughes was quite frank in his talk. I doubted if he was under any instruc- tion by his boss about how he should or could talk to me. If he was, he didn’t appear that way. I asked him about the economy, noticing the dense population Of the city and the number of people who seemed to be standing around, passing the time smoking and talking. "It is not very well—disguised unemployment,” Hughes said. "Agriculture is faring much better than before. Generally Vietnam now can export rice again. But absolute poverty still exists in rural areas, espe- cially in the northern and central provinces. Construction, trade, services, small manufacturing like garment making, food processing are booming—although not very orderly and well directed. But these activities cannot absorb the whole sur- plus labor force. Meanwhile, more productive manufacturing is still not much. Foreign investors will bring in their machines—but not now. They need more guarantees,” Hughes commented. “Vietnamese manufacturers cannot compete with importers and smugglers. And they are more interested in making quick money," he said. I also raised another question, this time about Vietnam’s renovation policies in practice and the reality of the relations between the government and foreign businesspeople. Policies could sound good on paper. But in many developing Countries there is a huge gulf between what is said and what is clone. 117 {i 118 Part I Matt and Jan ,- "In past years, Vietnam dealt fraternally with foreigners from communist countries only—with the exception of China, its northern neighbor. At worst, there was traditionally a mutual paranoia between communist Vietnam and the noncommunist world. At best, there was an absence of intercommunication and mutual understanding,” Hughes informed me. The answer from Hughes was thoughtful. The basic message I was culling from our discussion was that we shouldn’t have many expectations because doing business in Vietnam as a foreigner will not come overnight. The Vietnamese gov- ernment is trying to develop suitable policies to accommodate foreign business activity in the country. But before it can succeed in this effort, it has to understand what doing international business means. I figured the learning process in this country could be a painful one, because although they could have foreign advisers, I think some Vietnamese believe they should learn by themselves and accept the cost. In the same way, foreigners are trying to adapt themselves to Vietnam’s conditions, Wishing they could really understand the institutional framework in which they should operate. 5 "Their common sense and our common sense are not the same," Hughes ‘ piped in while I was lost in my own thoughts. "A lot of time is going to pass before they gain the knowledge and experience to develop a system that is compatible with communist ideals and the capitalistic realities of the outside business world. But I’m sure you didn’t anticipate that doing business in Vietnam is like that in the United States or Japan, or even Singapore or Hong Kong.” On this drive, I learned much more about Pathway’s business. In fact, Hughes V was not the “prime mover” of this business in Vietnam. He had been here for only nine months. It was Sean Connolly, Dragon Exploration’s director in Hong Kong, who first had the idea of going to Vietnam and designed the plan and broke the ground before "turning the key” to Hughes. Connolly came to Vietnam as a member of a trade mission from Hong Kong, a front—runner in foreign investment in Vietnam in the early days of this country’s campaign to induce foreign capital, and this brief visit triggered in Connolly a reasonable belief that there was a market in Vietnam for pharmaceutical products. At a reception at the Saigon Floating Hotel, Connolly got acquainted with Thu Le, who used to be an inter- preter for Saigon’s army before 1975 and is now running a "consulting office” of a foreign trade-related company based in Hanoi but with a branch in Ho Chi Minh City. Connolly was very impressed with Le, not only because of his command of English, but also his deliberate offer for help as a “field connection” for any of Dragon’s future business plans in Vietnam. Through Le, Connolly set up contact with Pharmthuco, a state-owned phar- maceutical manufacturing company of Thu Duc district (of Ho Chi Minh City) administered by both the city’s Department of Public Health and Thu Duc’s local administration. Pharmthuco had a license to import pharmaceuticals and medical i l i 1 l l Chapter 9 Culture in an Emerging Market: A Look at Vie supplies of any type. However, it seemed to have some problem with “interna- tional liquidity.” The foreign exchange reserve of the city was not very generous with a company at the district level such as Pharmthuco. Dragon could have only local currency when it sold pharmaceuticals to Pharmthuco. After signing an "agency" agreement with Pharmthuco to the effect that the Vietnamese company would be Dragon’s trading agent in this market, it would help Dragon apply for a representative office license, and both sides would look into the possibility of investing in a manufacturing joint venture in due course, Connolly had returned to Hong Kong with the agreement in hand and quite content about having done so. Rosenford appointed Hughes to carry out this project. Pathway was estab- lished for this Vietnam business with Hughes now at the helm. Our car finally ran on a six-lane highway on the outskirts of Saigon, the only one Vietnam had to date, built more than 30 years ago by Americans during the war years. It had once been called “Bien Hoa Highway" because it links Saigon with Bien Hoa, the capital city of Dong Nai province 20 miles to the northeast of Saigon. Now it is renamed "Hanoi Highway,” maybe a reminder that to enter Saigon, the “business capital” of the country, one must go through Hanoi, the “political capital” of Vietnam. At some point, our car turned right, entering a small road in quite poor condition running along a railway. It had much the look of the countryside with a few small fields of rice, but 1 also noticed quite a few factories lying side by side. The air-conditioned car felt good compared to the hot, sultry sun. It was like night and day getting in and out of the car. The car turned again to a small alley with clusters of bamboo on both sides. “Here we come,” Hughes said, pointing to an electric pole, explaining there used to be a big sign there, which read PATHWAY TO VIETNAM, but Pharmthuco had asked him to remove it until Pathway could get a business license. I supposed it was symbolic of the fact that our only meaningful identity in Vietnam was given by our association with a Vietnamese company, Hughes’s residence was located in a large compound that also houses the plant and office of Pharmthuco. It used to be an old villa of a well-to—do family that fled to the United States after the communist takeover in 1975. Pharmthuco was authorized to use this real estate and turned it into a warehouse for its phar- maceutical products, before realizing its sluggish operation was too modest to make use of even a half or a third of the space of this facility. So it was quite happy to let Pathway renovate the house and use it—not only a “gesture of good— will" but also an attempt to prevent the house from wearing out much further. Hughes had spent more than $50,000 to refurbish the house and make it livable. Painted dark brown, it was a wooden building with two floors elevated from the land surface adjacent to the side of the river. He took me straight to the house, where an attendant was waiting, helping me with the luggage. I was shown to my room, which looked over the bank of the river, where a small canoe tnam 119 120 Part I Matt and Ian _- was anchored. Very soon, I was back in a large living room, joining Hughes for a few drinks. Our ensuing conversation helped me learn much more about the medical supply market in Vietnam with its unique characteristics. Although the economy had switched to the market system quite a few years ago, the government still does not allow private or foreign-invested investments in the medical industry on the grounds that “public health” is a matter of highly sensitive importance that private enterprises, “whose only pursuit is profit,” should not be in— volved in. HUGHES “Recently, the Vietnamese government has encouraged foreign investors to coop— erate with Vietnamese state—owned firms to set up manufacturing joint ventures. No licenses have been issued so far, however. As a result, production has been totally in the hands of state—owned firms and daredevil clandestine producers, many of whom are pharmacists who work in state—owned manufacturing firms or drugstores in daytime, operating mostly in Cholon, which is Saigon’s Chinatown. Domestic output has fallen in recent years, and most factories at lower adminis— trative levels, like districts or wards, and even many at province and city levels have had to cease manufacturing. The so—called organized and planned market of the government, which ranges from trading companies at central and city- province levels to pharmaceutical stores at districts and wards, has been shrinking a lot and been taken over by other, officially nonsanctioned means. Because the government has still maintained certain price controls over subsidized products of state-owned firms, state companies can make a profit only by closing their front doors and channeling their goods, including even imported medicines and med— i ical supplies, through the back doors to the government—called ’nonorganized g market,’ which could hardly be described as a ’black market’ because it has been 5 so open and extensive. For the government to say it wasn’t going on would be claiming complete blindness. “Since the early eighties, in order to resolve huge unmet needs for medicines, the government has allowed, even encouraged, its people to receive pharmaceu— tical gifts from their relatives living overseas. Medicines and related supplies have become one of the hottest items on the ever-present black market, which in fact is a way of life in socialist economies—not really legal but taken for granted. There is no other way. The government can’t get any manufacturing going, let alone market and distribute medical products. Foreign medicines and supplies are 5 smuggled into the country from the sea and across the borders with China and Cambodia. These smuggled goods are instantly integrated into the nationwide “unorganized” market system that make the government’s own system of distri— bution look quite ridiculous. Chapter 9 Culture in an Emerging Market: A Look at Vietnam “When we came into Vietnam, we looked at the large market of more than 70 million people, but we did not recognize that the country is still very divided not only between north and south, but north, central, and south, or maybe even among 50 different provinces and cities run by 50 or so local lords. So where do we situate ourselves marketwise, we asked ourselves: in the organized market or the unorganized market? Personally, I prefer having a system of distribution of our own rather than relying on Pharmthuco. Their market doesn’t really go beyond this small district, and its salespeople are more interested in getting mixed up with the black market for their own sake.” ZVIATT I was not surprised at Hughes’s account, having occasionally heard stories about trafficking and the black market in China, Russia, and so on. In Taxi Blues, a film about Russia in the dying days of the communist regime, while the organized market required unending queues just for prime commodities, everything could be found in the black market, provided you know the rules of the game. But clan- destine market activities to this proportion, as described by Hughes, were still shocking to me. While we were talking, a young man rushed into the room and spoke very quickly to Hughes. From his pidgin English, I understood that Hughes needed to go to see somebody immediately. Something seemed to be wrong with the clearing of a shipment of medicinal drugs from the customs house. So Hughes asked to be excused, saying he would be back to take me downtown. “Another crisis to solve,” he said before rushing out of the house. From discussions I had at the American Club in Tokyo, 1 had the impression that a lot of young executives of American companies aspire to be appointed to head branch offices in Asian countries so they can become “lords of the rim." 1 really doubt many of them could fathom the challenges they would face in an emerging country like Vietnam. “Hughes get five years older since he work here,” his assistant My, a local Vietnamese, told me. I had no doubt about that after hearing Hughes recount what had happened that very evening. Hughes had gone to the customs office to see what the problem was. It didn’t take long to figure out he needed to get Pharmthuco involved. He wanted to talk directly to Dr. Tran Van Xuan, director of Pharmthuco, but he could not find Xuan because he was as "elusive as ever.” HUGHES “He’s called a (medical) doctor, but you would be surprised to see quite a lot of people with their name cards carrying their titles as doctors of some kinds! His unwritten life story is that Xua’n was a guerrilla fighter during the war. He helped 121 122 Part I Matt and Jan army surgeons carry out certain operations and also worked some time at a dispensary as a medicine auditor in the jungle. After peace was restored in 1975 he was sent to a part—time medical school for three years and made an administrative physician. One of his comrades, Dr. Le Thi Dan, developed her career in the same way but was more fortunate because Ho Chi Minh City needed an “educated” woman in the Party for the position of deputy chairman of the city. The story went that Mrs. Dan, ’the jungle—graduated physician,’ once in a position of power, did not forget her old pal Xuan, explaining why Pharmthuco as a district—level firm still could enjoy a few privileges known to only city-level firms and Xuan could be relaxed enough to go to the tennis court every morning or afternoon.” Question 1: Based on the description of how things work in Vietnam— the market system and position appointments, relation- ships between host anaforeign companiesmwoalayoa like working in that environment? Why or why not? “I knew Xuan might be with some leaders of the city in some tennis court, so I had to meet Nguyen Van Thanh instead, Xuan’s lieutenant, whose official title is ’Director of Planning.’ Thanh, a member of the Communist Youth League, is an influential executive, believed to be Xuan’s ’heir apparent,’ although I could not see why Xuan should disappear in any near future, unless he gets a kick upstairs. Thanh does not speak English well. Communication with him is really difficult, but he prefers not to have an interpreter. He is rather at odds with My, my assis— tant, because I hired him myself instead of going through him. It’s a two—edged sword because Nguyen would have picked some relative of his or a relative of someone he owed a favor. That might have helped my image with him a bit. But I never could have fully trusted any information my assistant would have given me and could certainly never have fully trusted him to keep information about Pathway confidential. “When I found Thanh, he looked quite upset. He told me that the customs would not clear the shipment over the weekend as expected, insisting that Pharmthuco must show an import license before any action was taken. This was not the first time Pharmthuco has imported a lot of pharmaceutical materials without a license. In previous cases, Xuan has just sent his deputy director, Tran Van Thu, to see the first deputy executive director of the Customs Office of the city with a bottle of Johnny Walker and a carton of 555 cigarettes. The deputy director used to be Thu’s boss in the city police department. As fate had it, Thu was purged out of the police following an investigation into a corruption case and designated the ’political commissar’ of Pharmthuco. And unfortunately, this first deputy officer had been transferred to the Saigon port authority, and his suc- i cessor was anxious to serve a reminder that this authority just had a new lord. Chapter 9 Culture in an Emerging Market: A Look at Vietnam “Customs officers at lower levels were taking this opportunity to strengthen their bargaining position. If Pharmthuco did not act promptly to get the right licenses, the customs office would report the case to the People’s Committee. Someone might leak this offense to the local press, which is very eager to hunt for ’scandals’ involving foreign companies, since the shipment is for Pathway. Either way, there was a strong possibility that the lot [of products] could be impounded. Pharmthuco, as the importer, would be fined. "80 I told him, ’What can I do? You are the importer, you must make sure everything is proper, legal. I never liked this importing without a license. I even warned you people repeatedly that you could not continue this practice forever. I did not feel safe. Neither did you. And it eventually would be you, and you alone, to take responsibility for any risk, loss, or trouble with the government. “In spite of what I said, I knew quite well that eventually, I might be the one who would have to bear the brunt of all of this. And it could leak to the press. They only write two types of articles: one to praise generously ’well-intentioned foreign companies and businessmen who come here because they love the com— munists and the Vietnamese people so much,’ and another to condemn "capitalist firms pursuing fast bucks by taking advantage of Vietnam’s inadequate prepara- tion for doing business with the rest of the world.’ "In this case, I tried my best to control my temper, because they had already told my boss I was ill tempered. So I told him that I would not agree to another delay, no matter what the situation was. Thanh, Pharmthuco’s planning director, called what happened ’regrettable and beyond Pharmthuco’s control’ but sug- gested there was still a way. He was going to try to talk to some customs officers at lower levels, but powerful enough, into setting aside the case for at least a week before reopening it. Meanwhile, Dr. Xuan would go see the director of the Department of Public Health seeking a letter affirming this lot was ’in the public interest’; his friend Dr. Dan would be asked to make a phone call to the director of the Customs Office. In order to buy time, Thanh suggested they use one of Path- way ’s ’medical gift samples,’ some 15 to 20 boxes worth at least $1,000 each. Each box contained an array of medicines. This was not the first time Pharmthuco’s staff had poked their noses into these boxes of échmitillons medicnlcs (medical samples). I knew there were instances in the past when they misappropriated these boxes, but I didn’t mind expending one or two or three boxes if the operation of his busi- ness needed this kind of lubricant. Even by greasing the palm, though, it would be a week or two before the lot at customs could be cleared. "In business, I’ve learned over and over again that time is opportunity, and opportunity is money. One day’s delay can be a real disaster. They understand so well that time is valueless to them but extremely valuable to us, so they want to force us to pay for the opportunity cost of time. Basically, it comes down to how much money you have to sink into others’ pockets just so you can transact 123 124 Part I Matt and Jan _, business. It’s doable if you’re a well—endowed business, but if you’re a small start— up, you might be in over your head. Investing for the long term is well and good, but not enough business can wait that long. "Pathway might have been a good idea, but in a complicated transitional economy like Vietnam, where the people still need much time to learn how to do business, and the legal framework is far from being adequate, to see a ’good idea’ through to its fruition takes more than smarts and willpower.” Question 2: I f you were the president of the parent company, Dragon Exploration, I no, would you continue to invest in Path- way orpnll out of Vietnam? Why or why not? "It was very unfortunate for Connolly that he first met up with one of Vietnam’s many so-called consultants. He’s the last man I would trust. In doing business here, you must watch out for those who always try to assure you that ’There is no problem.’ Nothing is easy or straightforward in this country, even to get a driver’s license When it was found out later that Connolly’s consultant was neither a member of the Communist Party nor a public servant, Connolly was advised to drop the guy immediately. He was a second—rate broker, anyway, and quite a few American businesspeople were just buying his words. Connolly was told to go to another consulting firm run by a government ministry. We were also warned against any directors of state—owned enterprises like Xuan, who is quite fond of bragging about having ’connections with the highest level in Hanoi,’ which would help him obtain any investment license for his partner ’with no dif— ficulty,’ he’d tell us. Xuan was really eager to work with foreign companies, simply because he believes we are ’cows to milk.’ "Connolly contended that the Vietnamese market would soon become very competitive, so any early comer should take the initiative to strike ’a preemptive coup.’ He decided to use Pharmthuco as the bridgehead to Vietnam, agreeing to support this company’s activity almost at any price in order to buy its ’heart and mind’ and provide the Vietnamese company with foreign ’high-quality’ products to sell. The Vietnamese people had developed an aversion to quoc doanh (state run), which was synonymous to ’inferior,’ ’incompetent,’ ’fake,’ like trong taz' quoc doonh (state-run referees), su quoc doanh (state—run monks), phim quoc doanh (state— run movies), or giant doc quoc dormh (state—run managing directors). Connolly also believed he could commit Pharmthuco further to this partnership by setting up a joint venture in manufacturing pharmaceuticals. In the early stage, Pharmthuco did provide Pathway with a shelter and a shield. It had a corner in the office of Pharmthuco. In return, Pathway brought in quite a few valuable machines for Pharmthuco to modernize its plant. The machinery was brought in with the ’tem— porary’ import permit under Pharmthuco’s name, but there was an appendix Chapter 9 Culture in an Emerging Market: A Look at Vietnam agreement that the equipment belonged to Pathway and was for the future joint venture. My question was what Pharmthuco had in mind for this joint venture. In the first place, Pharmthuco, as a district~level company, was so poorly capitalized that its machinery and equipment became a liability rather than an asset to the firm. In its possession were merely a business permit and an import license, which were deemed ‘both necessary and sufficient conditions’ for doing business in an economy where permits and licenses were so important. “Pathway had no permit to open a representative office‘for various reasons. No foreign company could have import licenses, simply because they could not open branches in this country. So it had to depend on Pharmthuco for the import trade and even for marketing activity because marketing without a representative office license was an offense according to Vietnam’s trading laws. Pathway believed it should be able to open a representative office for the pharmaceutical trade first—before exploring the possibility of investing in a drug—making com— pany. But Pharmthuco showed little interest in helping Pathway have the repre— sentative office license. They want us to embark on the investment joint venture plan, even though we’re not ready yet for this stage—not until we can measure the market potential by a self-initiated marketing survey. “Pharlnthuco has definitely been less than fully cooperative with us. Xuan, Pharmthuco’s director, wanted me to finance a district soccer team, give money to a school in the neighborhood, but I told him I wouldn’t fund anything before having the license. I refused to hire people he recommended because I had no need for them; so he was really unhappy, complaining I was not cooperative and did not understand the rule of ’unanimity’ in joint venture co—management! “I’ve been told that doing business in a country like Vietnam requires a long— term vision, hence patience and tenacity. In the meantime, I feel like a hostage. Without a trading license, we are like a ghost company, and I am a persona non grata in this city. Everything we do can be the cause for trouble any time. We rely totally on Pharmthuco’s ’mercy’ for survival. The problem is that Pharmthuco is not very merciful, by nature.” MATT Hughes decided to seek a meeting with the local government in Ho Chi Minh City in order to find out what was going on and assess the possibility of getting their own license. My arranged the event and also served as interpreter for both sides. Hughes kindly suggested that I go with him, so I “could learn something.” We went to the office of the People’s Committee of Ho Chi Mirth City. We scheduled a meeting to talk with officials responsible for reviewing applications by foreign Companies opening representative offices and investing in the city. The building 125 126 Part | Matt and Ian .a where we met is at least a century old and was the office of the French protectorate for at least 50 to 60 years——before the French colonialists withdrew from Vietnam in 1954. The People’s Committee is like a local government, with various directorates operating under its supervision, like ministries working in the government. As a matter of fact, there is a directorate of external economic relations (DEER) dealing with problems of foreign companies. But Hughes was told to come to the office of the vice chairman in charge of DEER because the vice chairman is like the deputy prime minister in the local government of the city, and the head of the directorate is just like a minister. The vice chairman has higher rank in both the local admin- istration and the city's party hierarchy. He is also more well versed with policy- related matters, we were told. This vice chairman has almost a dozen “senior experts,” and the first one we met was Sau Tung, who gave us his calling card, printed in English and introducing himself as “Doctor” Tung. Very different from most local businessmen who were dressed in ties and jackets, Sau Tung, in his mid—sixties, was attired in the old fashion of "popular communist cadres”: a short— sleeved white shirt hanging loose over his pants and a pair of sandals. On the con— trary, we were all dressed up. The suit and ties were seen as a sign of respect and seriousness that foreigners show to Vietnamese hosts. To show he had prepared for a strong case, Hughes also had with him an amply packed Samsonite case. And to win friends, he also brought two cartons of foreign cigarettes, one for Sau Tung and another for Ba Thoi, the other official we were to meet. Our Vietnamese host took the carton of cigarettes in a casual way. From the tobacco—tainted tips of his fingers and the black decay on his teeth, I figured he i must be a heavy smoker. My had briefed us about this northern—born bureaucrat. g He had been a senior official of the Ministry of Trade in Hanoi before being sent to Ho Chi Minh City to support the infant administration of the “newly liberated” government in the south. Thousands of bureaucrats from the war—ravaged north moved to the more prosperous south in this way after the war, but after a few years, southern communists were trying to reduce the power of those coming from the north. People like Sau Tung were gradually disarmed, neutralized, ‘ isolated—given titular positions like “senior experts.” Sau Tung was also known as “Comrade Sung Tau” (which in Vietnamese means Chinese Gun), not only I because this is the Vietnamese—style reversal of his name, but also on account of his "background," that is, five years of studying economics in Red China in the fifties and his reputation as a tough boss. He took from his drawer an iron box of tea and poured a handful of tea into a pot, which was so small I couldn't help wondering how there could be enough tea for all four of us. Then he slowly walked to a table in the corner of the room, took a vacuum flask, and added the hot water into the pot. From where I sat, I could also see he was pouring hot water from the thermos into small cups; then ...
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This note was uploaded on 01/19/2012 for the course MGT 4174 taught by Professor Jameswermert during the Spring '12 term at Kennesaw.

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