Doing Business in Vietnam: Always Look Ahead, Don't Worry About the Past

Photo of Ho Chi Minh City:
http://ow.ly/J3TP30azNRp

"The U.S. is now Vietnam's largest export market and a major source of foreign direct investment, helping fuel Vietnam's remarkable economic growth," according to the Vietnam Country Commercial Guide, a report produced by the U.S. Department of Commerce's International Trade Administration. Given the Economist Intelligence Unit's prediction that "Vietnam will be one of the region's fastest-growing economies" from 2017-2021, I was interested in attending an event hosted by the Trade Development Alliance of Seattle on Mar. 23, 2017 featuring Stuart Schaag, Commercial Counselor with the U.S. Commercial Service in Vietnam.

In his presentation, "It's Time to Rethink Vietnam," Mr. Schaag explained how the U.S.-Vietnamese commercial relationship has grown since the U.S. lifted its trade embargo against Vietnam in 1994 and the two countries renewed diplomatic relations in 1995. In fact, American exports to Vietnam increased by 77 percent from 2015-2016 with Ireland placing a distant second at 22 percent (exports of American products globally grew 10 percent for the same time period).

Vietnam is a member of the Association of Southeast Asian Nations. ASEAN, Mr. Schaag noted, is the largest destination of U.S. investment in Asia and the fourth largest market for export of U.S. goods and services. "560,000 American jobs are directly or indirectly supported by goods and services exported to ASEAN." Using 2012 statistics, he said "almost $100 billion of U.S. goods and exports go to ASEAN." Importantly, ASEAN contains a young population and growing middle class.

While American firms exported $26.9 billion in goods and services to Singapore in 2016, making it the largest export market in ASEAN, U.S. businesses exported $10.2 billion worth of goods and services to Vietnam--more than four times the amount exported in 2007.

Regarding the country's demographics, Mr. Schaag told the audience that Vietnam is the world's 14th most populous nation with 93 million people. Vietnam's labor force is comprised of 55 million individuals. The median age of Vietnamese is 30.7 and 24.1 percent are aged 15 and under. Citing statistics from the World Bank, 13.5 percent of Vietnamese lived below the poverty line in the 2014 compared to 60 percent in the 1990s.

The aforementioned Vietnam Country Commercial Guide notes: "With disposable income levels in major urban areas four to five times the national average, significant opportunities in the consumer and services sectors are fast emerging. A 2013 study by the Boston Consulting Group predicted that Vietnam's middle and affluent class will double by 2020, exceeding 30 million consumers."

Encouragingly, the report says: "Telecommunications, information technology, oil and gas exploration, power generation, transportation infrastructure construction, environmental project management and technology, aviation and education will continue to offer the most promising opportunities for U.S. companies over the next few years as infrastructure needs continue to expand with Vietnam’s pursuit of rapid economic development. Health care will also be a growing sector as the government expands programs and an increasingly wealthy population spends more on medical treatment."

My colleagues and I think Vietnam could be a lucrative market for technology companies specializing in cloud computing, connected devices, fintech, and mobile applications (particularly in education and health).

On the topic of entering the Vietnamese market, "U.S. companies preparing to enter the Vietnamese market must plan strategically and be persistent and consistent with face-to-face follow-up. It can take up to one or two years to make a successful sale into this market. Building relationships is important."

Mr. Schaag concluded his presentation by showing a video that illustrates how doing business in Vietnam is similar to the traffic in the country's dense cities:

• Go slow, take your time, don't expect to get there quickly.​
• Get some experience before venturing too far.​
• Always look ahead, don't worry about the past.​
• Have confidence (i.e. don't show fear).​
• Be in the right frame of mind. Find your zen.​
• Be open to doing things differently…​
• …but don't waiver on your values.​

What is your experiencing of doing business in Vietnam?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Doing Business in the UAE: An Opportunity to Develop Localized Mobile Content for Arabic Speakers?

Produced by GSMA Intelligence, The Mobile Economy Arab States 2015 report says: "A factor preventing smartphone users [in the Middle East] buying apps is the lack of apps in Arabic language. Arabic is the fifth language in the world by number of native speakers and is the first language for more than 240 million people. Nevertheless, less than 1% of websites in the world are in Arabic. Creating local Arabic content requires local talent, so there is clearly an opportunity for local developers, local service providers and local entrepreneurs to develop apps that meet the needs of these customers." My professional interest in producing localized content for Arabic speakers was the primary reason I attended the "Business and Trade Opportunities with Jebel Ali Free Zone (Jafza), Dubai" seminar on Sept. 27, 2016 in Seattle, Wash.

Jafza, a DP World-owned company, is based in Dubai, United Arab Emirates and promoted as one of the world's leading free trade zones. Created in 1985, a"the free zone's purpose is to promote trade and support container throughput at the Jebel Ali Port," according to a promotional materials produced by the based organization. "Jafza accounts for almost 32% of total FDI (Foreign Direct Investment) flow into the country. The free zone contributes 21% of Dubai's GDP on a yearly basis and it sustains the employment of more than 144,000 people in the United Arab Emirates. In 2015, Jafza generated trade worth USD 87.6 billion."

Speakers at the seminar noted that the United States has enjoyed warm relations with the UAE since 1972 and the U.S. was the third country to establish formal diplomatic relations with the UAE. With respect to international trade, the UAE is the United States' single largest export market in the the Middle East. Over 1,000 American firms have an on-the-ground and expanding presence in the UAE. FedEx, Ford, GM, and General Electric are among the Fortune 500 companies operating in Jafza.

The seminar explained some of the value-added services and incentives for companies to locate in Jafza including: 100 percent foreign ownership, no corporate or income taxes, no import import or re-export duties, no restriction on capital repatriation and no currency restrictions. Covering 22 square miles, Jafza can provide businesses with plots of land, warehouses, a business park, and on-site residences.

Photo: Trade Development
Alliance of Greater Seattle

I enjoyed attending the seminar, which was hosted by the Trade Development Alliance of Greater Seattle, and learning about the opportunities that exist for American firms. However, the focus of the presentations was on products rather than services such as cloud computing or information technology such as software-as-a-service, the latter of which is the primary focus of ROI3, Inc. During the Q&A session, there was some discussion about UAE's planned effort to support local entrepreneurship and the creation of small businesses.

The GSMA report referenced in the first paragraph above explains that "the mobile industry in the Arab States has grown rapidly over the last few years, with 54% of the population subscribed to a mobile service as of mid-2015. At this point, the unique subscriber base in the Arab States stood at just over 200 million." Given that just 1% of websites in the world are in Arabic, entrepreneurs and small businesses in the UAE are presented with a great opportunity to develop localized mobile web content. My colleagues and I look forward to having the opportunity to develop mobile software solutions for Arabic speakers, particularly in the education and health sectors.

What has been your experience of doing business in the UAE?

Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

Learning About Business Opportunities in Taiwan

Photo of the Taipei skyline:
http://ow.ly/4n5sQi

Did you know Taiwan is the tenth largest trading partner with the United States? Bilateral trade between the U.S. and Taiwan reached $67.4 billion in 2014, according to U.S.-Taiwan CONNECT. While most Americans are aware of the strong trade relations that exist between the U.S. and mainland China, many people, myself included, are unaware of the business opportunities available in Taiwan for American companies. An event sponsored by the Trade Development Alliance of Greater Seattle (TDA) explored the cross-border relations between China and Taiwan, as well as an examination of the market opportunities that exist for companies based in the Greater Seattle area. This post addresses some of the points presented during the Apr. 19, 2016 event in Seattle, Wash.

Andy Chin, Director-General of the Taipei Economic and Cultural Office in Seattle, talked about how U.S. products are well-represented in the Taiwanese market. Mr. Chin cited examples such as Boeing's long-standing relationship with Eva Airways with the former selling commercial aircraft to the latter and Microsoft's success of not just manufacturing its products in Taiwan, but commercializing its cloud-based services to the island with a population of 23 million.

Upon performing some research for this post, I learned of another dynamic between Microsoft and Taiwan such as the collaboration between Microsoft Research Asia and Taiwanese academia that "began in 2003 with a partnership between National Taiwan University, National Tsing Hua University, and National Chiao Tung University. This alliance led to programs that foster new talent, curriculum innovation, and academic exchanges. In 2006, Microsoft Research Asia extended this collaborative partnership to additional institutions, such as National Cheng Kung University in Taiwan."

Joe Borich, Senior Advisor with Nyhus Communications, said U.S. products are well-represented in the market and noted that Taiwan is a good target market for high-quality, differentiated products and commodity items. He also remarked how Taiwan possesses a comprehensive modern legal system with an independent judiciary. Lastly, according to Mr. Borich, Taiwan contains a number of excellent higher education institutions that produce graduates who are well-prepared for the challenges of working in a global marketplace.

Seattle has maintained a long and storied relationship with Taiwan including the former's sister city relationship with Kaohsiung, Bill Stafford, a Senior Advisor with TDA, explained. He also commented that Taiwan serves as a good location to export to emerging markets throughout Asia. Mr. Stafford further said economic ties between Taiwan and mainland China will continue to improve with the latter increasing its foreign investments in Taiwan over the next few years.

According to the Doing Business in Taiwan: 2015 Commercial Guide for U.S. Companies, a report produced by the U.S. Commercial Service in Taiwan, "Taiwan is a thriving democracy, vibrant market economy, and a highly attractive export market, especially for U.S. firms." Moreover, according to the report, "Mainland China (including Hong Kong) is Taiwan's largest trading partner, accounting for 26.7% of total trade and 18.1% of Taiwan's imports in 2014. The United States is Taiwan's second largest trading partner, accounting for 10.6% of total, including 10% of Taiwan's imports."

The report also provides an overview of the sectors ideal for U.S. export and investment in Taiwan. I was pleased to read: "The Taiwan authorities have identified cloud and mobile computing as the most promising sectors in the Taiwan’s computer software and service industries." The report includes business application software and Software as a Service (SaaS) in its list of Sub-Sector Best Prospects and explains "the Taiwan authorities have identified cloud and mobile computing as the most promising sectors in the Taiwan’s computer software and service industries."

On the topic of openness to foreign investment, the Doing Business in Taiwan report says:

Strategically located between Northeast and Southeast Asia, Taiwan is an important hub for regional and global trade and investment, especially in the high-technology industry. Indicative of its developed and open investment environment, Taiwan ranks in the upper tenth percentile of major global indices measuring ease of doing business, economic freedom, and competitiveness. Taiwan's investment climate has improved in recent years with expanded cross-Strait trade with mainland China and expansion trade links with other partners in the Asia Pacific region, as well as reforms to enhance protection of intellectual property rights and rationalize other investment-related regulations.

My colleagues and I at ROI3 are in the early stages of learning about the opportunities that exist in Taiwan for our SaaS solution, which provide smartphone and tablet users with the ability to learn English language skills and use of the language in business, legal, medical, aviation, and other professional settings. Do you have any advice or lessons learned of doing business in Taiwan?

Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

Optimistic about China Despite its Slowing Economic Growth and Rising Costs

On November 20, 2013, I attended an event in Seattle, Wash. entitled "Update on Issues in the US-China Relationship," which was co-hosted by the Washington State China Relations Council and the Trade Development Alliance of Greater Seattle. Erin Ennis, Vice President of the US-China Business Council (USCBC), a Washington, DC-based organization representing approximately 220 US companies selling American goods and services in China, focused her presentation on the USCBC 2013 China Business Environment Survey Results.

According to a press release dated October 10, 2013, the USCBC "surveys its member companies each year to gauge China's business climate and assess the top challenges faced by companies doing business there." The press release explains, "As China's economy has slowed over the past year, USCBC’s survey results indicate that companies face business and market access issues in an economy that for the past five years has been a rare bright spot in a difficult global downturn."

Ms. Ennis noted that the growth rate of China's economy is slowing and cost increases are the most significant challenge of member companies. Reading from the report, she said, "Fewer companies in this year's survey report that their profit margins in China are better than that of their global rates, and fewer companies report double-digit revenue increases compared to previous years."

Ms. Ennis said competition with Chinese companies in China is listed second among the ten challenges identified by member companies (see list below). The report's Executive Summary explains that "most multinational companies in China contend with other foreign competitors as well as both state-owned and private Chinese companies. Survey respondents expressed concern over the benefits that Chinese companies (both state-owned and private) receive that are not available to foreign companies."

Interestingly, while intellectual property rights (IPR) are a regular topic in the U.S. media, IPR enforcement is listed fifth among the ten challenges identified by member companies. The report says, "Problems with licensing occur at the central, provincial, and local levels and affect almost every aspect of doing business in China. Licensing issues often overlap with other issues in the top 10, including uneven regulatory implementation, lack of national treatment, and insufficient transparency in government rule drafting and decision making."

While my colleagues and I at ROI3 recognize the slowing pace of China's economic growth, we continue to remain optimistic about the opportunities to monetize our mobile software-as-a-service in the world's second largest economy and one of the world's largest mobile telecommunications market. As outlined in previous posts on this blog, China currently has over 300 million 3G subscribers and will see smartphone shipments exceed 460 million units by 2017 including 440 million 4G users by 2017. We are committed to producing localized mLearning apps and content that will empower smartphone and tablet users in China to improve their lives.

The top 10 challenges cited by USCBC member companies are:

#1  Cost increases
#2  Competition with Chinese enterprises (state-owned or private)
#3 (tie)  Administrative licensing
#3 (tie)  Human resources: Talent recruitment and retention
#5  Intellectual property rights enforcement
#6  Uneven enforcement or implementation of Chinese laws and policies
#7  Nondiscrimination / National treatment
#8  Transparency
#9  Standards and conformity assessment
#10  Foreign investment restrictions

Aaron Rose serves as President and CEO of ROI3, Inc., a Seattle, Wash.-based company that empowers people in emerging economies through innovative, technology-based solutions. He is also the editor of Solutions for a Sustainable World.

SeaMo: Connecting the Microfinance Community

I serve on the Advisory Council of the Trade Development Alliance of Greater Seattle, which is a collaboration of local governments and the private sector to promote the Seatte metropolitan area as one of North America's premier international gateways and commercial centers. During the Advisory Council's quarterly meeting held on May 13, 2009, Ryan Calkins, Executive Director of SeaMo, a Seattle-based nonprofit organization, gave a presentation on microfinance. Founded in 2007, SeaMo's mission is to connect the (Seattle) microfinance community through events, online services and opportunities for collaboration by hosting networking events and speakers series, and providing a website that serves as an events calendar, jobs board, community forum, and news source. (Photo courtesy of the Esperanza International Foundation)

According to Consultative Group to Assist the Poor (CGAP), a Washington, D.C.-based policy and research center dedicated to advancing financial access for the world's poor, "'Microfinance' is often defined as financial services for poor and low-income clients. In practice, the term is often used more narrowly to refer to loans and other services from providers that identify themselves as 'microfinance institutions' (MFIs). These institutions commonly tend to use new methods developed over the last 30 years to deliver very small loans to unsalaried borrowers, taking little or no collateral. These methods include group lending and liability, pre-loan savings requirements, gradually increasing loan sizes, and an implicit guarantee of ready access to future loans if present loans are repaid fully and promptly. More broadly, microfinance refers to a movement that envisions a world in which low-income households have permanent access to a range of high quality financial services to finance their income-producing activities, build assets, stabilize consumption, and protect against risks. These services are not limited to credit, but include savings, insurance, and money transfers."

During his presentation, Mr. Calkins said, "Microfinance is a key breakthrough in economic development in emerging markets." He explained that without microfinance, consumers in poor countries have to pay with cash only and businesses have to hold large inventory supplies, which reduces profitability. With an increase in established MFIs, developing economic markets have experienced accelerated growth over the past several years. Mr. Calkins noted that Seattle is a hub for MFIs or supporters of MFIs by listing a few Seattle-based organizations:

• Agros International;
• Bill & Melinda Gates Foundation;
• Esperanza International Foundation;
• Global Partnerships;
• Unitus;
• Washington Community Alliance for Self-Help (CASH); and
• World Vision

Having traveled to some of the world's least developed regions, I have personally witnessed how individuals are utilizing microfinance strategies to build entrepreneurship opportunities in an attempt to breaking the cycle of poverty. There are many success stories worldwide of men and women (CGAP claims 66 percent of microfinance customers are women) taking small loans, some as little as US$50, and creating sustainable small businesses. However, critics of microfinance suggest that these loans assist a disproportionately small number of people compared to the overall demand. Comparing the financial amount invested, critics argue, microloans have made little impact on increasing gross domestic product rates. Furthermore, recognizing that microfinance may provide an avenue for individual or small groups to increase financial equity, microfinance falls short in helping borrowers rise above poverty. In essence, more must be done to create a thriving middle-class in developing nations. I will address these issues and formulate viable solutions in a future post on this blog.