What's Keeping U.S. Companies Out Of Vietnam? The U.S.

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 does not 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 will be ineligible not only for U.S. Export-Import Bank financing but also for 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 that 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 takes some action, many agricultural exporters and manufacturers of big-ticket capital goods see lucrative deals passing them by. Just ask Unisys Corp. The company went all-out to reel in computer orders from Hanoi, even flying four officials to Singapore for a software demonstration. But Hanoi chose European equipment instead--and 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.

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 are not able to 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 explains.

PIGGYBACK RIDE. To get a foot in the door, some U.S. companies are piggybacking on ventures that are led by foreign outfits whose governments are doling out aid to Hanoi. For example, 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. This would give President Clinton some political cover. McCain, who plans to visit Vietnam in mid-April, is sympathetic to the idea, but he hasn't yet made a decision.

For their part, some Administration officials would like to see U.S. business opportunities given priority over MIA concerns. But in Vietnam, U.S. policy is still largely shaped by past events rather than current interests.



-- Some 70 U.S. companies

have licenses to do business

-- Oil giants such as Mobil and

Occidental Petroleum are

actively exploring offshore

-- American consumer prod-

ucts-from Pepsi to Motorola

pagers-are hot sellers


-- 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


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