With $7 billion worth of infrastructure projects on the drawing boards, Vietnam is a magnet for Caterpillar Inc.'s bulldozers and excavators. After President Clinton lifted an 18-year trade embargo in early 1994, the heavy-equipment maker moved aggressively, opening a dealership in Hanoi and bidding on a $10 million mining contract.
But because Washington doesn't have full relations with Vietnam, Cat couldn't get cheap financing from the likes of the U.S. Export-Import Bank. So last month, the contract went to Japan's Komatsu Ltd. "Without access to competitive financing, we'll lose millions more dollars in contracts this year," says Anthony Salzman, president of V-TRAC, Cat's dealer in Vietnam.
BIG HANDICAP. While Vietnam is officially open to U.S. companies, it is anything but a level playing field for Americans (table). Until Washington restores diplomatic ties, Vietnam is ineligible not only for U.S. Export-Import Bank financing but also Overseas Private Investment Corp. guarantees, risk insurance, and other subsidized credits. The U.S. has "a very serious handicap," says J. Daniel O'Flaherty, president of the newly formed Coalition for U.S.-Vietnam Trade in Washington.
Despite such moans from the business community, the White House is skittish about upgrading ties with Hanoi. U.S. officials fear they will unleash a torrent of criticism from families of former prisoners of war and missing soldiers, and refocus attention on the President's avoidance of military service. If Clinton doesn't act by fall, the Presidential campaign could keep the issue on the shelf until 1997. That has prompted a loose alliance of U.S. companies to lobby for speedy renewal of diplomatic relations. Many executives hope the 20th anniversary of the conflict's end on Apr. 30 will be a healing event that will allow Clinton to move forward.
Until Clinton acts, many agricultural exporters and manufacturers of big-ticket capital goods see lucrative deals passing them by. Just ask Unisys Corp. It went all-out to reel in computer orders from Hanoi, flying four officials to Singapore for a software demonstration. But Hanoi chose European equipment--with European financing.
Not all U.S. companies are hampered by the lack of subsidized financing, particularly consumer-products makers. Convenience stores carry Heinz ketchup and Kraft salad dressing. Coca-Cola Co. and PepsiCo Inc. have opened bottling plants. And a Baskin-Robbins ice cream parlor opened in Ho Chi Minh City in January.
PIGGYBACK RIDE. In more capital-intensive industries, though, the lack of diplomatic relations hurts. For instance, Mobil Oil Corp. is participating in two drilling ventures off Vietnam's shores. If petroleum is discovered, Mobil says it will need outside financing to help defray high production costs. One complication: Without normalization, American corporations can't claim a U.S. credit for taxes paid to Vietnam. "That lowers the return on deals, making it harder to get financing," a Mobil spokesman says.
To get a foot in the door, some U.S. companies are piggybacking on ventures led by foreign outfits whose governments are doling out aid to Hanoi. Black & Veatch, a Kansas City (Mo.) engineering firm, has teamed up with Canada's Stanley International Group Inc. to bid on an $87 million water-treatment project for Ho Chi Minh City. "The only reason we are on the [unofficial short] list is that we are with Canadians," observes Charlie Sievert, Black & Veatch's Vietnam manager.
U.S. companies are urging Senator John McCain (R-Ariz.)--a former prisoner of war--and other Vietnam veterans on the Hill to endorse diplomatic recognition, thus giving Clinton political cover. McCain, who will visit Vietnam in mid-April, is sympathetic to the idea but hasn't made a decision. For their part, some Administration officials want to put U.S. business opportunities over MIA concerns. But in Vietnam, U.S. policy is still largely shaped by past events rather than current interests.
DOING BUSINESS IN VIETNAM: A FEW ADVANCES...
Some 70 U.S. companies have licenses to do business
Oil giants such as Mobil and Occidental Petroleum are actively exploring offshore
American consumer products-from Pepsi to Motorola pagers-are hot sellers
...AND SOME PROBLEMS
American companies rank 13th in direct investment, with only $270 million worth of signed contracts
A lack of U.S. government guarantees, political risk insurance, and subsidized trade finance hurts sales and investment