The MPDF is close to arranging financing for seven or eight small businesses. Davenport expects to work with another ten to 15 companies next year, and another 20 in the year after that. This doesn't mean that it is always easy to shepherd young SMEs, or even find them. "The successful ones, especially, have their heads down. We trip across them," he says. Many foreign investors and manufacturers who have sought local partners know the feeling. "If you can't get a 100 percent foreign-owned license your options are SOEs, and I can't think of any I'd partner with," says a consultant and developer who has been in Vietnam for five years. "Instead I look for someone who is young and wants to do business for business' sake." He would rather have a successful nightclub manager run an aquaculture project than arrange a joint venture with an aquaculture SOE, he says. The trick is finding that nightclub manager. Foreign investors choosing to partner with private companies also take on much of the disadvantages facing Vietnam's private sector. For example, a recent law requires that foreign importers need an import-export license, whereas previously a contract with a Vietnamese agency was sufficient. "I'm very concerned that you will not be able to have any contact with a private company but must do business with an SOE," said a Ho Chi Minh City-based lawyer. One reason that 96% of all joint ventures are with SOEs rather than with private companies is because of the government's disregard for the domestic private sector. In high profile venues recently Prime Minister Phan Van Khai met with both foreign and domestic investors to discuss the country's business climate. He received praise from business people and the media for what was considered a bold move, but he also heard a litany of complaints and frustrations. In Hanoi one of the attendees, the director of a wooden handicraft exporter, Luu Hai Thuy, actually cried when recalling how a suddenly implemented government decree that banned the export of forestry products left her with a warehouse of products worth 3 billion dong (about $250,000). The director of HCMC's Tocontap Saigon also broke down, according to press reports, while explaining that he could not export three containers of bamboo curtains because they had wooden frames. Another trader went to the heart of the issue, the government was hurting the country's best hope for economic development. "The existence and development of domestic business isn't respected," he was quoted by state-run media as saying. "Eventually, lack of consideration for the development of these businesses will make it impossible for the government to arouse the country's internal forces." The situation may be improving for Vietnam's private sector. With the government redoubling its efforts to increase exports, export-oriented domestic businesses are more likely to be given the same consideration as SOEs, says one economist. Yet for the private sector to truly become an engine of growth for Vietnam requires more serious reforms as well. Even with a more favorable regulatory regime, the private sector's success will depend on the government's ability to confront larger issues, such as foreign exchange controls which make it difficult for manufacturing firms to compete in global markets as well as against cheap imports within Vietnam. In the meantime, most entrepreneurs are likely to remain wary of a government that has typically offered little but obstacles. They are more accustomed to side-stepping the system than working within it, a resourcefulness that has made them a vanguard of sorts of private enterprise. Business-friendly talks by the prime minister are encouraging, and they are interested to see what happens. They are also intrigued by talk of a stock market, which they understand will provide a more free-market way of raising capital. "Whoever is a good fisherman, he will catch more fish," says one businessman. But they also know that so far, in their experience, it's rarely been that simple. |
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