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2015: A Milestone Year Ahead for Vietnam

Last year saw monumental changes in geopolitics: shifting borders between Ukraine and Russia, the growing impact of ISIS in the Middle East, student protests in Hong Kong reaching new heights, and the Ebola virus wrecking havoc in West Africa.

Another development that caught most of the world by surprise was a change in official policy between Cuba and the US. On December 17 2014, President Obama and President Castro held dual press conferences to announce the establishment of full diplomatic relations between the United States and Cuba. For context, when Vietnam was unified in 1975 the US embargo against Cuba had already been in place for almost 15 years (since October, 1960). As a result of the recent announcement between the two presidents, almost every barrier to trade and free movement of peoples between the US and Cuba will be removed, with the exception of the embargo—which only the US Congress can repeal. Historically, Vietnam and Cuba have shared a special relationship because of their ideological and independence struggles in the 20th century; perhaps Havana can learn from Hanoi’s experience in transforming into a “socialist-oriented market economy” and beyond. US investors and entrepreneurs will only be too willing to help as well.

2015 is special year, in part due to the number of significant anniversaries; for one, it is the 20th anniversary of the normalization of relations between Vietnam and the US under President Clinton’s administration. This year will also be the 40th anniversary of the reunification of Vietnam, the 85th anniversary of the Vietnam Communist Party (VCP) and the 70th anniversary of Vietnam’s Independence Day. Moreover, this year will mark the beginning of the 12th National Congress of the Communist Party of Vietnam.

As we enter deeper into 2015, there are many developments, changes, and policy implementations to look forward to and to make sense of. Above all, there will be increased amounts of competition in Vietnam—both from foreign and domestic players looking to capture a piece of the steadily growing economy. However, organizations operating in Vietnam should be on the lookout for commodity price swings (notably oil), currency fluctuations (as we are seeing with the Euro and the Swiss Franc), and new signs of saturation in certain domestic industries (such as motorbikes), all of which could stymie economic growth.

A Revamped Visa System and New Laws

January 1st brought new visa rules for foreigners with a complete overhaul of the old system. Basically, the number of visa types is increasing from 10 to 20 and there are new entry and exit requirements.

The former tourist visa (C1) is now “DL” visa and the former business visa (B3) is now an “DN” visa. One of the major changes of the new rules is that visa types cannot be changed while the applicant is in Vietnam, which means that tourists desiring to become English teachers (seemingly the majority of westerners) will now have to leave Vietnam and re-enter under the correct visa scheme.

Regarding the exit requirements for foreign nationals, they are listed below.

Article 28. Cases of suspension from exit and duration of suspension

1. A foreigner may be suspended from exit in one of the following cases:

a) He/she is currently the suspect, the accused, or the person with relevant obligations in a criminal case; a defendant or a person with relevant obligations in a civil case pertaining to business, employment, administration, marriage and familial affairs;

b) He/she has to implement a judgment or decision of the Court or a Competition Settlement Council;

c) His/her tax obligation is not fulfilled;

d) He/she is obliged to implement a decision on penalties for administrative violations;

dd) For reasons of national defense and security.

2. Clause 1 of this Article is not applied to people who is serving a prison sentence and taken abroad to provide evidence as prescribed by Article 25 of the Law on Judicial assistance.

3. The duration of suspension from exit shall not exceed 03 years and may be extended.

It will be interesting to see how these exit requirements will be implemented—and if they will be pared back once they are practiced on the first few cases, which will surely receive widespread publicity.

Additionally, foreigners now have rights that are outlined in the same legislation (which wasn’t explicitly stated previously):

Chapter VII, Article 44.1. Foreigners that enter, leave, transit through, or reside in Vietnam are entitled to:

  1. Have the life, dignity, property, the lawful rights and interests protected in accordance with Vietnam’s Law while they are staying within the territory of Socialist Republic of Vietnam[.]

There are other rights and obligations, so you can view the actual legislation here if you’d like to know more about the change in visa law for foreigners.

Additionally, the are a number of other laws that will take effect in 2015 such as the Amended Property Trading Law and the Amended Housing Law which will impact foreigners; they will set new equity capital requirements for real estate businesses and property projects, and allow foreigners to own a house in several specified forms, respectively. Moreover, there are other laws that will have profound changes for foreigners seeking to invest and own businesses in Vietnam, such as the Law on Enterprises and Law on Investment.

Same Sex Marriage Unbanned

Earlier this month, Vietnam repealed a same sex marriage ban, boosting the nation to the head of the pack for gay, bisexual, and lesbian rights in the region. Both Hanoi and Ho Chi Minh City have yearly gay pride parades in the past which have been growing in popularity with each passing year.

A New American Ambassador

The change in marriage for same-sex policy couldn’t have happened at a better time, as the new American Ambassador, Ted Osius,  was officially received in Hanoi last month. Ambassador Osius and his partner, Clayton, have a son, Tabo, making theirs a truly multi-cultural family and perhaps an archetype that will be more represented in the 21st century–in Vietnam and beyond.

Your author had the opportunity to meet with Ambassador Osius during a dinner last week in Hanoi–we have both lived in HCMC and Hanoi, albeit during different eras. More importantly, we also spoke about encouraging American students to study abroad in Vietnam as a way to change the perception of Vietnam in the US, which currently has approximately 16,000 Vietnamese students studying at higher education institutions. Overall, Ambassador Osius spoke openly and candidly about his priorities for his tenure here in Vietnam, some of which you can find here. We are excited and look forward to a new chapter of relations between Vietnam and the US.

New Trade Agreements and Fulfilling Obligations

The Trans-Pacific Partnership (TPP), once finalized, will set the stage for the US to be Vietnam’s largest trading partner. Additionally, Vietnam and the Customs Union will also be finalizing their agreement later this year. Once both agreements are executed, it will deliver a big boost to Vietnam’s trade activities.

Also this year, Vietnam must fulfill its World Trade Organization (WTO) obligations of permitting the establishment of wholly foreign-owned businesses, including retailers and wholesalers. Furthermore, integration with ASEAN Economic Community (AEC) allows the free flow of goods and technical (highly skilled) personnel this year (and will slash tariff rates to zero by 2018). Vietnamese companies might be woefully unprepared to compete against new products and services from outside of Vietnam coupled with foreign businesses right in their backyard—but it’s still not too late for Vietnamese business stakeholders to change directions.

Industries, Opportunities, and Trends to Watch Out for in 2015

-New mobile game companies, new gaming models, and cyber and physical spaces merging

-Continued and extended education; for workers and students, respectively

-Improving the local tourism/customer service experience for non-Vietnamese speakers

-Vietnamese startups and local companies continuing to go global

-Agriculture and forestry restructuring; organic foods beginning to become more popular

-Developing “smart” ecosystems at city and building levels

-Social media usage by official Vietnamese organizations

"Happy New Year 2015"

“Happy New Year 2015”

Winter in Hanoi, can you believe it?

Winter in Hanoi, can you believe it?

"Thang Long-Hanoi Thousand Years of Heritage Heroic Capital The city of peace"

“Thang Long-Hanoi
Thousand Years of Heritage
Heroic Capital
The city of peace”

 

Happy New Year; we wish you a healthy and happy 2015.

 

 

Building a Brand in Vietnam

Building a successful brand in Vietnam (or anywhere) requires having a clear idea of local consumer (and by extension, social) norms, trends, and perceptions (i.e., market in general) in addition to understanding the local, regional, and national cultures for successful positioning in a country. Yes, conspicuous consumption exists here in Vietnam but for many brands, simply copying and pasting a western marketing campaign won’t work beyond luxury brands that convey a sense of status to those around the targeted consumer. Sometimes, understanding a market means a change in mindset.

This week we are taking a look at three modern scenarios: the first, a globally known brand seeking to capture market share in Vietnam; the second, a local brand growing domestically (and which could eventually lead to the third scenario); and the third, a local brand entering foreign markets (which will most likely increase in the future). We’ll also explore some potential ways forward for Vietnamese companies in the future.

Global Brand to Local Market

Earlier this month, we were invited to the first ever AMX Seminar in Hanoi, which was followed up by a similar version a few days later in Ho Chi Minh City (HCMC). The audience in Hanoi was primarily comprised of 20-30 Vietnamese Systems Integrators (SI) with less than five foreigners in the audience. After the half-day presentation, we were asked to give feedback on the potential for the AMX brand in the Vietnam market and how to improve service and support overall.

In short, the event was a solid step toward establishing the AMX brand in Vietnam but it won’t be an easy win in this market as Crestron, Savant, and Extron are all available here as well—not to mention local and/or less expensive offerings. So, there’s definitely opportunity for AMX (and any technology brand) to establish itself as a market leader and ride the growing economic wave here—but it will have to be in a personalized manner that resonates with Vietnamese stakeholders and/or expat decision makers.

These technology brands don’t have counterfeit and quality issues to deal with because their products are sold through authorized dealers and country distributors. For other industries, such as cosmetics, there exists a trust deficit: how do local consumers know the products that they are buying are authentic? Thus, consumers prefer hand-carried cosmetic items from trusted friends or associates who are traveling to Vietnam from more developed markets such as Hong Kong. After all, skin and eye products are the ones that you don’t want to be cheap on.

Local Brand to Local Market

Another company that is building a (completely) new brand here in Vietnam is Emigo, which is owned by VinFashion of Vingroup. The Emigo brand was launched earlier this year and it already has two open locations including Vincom Center Ba Trieu and Vincom Mega Mall Times City. Approximately four additional locations are slated to be opened throughout Hanoi in the near future.

The Emigo brand has the potential to make an impact on the fashion scene here since its offerings are more affordable than brand name imported clothing lines (its designs are similar to Zara or H&M) and there is always an element of national pride in buying from a Vietnamese brand. It remains to be seen how the Emigo brand will be built domestically but for sure Vietnamese shoppers will want to inspect the materials and quality of the real products for themselves before deciding whether or not to buy into the brand.

If Emigo can resonate with local consumers then it might be able to build momentum here and expand abroad—if those are indeed the plans that VinFashion has in store for the brand. Still, could we see Emigo products in western stores one day? If so, then perhaps the clothing label will read “Created in Vietnam” in addition to “Made in Vietnam.”

Local Brand to Global Market

Brands coming into Vietnam have the advantage of prestige and case studies in western markets—but what about the reverse situation? How would a Vietnamese brand fare in the global marketplace? When foreigners hear “Vietnam,” what is their impression of Vietnam, i.e., what is Vietnam to them? And, what is Vietnam known for globally? These are all questions that Vietnamese brands looking to go abroad will have to find the answers to in order to enter new markets in the most efficient way possible.

A Vietnamese client recently told us that they wanted to build a “Vietnamese iPhone” in part due to the success of Apple’s iPhone in Vietnam and the rest of the world. Instead, we suggested that they differentiate their product by creating a secure smartphone (similar to the Blackphone or Boeing Black). Given last year’s revelations by Edward Snowden and Glenn Greenwald, security conscious companies might prefer another option for secure handset communications beyond American and Chinese manufacturers, especially if the alternative price point is attractive. Or a suitable Vietnamese startup could always take a page from Xiaomi’s book (2010 wasn’t so long ago).

The growing risk for Vietnamese companies who have the technical skills to produce something for other markets is that they might create something that only Vietnamese consumers will like. For example, when Yamaha Vietnam unveiled its website redesign in a “flat design” style, the feedback they got from Vietnamese visitors was that the website had no information and was hard to navigate. Vietnamese taste and design considerations can be very unique, even in Southeast Asia. Another way to think about about going to another market is that it’s not realistic for an American company to come to Vietnam, do things the “American” way and expect to be successful. Similarly, how do you think a Vietnamese company trying to do things the “Vietnamese” way in the US (or any other country) will fare?

Choosing the Long Term

During a conversation last week with some Vietnamese/New York fashion industry insiders in Hanoi, we discussed how to create and position a future clothing brand here in Vietnam. What is Vietnam’s competitive advantage in manufacturing? Vietnam’s current advantage is its low cost of labor (in addition to other financial incentives) which has prompted giants like Samsung and Intel to setup multi-billion dollar manufacturing facilities here.

However, inexpensive labor won’t last forever nor will Vietnam’s “Golden Population Structure” remain intact. Just as investment has flowed into Vietnam from China, so too will investment flow into a location with less expensive labor costs—perhaps to another neighbor as well. So looking ahead, what product or service might Vietnam have in the future that will give it an advantage in the global marketplace?

Today, Vietnam has plenty of raw materials but they aren’t finished goods which Vietnamese manufacturers can command a premium for. Not to mention that we live in a world of limited resources, so what can Vietnam offer the world in the future? One way to answer this question is to think about the challenges that Vietnam will face in the future (and that other countries will have as well). If Vietnamese companies continue to or start working on solutions for those problems then they can be ahead of the curve. After all, there is innovation here–many Vietnamese are “professional improvisers” in their daily lives and they are quick and resilient learners, as history has shown.

In the future, Vietnam won’t be the only country that has a rising national power consumption (and therefore rising demand for coal if alternative sources don’t emerge), it won’t be the only country with more cars on the road (and therefore more air pollution), and when sea levels rise it won’t just affect a single city like Can Tho in the Mekong Delta—it’ll affect hundreds of cities and displace millions of people. The point here is that the challenges of the future won’t be exclusively Vietnamese, but Vietnamese-origin—and not uniquely Vietnamese—solutions can be used to solve the challenges of the future (if those problems are solved here first or at the very least knowledge can be shared abroad). However, it takes a long term mindset to truly tackle these transnational issues of our time in addition to investments in education, human capital, and financial resources for research and development.

Peter Drucker, the 20th century’s greatest management thinker advised to always choose the long term, because it always comes true. Focus on your long-term strategy, but take advantage of the short-term opportunities in the meantime–that’s how a future brand in Vietnam will be forged, and how Vietnam–the brand–can begin to take shape as well.

The Olympia Schools

We all remember the best and worst teachers we had growing up but what makes a school great? Is it the students, the teachers, or the environment? Is it a top-down approach, organic growth, or innovative teaching methods? Or is it simply a matter of caring and going beyond preparing students for the next stage of life?

With some exceptions, primary and secondary education in Asia doesn’t have a stellar reputation to begin with: many schools are pressure cookers that are ripe with rampant student cheating, some who freely admit to doing so. In some instances parents pay teachers to “look after” their children and teachers pay the school’s principal to get a job in the first place. Traditionally, the goal of education in large parts of Asia is to absorb and repeat as much as factual knowledge as possible (rote learning) all without questioning the wisdom and authority of teachers.

The Olympia Schools aims to change the educational mindset whereby students focus on how to learn and access information so that they are able to develop the critical thinking skills which will be essential when facing new challenges in the 21st century. The school places emphasis on the process of learning, and seeks to intersect theory and practice for each of its units throughout the school year.

Simply put, the Olympia Schools are a new breed of education in Vietnam. The school started out as Dream House 11 years ago and was the creation of four Vietnamese women who weren’t satisfied with the local kindergarten offerings in the neighborhood. So naturally, they did what anyone would do: they opened their own school. Word spread about the new school and it became a popular school with parents who wanted better alternatives for their children. It was so popular that when the co-founders’ children finished kindergarten, they started an elementary school. Finally, about four years ago the school became the Olympia Schools. Today, some students are bused to the school from up to an hour away.

Christopher McDonald, a native of Michigan, is the Head of Schools. He has played an integral part in shaping the school’s atmosphere and amenities to form the current school environment. We stopped by on a recent Friday morning to speak with Mr. McDonald about what makes the Olympia Schools unique in Vietnam and how the school is preparing its students for life (the school’s motto).

A Meteoric Rise in a Decade

The Olympia Schools is located in Trung Van, Tu Liem, Hanoi. The facilities at the school include a tennis court, a football (soccer) field, an art studio, a games area, a weight room, and even an underground swimming pool. The vast majority of the students are Vietnamese and instruction is given in both English and Vietnamese. Among one of the many notable firsts, the school was the first in Vietnam to offer the PSAT last year and currently offers AP courses. During the summer, the school is host to a camp called Utopia where participants create their own society.

The campus has a distinct international feel to it and has a wide range of easing colors throughout the halls. When we arrived, the first graders were practicing for the Winter Festival, to be held later this month. There is a good feel of school spirit, from the formal uniforms (which are worn every day except on Casual Fridays) to the country flags hanging in the entrance hall to the nice green spaces surrounding most of the school (it’s sometimes hard to find quality green space in a bustling city like Hanoi). Even Martial Arts and cooking classes are offered and the students’ photos are displayed on digital signage on their birthdays, a nice way to make the students feel even more special.

Below is the school’s mission statement:

“The Olympia Schools embrace Vietnamese values while providing an integrated experience in the study of English and global issues by developing fundamental skills, fostering creativity and problem solving, and promoting ethics that allow students to adapt, to improvise, and to overcome challenges–we prepare students for life.”

Grades 1 through 12 are offered at the campus and there are plans to bring the kindergarten classes on site in the future. The school also has partnerships with educational organizations in the United States as well as Canada—something that gives it an advantage in terms of prestige but also exposes its partner schools to resources on the other side of the world–a winning formula for all.

The school also focuses on soft skills beyond the classroom to develop all aspects of a student’s character and attitude. The faculty is a mix of local and foreign teachers and we saw several classrooms that had projectors as you would find in the US. The school currently uses a four term school year where students focus on different objectives each term. For example, Term 1 revolves around project based learning (PBL); Term 2 ends in traditional formal testing; Term 3 features Creative Learning Expression which requires the student to demonstrate what s/he has learned via any medium; and Term 4 is a portfolio review/analysis which culminates in a reflective end to the school year. For more information about the terms, please see here.

Additionally, there is a summer skills component which may include an internship, e-project, or reading assignment. As a testament to how impactful the school’s efforts are, Vietnam’s Ministry of Education and Training (MOET) has followed The Olympia School’s success in regards to using integrated studies in its curriculum. The result has been Olympia Schools graduates going on to be successful in their university careers, in large part due to the emphasis on scholarship and continuing studies.

As profiled in the Forbes piece:

“It was the first Vietnamese school with a college counselor on site like an international school—normally college counseling is offered via a separate paid center—and its graduates often attend university overseas.”

The school’s alumni in recent years have gone on to study in the US, Singapore, Australia, China, and other countries. From organizing a kindergarten class to building an entire campus and sending students off to universities within a decade; an amazing feat indeed.

A Future Model

On December 20 and 21, the Winter Festival will be held at the Olympia Schools. The Winter Festival will feature performances, a fair, and games and will include participants from other schools in Hanoi as well. This year’s theme is fairy tales of Vietnam and other countries with the purpose being to raise money for the “Seasons of Care” fund which was founded four years ago. The fund aims to build a new water supply and filtration system for Na Loc Primary School, Ban Mu, Tu Xuyen, Van Quan County in Lang Son Province, close to China. Art performances and games will be held from 2:00 PM to 9:00 PM on both days as the fair provides opportunities for the community to come together to make an impact in Vietnam all while enjoying each other’s company.

So beyond this month, what’s in store for the Olympia Schools? Well, it hopes to be the new model for schooling in Vietnam by combining learning with experiences in and out of the classroom, i.e., learning by doing and by sharing with others.

In this day and age students cannot afford to be mere bystanders or observers of history because the classroom of today will be the workplace of tomorrow in terms of diversity, culture, and foundations of excellence. The successful students will be the ones who communicate effectively, who engage with different and relatively unknown cultures from their own, who think critically, who ask thoughtful questions, who reflect upon their experiences, and who can work together with anyone to accomplish synergy.

Schools like The Olympia Schools realize the new world that we all live in–this Information Age–and seek to prepare students for a rapidly changing and volatile world by enabling them to craft and assemble the tools to understand and overcome complex global challenges that they will encounter in their lives. This task is critical because one day in the near future students will have to answer a vital question: what does this change mean for me?

Thanks to Christopher McDonald, Head of Schools for sharing his time with us and answering our questions. 

 

Devon London by Devon Nguyen

 

Fashion in Vietnam has come a long way from loose shirts in the 1980s and denim jeans in the 1990s. In recent years, there has been a wave of Vietnamese from overseas who have returned to Vietnam and set up fashion houses all in an effort to shape the fashion industry in Vietnam and beyond. Kelly BuiHelene Hoai, and Devon London are just a few brands started by pioneering entrepreneurs who have faced the odds and challenges of starting up in a nascent domestic industry.

Recently, we sat down with Devon Nguyen, CEO of Devon London to find out more about the fashion scene in Hanoi and greater Vietnam. Ms. Devon grew up in Warsaw, Poland and worked in London (where she developed herself as artist and designer) before moving to Vietnam and launching her Devon London line in 2011. She is currently based in Hanoi and opened up a second store location in Saigon about a month ago on Dong Khoi street.

For Ms. Devon, her brand’s style is different from domestic and international brands and it is geared toward people who know what they want from fashion. Ms. Devon describes the brand as stylish, sophisticated, modern, and minimalist because for her customers, they can get a Devon London outfit that they can wear beautifully. The Devon London line is designed at her studio in Hanoi and the clothes are produced in a factory in Hanoi employing some laser cutting techniques (hers was one of the first brands to utilize this technology in Vietnam for clothing).

To Ms. Devon, her brand is more than just a business. Ms. Devon is family oriented but she is also a self-described workaholic—the key for her is balance. She has a Vietnamese husband who lived London; an architect and a fellow artist. Both of their families are from northern Vietnam and she also has a brother and sister: twins who are 10 years old.

Fashion From the Start to Starting in Vietnam

Ms. Devon always knew that she wanted to be a fashion designer from an early age. In part, she had early influences from her parents as they had fashion backgrounds. However, it wasn’t until she was 15 years old that her parents treated her interest in fashion as something serious. Despite her interest in fashion at a young age, she wasn’t enrolled in creative courses as she grew up. In fact, she was self-taught and through research she learned how to draw and to sketch.

Ms. Devon has been living abroad her entire life so when she came to Hanoi, it took her a year to get adjusted to life here even though she grew up on Vietnamese values abroad since she was three years old. Even today she is still learning new things about Vietnam compared to her past. During tough times, she thought about going back to Europe but she ultimately decided to stay and persevere.

In some cities it can be easier to create than in others due to inspiring surroundings, a robust art community, and collaborative talent. When Ms. Devon arrived in Vietnam, she needed to get used to a lot of different and new things. Designing is art form so her role as a designer is to create art. At first, she was surprised that she couldn’t get inspiration—it was so hard compared to her time in London. For Ms. Devon, the hardest part of operating in Hanoi is challenging herself—not with the environment but with design technique, i.e., keeping the creativity flowing in Vietnam. Not being able to find inspiration means that the risk increases of “becoming more commercial,” which can result in an unclear picture of where to stand and brand. Thus, the real danger is being a copy of other people and losing what you were fighting for in the first place.

Suffice to say, Ms. Devon does a little bit of everything. Not only does she design the line, but she is actively involved in the PR, marketing, sourcing, and almost every other aspect of the business in Hanoi. Ms. Devon is passionate about what she does because for her, fashion is not a job—it’s part of her but it doesn’t mean that it’s always easy. Daily operational challenges include finding quality people and drawing out the most of her creativity.

The people Devon London hires have the potential to be someone in the future. Ms. Devon sees herself in them, as a version when she was just starting out; they need experience from someone they admire in a good environment and Ms. Devon provides that. In her recently opened larger location in Saigon, it was important to select the right store manager to represent the brand. As she put it, “opening a shop is easy but expanding is difficult.”

With the opening of her second store, Ms. Devon has to be more precise in training employees and she begins to scale the brand. When employing people, it requires finding experienced employees and using what you have. In the end, “we choose what’s best for us, what gives us peace of mind under a lot of stress.”

Changing Trends

Like many things in Vietnam, the fashion industry has developed a lot in recent years. In fact, the fashion scene here has been changing every year; for example, last year the fashion industry was not as developed as it is today. Two years ago there was a huge gap in the industry and three years ago no one cared about fashion shows. People were simply not interested in fashion the way they are today and as with anything new, people need some time to get used to new fashions.

Since a large part of the time for “first movers” is spent educating consumers, Vietnamese designers struggle daily. People tend to comment without knowing the real substance so they make up a story; it’s a hard path to expand to be someone and to get a brand to be where you want it to be. And if you are original then get ready to be copied because so many designers go for the “easy job.” However, customers know what is what—they are very smart. For other stores who copy Ms. Devon’s style, it’s something that she can joke about because it’s not something serious when her customers tell her, “I saw your design in another store’s window but it looked horrible.”

Still, being in the fashion community in Vietnam can be tough since there is jealousy and it’s a competitive business all the time. However, healthy competition is always good; there are new designers so it pushes Ms. Devon to be good all the time as she needs to try to be better every collection. The London Devon brand primarily competes on quality and pricing. For global super brands the design looks great, but the average income in Vietnam does not make it affordable. Devon London is a unique design which can expand consumer tastes and habits. But Ms. Devon warns, “if you want to be original then you have to be ready to be copied.”

Advice for Entrepreneurs

For other expats who come to Vietnam and settle down here, Ms. Devon recommends that they know the local language because Vietnamese people don’t speak much English. If you want to establish things then you will need to work with a lot of people which means that you will need to coordinate with local workers. Learn about the culture, how people operate and spend time to get to know where to buy things, who to speak to, and gain a bit of connections. Remember, it’s not what you know but who know.

For sure, the beginning of any journey is the hardest part. Ms. Devon advises that, “when you think of giving up then think of why you started. Nothing comes easy.” For her, when things don’t go as planned, she finds peace with her family and divides between work and home life. For example, she hasn’t worked on a Sunday in the past two years.

Also, it depends where you start in Vietnam. In Hanoi, the customer market is different compared to Saigon; there is more culture in Hanoi whereas Saigon is more commercial and more open. There, they appreciate a more unique style but in Hanoi the people appreciate something more stable and prefer to blend in in Hanoi, where people can be more judgmental.

Devon London, Present and Future

For future plans, Ms. Devon would like the collection and brand showcased in a major fashion city like London or New York but it’s a long term objective. For now, she ships orders outside of Vietnam for customers who buy online.

Ms. Devon describes her life as busy all the time but for her, busy means that she’s doing good so she doesn’t complain about it; she strives to find the right balance. Each collection she designs is different. In London she found inspiration by going to the park and relaxing or by going to an art gallery exhibition but it’s not so easy in Hanoi. Ms. Devon reads a lot of books and has learned how to be creative in Hanoi, how to train her creativity, and how to find inspiration in Hanoi. In her downtime, she travels to Thailand and Hong Kong.

In terms of future prospects overall, the Vietnamese fashion industry will grow very fast. A lot of designers like Ms. Devon are coming back to Vietnam. Furthermore, a lot of creative people are seeing that the fashion space in Vietnam hasn’t been used to the fullest, but what they do about it is the defining portion. For those that see the gaps in the fashion community, they can’t sit and complain—in other words, don’t say “we don’t have anything” instead of finding it or creating it.

Ms. Devon sees Vietnam as a source for prototyping for up-and-coming fashion designers outside of Asia due to costs of manufacturing. Furthermore, she is confident in the Devon London brand; it’s on the way and doing well. For Ms. Devon, everything is possible—nothing is impossible as long as you put your heart into it. At the end of a journey, you can say “we used the best we could and did with what we had.”

It seems like that fashion journey is just getting started for Vietnam; this month the first Vietnam International Fashion Week was held in Ho Chi Minh City (HCMC) with about half of the showcases being local designers. For some of the designers, they might be living their dream, and for others the show might be a stepping stone to something greater. Only time will tell but if you have trouble figuring out what to do, as Ms. Devon says, ask yourself, “what really makes me happy?”

Long Van Group

Long Van Group, founded in 1992, is comprised of four companies: Long Van NTV, Loval, ALV, and Hondalex. Through its portfolio companies based in Vietnam and the US, the family-owned group is perhaps best known for its aluminum product manufacturing—which is how it got its start. The other companies include a trading company in Ho Chi Minh City for the domestic market, a trading company in the US for the international market, and a joint-venture with Hondalex. Recently, we sat down with Thy Van Nguyen (Vanessa), whose official title is Operational Director but she is heavily involved with the strategic vision of the group as well as integral in implementing organizational change across the companies.

Ms. Nguyen was born in Ho Chi Minh City and moved to the US when she was 16. After being based in Seattle, Washington and attending university in the US, Ms. Nguyen moved back to Ho Chi Minh City about 18 months ago in order to focus on the family business. She currently spends about 80% of her time in Vietnam between Ho Chi Minh City and Binh Duong Province, where the manufacturing  activities of Long Van Group takes place. Currently, one of Ms. Nguyen’s major initiatives is the transformation of culture in her organization, something that she has successfully done in the domestic trading arm of the group.

Changing a Culture From Within

Ms. Nguyen is a big believer in getting the people doing a task or activity to understand the purpose of it. The people on the front lines are already the best people to do to the job so they will also be in the best position to improve the process. It’s only a matter of getting them used to speaking up and contributing regularly for the reward is improved efficiency and recognition by management and their peers.

That goal is sometimes easier said than done as older managers in a company have a more traditional mindset of top-down management style. Therefore, it’s necessary to first change the managers—either their attitudes or outright replace them (however, Ms. Nguyen didn’t have to fire anybody). If the managers had not bought into her vision at the onset then the project couldn’t have worked. Having the managers on board enabled the culture at the trading company to completely change within eight months but it took six months before she began to see the fruits of her labor. It also helped that Ms. Nguyen speaks Vietnamese in addition to English, and is the daughter of the company’s owner so she did have the power to initiate and implement change. However, despite these advantages it was still tricky for her to balance the right relationship with the workers due to some strong local cultural elements.

Part of the culture in Vietnam revolves around a fear of power which has roots in the royal history of Vietnam and continues in the form of wealth and political power today. Therefore, people in positions of power might need to be more informal, more cheery, and re-emphasize what resources are available to workers who need help, guidance, or any kind of assistance. People aren’t going to ask for help on their own or tell you what problems they have. Vietnamese culture is generally not expressive; a Vietnamese son or daughter can do 1,000 things right and not receive a single compliment. However, if s/he does one thing wrong then they will hear about it to no end. Thus, a lack of a negative response is a positive step. It’s important to praise workers because no one really says compliments from an authority position so it really impacts their subordinates.

It’s interesting to note that Ms. Nguyen was able to effectively change the culture because of gaps in old culture when other senior leaders were focusing on other business lines. Her changes came at the right time because the old system was not effective for expanding beyond the original 20-30 employees since it was largely based on gut feelings.

It may also be that everybody can see the problem at hand but no one wants to do much about it–Ms. Nguyen sought to change that. The interesting thing is that the workers want to hear different perspectives but not necessarily change the old ways of doing things. So even though everyone can point out the problem, no one can suggest a solution because it may be too risky to suggest a potential solution.

This challenge of self-confidence and expression has its origins in the educations system in Vietnam. The educational culture in Vietnam revolves around being told what to do; the teacher tells you the answer and that’s the answer–end of discussion. One way to overcome this element is by tapping into the fact that Vietnamese people love to look good; they want the story to be about them. They love the credit so give them that credit when appropriate. For example, present them with a situation and ask them to help. Then you can follow up with: “I listened to you and it worked.” In these moments you will see how proud the workers are and have just established a precedent. Perhaps the most effective way to connect with workers is to tell them stories, and then get them to be part of the stories. It can be as simple as presenting a scenario to workers and asking them, “if you had to make that decision then what would you do?” Indeed, not all changes are smooth and changing a culture is perhaps one of the toughest tasks to take on but by empowering workers it increases an organization’s operational efficiency overall.

Make no mistake: an organizational transformation is not without friction and conflict—especially when dealing with the “old guard.” Some people quit in the process, in part due to wanting to change the organization in a different way than Ms. Nguyen so they left. Changing the culture required that Ms. Nguyen trust that a real foundation was in place for the company to expand upon itself. To that end, she had to let go of some of the intensive focus she had on certain processes. These days Ms. Nguyen’s 62 workers at the trading company embrace and drive towards her and their vision of change.

Training and Developing Vietnamese Workers

Improvement is a continuous process at Long Van Group. Ms. Nguyen gives training courses once or twice a week for each division in her company in an effort to better prepare them for current and future work-related tasks. She strives to get different workers to select a unit each week based on a set list and give a presentation to the other workers. In her “guide-on-the-side” role, she asks questions and draws opinions from the workers and gives feedback at the end of each session.

During her training sessions, she will also share a story about a work experience, or conduct a workshop, or present a scenario. Then the workers will split into groups and talk about what each worker would have done in the scenario or what to do in the situation in the future.

Example: Your colleague sends an email to an organizational partner who you must coordinate with on a project. In the email, your colleague states that your company is not responsible for a specific portion of scope but that there are related issues that need to be addressed for the client’s benefit. The organizational partner’s vice director simply responds: “If the scope is not your responsibility, then your opinion does not matter.”

Ms. Nguyen will then question the workers on whether or not the logic of the vice director is wrong. Thus, the workers are solving problems with real experiences (the above example is actually used in training by Ms. Nguyen and was experienced by your author in Ho Chi Minh City last year) and are thinking about how to view situations more deeply.

This analysis is important because when responding to allegations some Vietnamese tend to lash out when things start to take a dive and they can take things personally even if they aren’t meant to be from your side. So it’s vital to be mindful of not only what you say (although that is important as well), but about how they feel (and taking care to let everyone save face).

Within Vietnam, southerners rely more on gut feelings whereas northerners are more logical. The southerners present themselves at face value; they want to prove to you that they care about you when they meet you. However, northerners want to compare status levels and act accordingly. Thus, foreigners might have a better time in Hanoi compared to “common people.” Northerners tend to think more before they talk so their use of words is better and more structured which presents them as being clever. Southerners speak more from the heart since they are generally more open and expressive. It’s important to be aware of your counterpart’s feelings because in Vietnam and in life, one can never do something big or grand without building a coalition.

Human Capital in the US and in Vietnam

In the US, people and workers are proactive while in Vietnam they are largely reactive. However, foreigners can learn a lot from Vietnamese people. But first, they must stop assuming and see things in limited possibilities. Ridiculous and downright crazy (from a western perspective) things could and will be possible because it may be the only option for moving forward in Vietnam.

The social structure is more set in the US due to the developed economy and Puritan work ethic. So in the US there is freedom to choose within set choices, i.e., the illusion of freedom because everything is already structured. Life is very predictable in the US so many people want to be proactive, they want to be ahead of the curve. Thus, Americans tend to assume a lot when planning.

On the other hand, Vietnamese are “proactive by being reactive:” they expect the plans to go awry so they bypass the planning stage and when things devolve they are better equipped to salvage the situation. Thus, Vietnamese prepare for certain situations but not for all situations. In that sense, they are able to make unreasonable (or even crazy) positions seem logical because they have developed these skills. They are very adept at framing an arena and taking up defensive and offensive positions and excel when things don’t go right, in part due to the messy social structure. It may be surprising to some that Vietnamese can be very practical because oftentimes there are no other options.

So, Vietnamese are really good at changing situation into their favor but they are also good at making crazy logic sound normal. Some people may believe that if they spot an issue and bring it up, then they will need take responsibility for it. People are afraid of responsibility because of the challenge of getting the task accomplished correctly. Vietnamese people like to look good so they don’t like to put their name on a project or idea in case it fails. But if it turns out good and then they take full credit. For Ms. Nguyen, a large part of the effort to change the organization is by marketing herself through self-branding because the perceptions of the workers will make or break any initiative.

Opportunities for Expats

To Ms. Nguyen, Vietnam is the perfect country to grow something big—but it’s a double-edged sword. Everything is based on relationships, which can be good or bad depending on the perspective. To be successful in Vietnam, one needs to be flexible and open-minded since many problems in Vietnam need to be solved in unorthodox manners. Structure beyond social doesn’t really exist, so if one relies on structure to move forward then s/he is in for a rude awakening (unless those connections are present). Above all, give Vietnam a chance but know where your limits are and what is the extent of your comfort zone for (operational and legal risks).

Expats shouldn’t assume anything in Vietnam and they will have to take on more responsibility to ensure that things stay on track and don’t fall apart. Things that are taken for granted in the west simply don’t exist in Vietnam. For example, the search results of Google, and Google VN are very different. Some people in Vietnam trust the US version more than the Vietnamese version. Also, Vietnamese websites generally don’t have a “how-to” section. For western websites, the product or service offered is described in depth and it is very clearly shown what it is and how it is done.

When explaining something in Vietnam, it has to be simple, clear, and consistently explained multiple times. Then, inverse questions need to be asked in order to triangulate what the actual response is for determining if the receiver understands or not. Communicating processes, requirements, or issues to locals can be timely and frustrating, even when explaining in the Vietnamese language. One way to get Vietnamese people to understand a process or information is through infographics—and in particular, youngsters will understand it better. They like the convenience aspect and the way the information is presented so they are more likely to understand it. If a member of the older generation doesn’t understand something, then s/he will just ask someone nearby or a close friend who will be put on the spot and could just blurt out something that sounds good but isn’t necessarily accurate. Thus, a crazy feedback loop begins where most of the information is wrong as the process continues. Besides, many Vietnamese don’t believe what they read. The older generations do, but the younger (those born in the 1990s and later) ones, no. Cute infographics can help explain things succinctly—and the cuter, the better; think anime characters.

In more general terms, most work fields don’t give newcomers to the country a chance. Connections are part of status which bypasses merit in many cases. It doesn’t matter if you are the best in your field, if you don’t have a good connection then no one will work with you. When arriving in Vietnam, get the connection first. Leverage being sent by a foreign company by learning about the country and forming bonds. Another option is to wait until you have the money to buy status here. In that sense, you don’t have to be the best person in your field—you can be average but still get a piece of the action through connections.

Drinking: Bad or Good for Business?

Still, business can be too much relationship-based; that is to say too reliant on gut feelings and feelings in general. Logic is largely used to make decisions in the US but in Vietnam they need to “feel it” in order to do something. These positive feelings are usually the result of some bonding over alcohol, either bia hoi, ruou, or some imported spirits.

Ms. Nguyen points out that her male employees never get drunk enough to be inappropriate at company functions. And for those who don’t drink any alcohol, while they can sponsor a “drinking nominee,” they could be at a disadvantage with their local counterparts by them not “truly” knowing the person when s/he is drunk. Thus, the best way to establish trust with Vietnamese counterparts is to drink alcohol with them—so if you get drunk easily then you must learn how to control yourself. Vietnamese truly believe that you will be yourself when you are drunk so in a way it’s like peering into your soul.

Everything you say or do shapes their perception about you, especially when drinking. The actual message, while important, is secondary since they are judging you via a gut feeling. It can be quite dangerous since Vietnamese may perceive an offense where there was none. When doing business, Vietnamese generally won’t trust you until you drink alcohol with them and they are able to see the “true you.”

How you are as a person when drunk may be the biggest indicator of doing a deal with Vietnamese. Their perception of you while imbibing will be the baseline for judging you. Once they see you drunk, then that’s how they will perceive you and they will hold onto this image of you until the next time you drink together. If you are a bad drunk, then beware.

The Next Step

Next up for Ms. Nguyen is changing the culture at the factory since it is a special case. The entire production was in the hands of two directors but the current result didn’t turn out so well so the focus is on getting workers to take more initiative and overcome fears of failure. Indeed, Long Van Group is at the forefront of providing high-quality products and driving organizational change in order to provide a better customer experience. Vietnam is becoming an even more prominent destination for outsourcing and manufacturing and as more projects are implemented here then the technical and management skills requirements will increase as well.

Today, China produces for much of the world but in recent years some factories have migrated to Vietnam, in part due to the fact that wages in China are higher than in Vietnam. However, prices of finished goods in Vietnam can be higher than in China because of other operational costs. The disadvantage that Vietnam has is that the workforce is less skilled than China’s and the economies of scale don’t exist on par with China. Quality control remains an issue in Vietnam as well.

As more foreign companies come to the Vietnamese market, the standards for local workers’ qualifications and skills will rise. A growing trend is for Vietnamese workers to take courses at private institutes to aid in their professional development, e.g., how to be a better manager or CEO. These courses are truly development on an individual level because people are there because they want to be better. For the students, Ms. Nguyen suggests that they seek to understand on a conceptual level and learn to connect everything.

“Learning how to connect things is the tool you need to work in the real world,” Ms. Nguyen advises.

Below, Ms. Nguyen shares some of her favorite quotes:

“Do or do not, there is no try.” –Master Yoda

“If you are a good leader, when your work is done, your aim fulfilled, your people will say, ‘We did this ourselves.’” –Abraham Lincoln

“You can listen like a blank wall or like a splendid auditorium where every sound comes back fuller and richer.” – Alice Duer Mill

 

Special thanks to Vanessa Nguyen of Long Van Group who shared her time with us and greatly contributed to this week’s post.

First Impressions of Vietnam

Trying to explain Hanoi, and Vietnam in general to someone who has never been here can be quite challenging. For many expats in Southeast Asia, the region and its cultures can be difficult to understand and navigate let alone effectively explain to family and friends at home. And research, while helpful to understand settings, is not a substitute for direct experience.

This week we have a guest contributor who is with us here in Hanoi. Zdravko Tumbovski is an international businessman who has done business in Turkey, Bulgaria, his native Macedonia, and other countries. He arrived in Hanoi for the first time on Tuesday, November 18 in order to take a firsthand look at the Vietnamese market and to gauge its potential for his interest in trading with Vietnam and in Southeast Asia.

His professional experience includes an internship at an insurance company in Macedonia; a Business Analyst position at a family owned company, Info Group Ltd, which made investments in the Macedonian Stock Exchange and the Macedonian Real Estate market. Currently, Mr. Tumbovski is the founder and director of Z&Z Capital Ltd based in Bulgaria, which specializes in transport and logistics services in the European Union (EU).

Additionally, in conjunction with partners in Turkey, he is involved in import-export transactions, mainly in cooking oil, but they are also expanding to other commodities for the Turkish bazaar. His primary role is to find a suitable supplier and to negotiate the payment methods and transportation of the goods.

Zdravko shares his first impressions of Vietnam below:

After constantly moving around between the US, Europe, and the Middle East in the last seven years, I spent a considerable amount of time in Los Angeles this year. About a month ago, I reconnected with director of GKTA Group, whom I have known for several years.

GKTA Group introduced me to some of the many challenges, opportunities, and conditions faced in Vietnam. I felt attracted to learning more about this dynamic market and it didn’t take long for me to decide to come here and check out Vietnam for myself.

Even though I am still in the first week of my arrival, I must admit that I am having a very smooth transition to this country so far. I was already familiar with Asian cultures due to my friendship with Asians in my network that I have known for a long period of time, and also because GKTA Group put a lot of effort to set up at least one meeting per day with a local person where I can get his/her answers to some of my questions about his/her country’s future, his/her point of view toward foreigners, and the changes that s/he has seen the past five years in Hanoi, especially.

Hanoians and Hanoi

Vietnamese people in the capital of Hanoi are generally polite and quiet. It usually requires some time until they start to feel comfortable sharing their views, and begin to realize the goal of my questions because I see that they are not very used to foreigners who are interested in their culture, and who try to understand their values.

Vietnamese people seem to be the loudest on their motorbikes. They are honking at every cross street, and from my findings they rarely show anger with words, but only with menacing stares at the perceived wrong-doer. The amount of motorbikes and the traffic frequency for me was something unseen before; in short, outrageous.

Hanoi is a city with a long history, and it is shown on every corner. Hanoi has the street-selling spirit and it is still done traditionally and mostly inexpensively for locals. However, there is luxury consumption visibility in the younger generations and newly rich populations. For me, this is probably more visible because I was raised in a former communist country, Macedonia (Former Yugoslavia).

The Wi-Fi coverage and the use of internet are quite impressive compared to the expectation of technology in a developing country. The “drinking-coffee” habit is at large range, and the number of cafes is seemingly endless but a favorite of Vietnamese people. One new thing for me is using condensed milk (“sua dac”) in almost every cup of coffee—and I find it tasty—even if it is uncommon for me as a European.

Luckily, I am fan of Asian cuisine, and have been eating it frequently. Compared to other cuisines and the tastes of some westerners, you may remain hungry here if you are very picky with the food. The traditional street foods, or the local dishes in the very basic and not-so-modern restaurants can be tasty for people who are food enthusiasts and open to new flavors; on the other hand, it can be off-putting (even though I aim to be cautious with my language here), because I certainly know many people who would not be able to eat the local food here, and who would not be willing to be seated and served in the Hanoian or Vietnamese way of small tables and children chairs. So far, I enjoy it.

Work Ethic and Exposure

My personal view is that most of people here work hard and long hours. The basic example for that is the staff at the hotel where I stay. They are here every single day of the week, for over twelve hours per day. They are very friendly and very helpful even if there is occasional miscommunication.

When talking to waiters or other people in cafes and on the streets, I have come to realize that many of them have not had a chance to travel a lot. Actually, many have never been outside of Vietnam. The reason for that is first, money and second, time since, as mentioned before, they have to work almost every day, year-round.

There is a sense of trust that permeates through the people here. I had a very unique experience that occurred to me at the border upon arriving at the airport: I had arranged for visa upon arrival and at the bureau the visa was issued and stamped more quickly than what I had estimated, but I had no cash on me to pay. The customs officer asked me if I had any currency equal to the amount of $95 (the price of the visa), but I had none. The ATM was outside the immediate area, after the passport control, so I thought that I couldn’t consider the option to withdraw some money. As a matter of fact, the officer walked me through the immigration border without any checking and without any concern, just to withdraw the necessary money for the visa, and then led me back to her desk in order to pay. That was surprising. Actually, the border control experience in general was more liberal than in many other countries.

If I am allowed a chance or could offer some suggestions to Vietnamese who want to be successful with westerners, it would be:

  • Learn more English, the number of tourists is increasing  and you need it
  • Strive to be more comfortable with foreigners
  • Be more creative for international businesses; this land is rich
  • Act more responsible to the duties and respond to requirements efficiently and faster

Business and Understanding Vietnam Now and in The Future

I haven’t experienced any business deals in Vietnam yet, but I am most worried about the changing industry regulations, the unpredictable law amendments, unfair competition, and the guarantee of quality standards.

My advice to the expats that want to do business in Vietnam is to spend as much time as possible here, but with local people. It is essential to understand the habits of the Vietnamese before starting any sort of business, in order to prevent an organizational mismatch and communication misunderstandings. It is complex and different here indeed.

I can already see that the necessary attributes required to succeed in Vietnam are patience and simple guidelines.

What I would like to learn about Vietnam or the Vietnamese is: until what extent have the ancestors shaped today’s population, and how much is the young generation willing to keep and practice the old traditions? I hope that finding this balance will help me to predict and understand their place in the world for the next decade.

This next decade will be crucial for Vietnam as the country transitions to increased trade with more global partners, the middle class continues to grow, and more foreign investment pours into the economy. Vietnam has many natural resources, a lot of talented people, and a willingness to exceed economic indicators but it will not be without some development friction, conflict between traditional and modern Vietnam, and addressing some major investor concerns. However, the long-term benefits will be far greater than what the shortcut rewards of today will provide. After all, as Jim Rohn says, “You cannot change your destination overnight, but you can change your direction overnight.”

Thanks to Zdravko Tumbovski who contributed to this week’s post.

Currents of Creativity in Hanoi

We took off from publishing last week so we are resuming our normal schedule of Sunday posts. Keeping a schedule or routine in general helps to build structure and maintain momentum; for some that means going to the gym, for others it means traveling once a month, and for us it means writing consistently in between projects, meetings, and travels.

However, it’s good to change things up once in a while and to consume content instead of creating it—movies usually fill that role but for inspiration it’s best to turn elsewhere. While it might be hard to find unique institutions of culture in Vietnam beyond museums, a vast assortment of handicrafts, or those visible propaganda art shops in the streets, it does not mean that Vietnam is devoid of other forms of creativity and expression. Indeed, there are coursing currents of creativity in Hanoi and greater Vietnam that can be missed at first glance. This week we will take a look at some emerging sub-culture trends within the last few years.

Tuned In

Music: art for the ears. In general, many of the younger generations of Vietnamese seem to prefer western songs with romantic undertones. However, there are not many high-profile western musical acts that come through Vietnam, which is a bit surprising to consider since western culture can be heavily consumed in Vietnam at times. For example, one could make a strong case for P!nk’s Just Give Me A Reason as the 2013 unofficial theme song of Vietnam. And speaking of anthems, let’s not forget Michael Learns to Rock’s Take Me To Your Heart, which seems to be played everywhere in Vietnam (even though they are technically an Asian-branded band). Some Vietnamese children even learn the lyrics to MLTR songs while growing up—and they probably could have learned their first English words via those popular songs

Some other younger and more hip Vietnamese seem to enjoy rock music more, preferring local bands, or jazz, or rap music. Vietnamese rappers such as Su Boi and Kim (also known as Kimmese) are among two of the most popular acts. Moreover, KPOP has spread its influence to a huge numbers of followers here in Vietnam. KPOP stars have brought everything from new dance moves to novel hairstyles to nascent fashion trends in Vietnam. On a more local level, Hanoi seems to have more charm and is more music festival centric whereas Saigon experiences are more about the creativity and variety in cosmopolitan nightlife experiences in bars and clubs.

On The Move On and Off The Wall

Run, Saigon, Run! Earlier this year, the unique Color Me Run, “based on new ideas for activities” was held in Saigon for the first time. Meanwhile, in Hanoi, Viet Pride, an inclusive equality and volunteer driven parade was first held in Hanoi in 2012, and then subsequently spread to Saigon and beyond. It is interesting to see the divergence between commercial and social mission events within the host cities, especially because some of the more progressive events originate from the more traditional city.

Other than those events, street art and graffiti, in general, have been getting more popular in Vietnam. Whether it is tagging or painting intricate wall murals around West Lake, the interest in street art could bring bigger opportunities for commercial enterprises as Vietnamese youth and other thought leaders turn their attention toward alternate forms of expression beyond the traditional outlets, i.e., “rebels,” if you will.

Speaking of  rebels, Harley-Davidson, the symbol of rebels against society, finally arrived in Vietnam last year. With the opening of the first Harley-Davidson dealership in Vietnam, we can expect to see more western culture absorbed and emulated in Vietnam as more and more brands go east. With the high barrier to entry (entry-levels models like the 883 start off around $16,000), there is a premium for being a rebel leader. A complimentary first year’s membership to Saigon H.O.G. or Harley-Davidson Owner’s Group is included with each new purchase of any model. And what are bikers without tattoos? The first Tattoo Convention in Vietnam was held in Saigon last year as tattoos became even trendier and more mainstream.

Hanoi: For Local and Foreign Artists

Even on an educational level, art is becoming more popular in Vietnam. Some of the most popular majors for Vietnamese students include banking and finance. Indeed, there are institutions dedicated to a banking emphasis since it is a conventional career path option for many Vietnamese. Over the last few years, a small but growing number of Vietnamese students have opted to study abroad in an effort to pursue less “safe” subjects and have chosen to go to art schools in the US—something that would have been even more rare a few years ago.

That’s not to say that there are not any locally grown artists; for example, Nguyen Minh Son is originally from Hanoi and draws most of his inspiration from traveling throughout his home country of Vietnam. In addition to art, Mr. Son also has a passion for Kung Fu, which he has been practicing for over twenty years. Over the years, Mr. Son has experimented with various forms of expression as viewed in his gallery and on his website.

Indeed, one does not need to leave Hanoi to become an artist for there are available local art lessons for anyone to join. Knee Jerk, originally from England, came to Hanoi almost four years ago from Melbourne, Australia. Since then, he started doing graffiti in the streets of Hanoi and has been commissioned for art in retail settings. Currently, he offers classes in his studio for people of all ages; his current students include children of expats as well as adults who want to hone their artistic skills. He regularly collaborates with artists from around the world including France, Hong Kong, and Brazil.

As Knee Jerk describes in his own words:

“I am an Artist and Art teacher creating Art and also running classes from my home and studio, Not Pop Studio. My background is graphic design and illustration, which is what I studied at Salford University in England, graduating in 2003. Most of the artwork I produced before coming to Hanoi was digital based, but almost as soon as I arrived in Hanoi, I revisited an earlier love of painting using hand cut stencils and spray paint.

I quickly learned to combine my digital designs with hand cut and paint techniques and I continue to paint everyday, either working on canvas/mural commissions or more self instigated street paintings. I try to paint eye catching pieces of art that also makes people think and not to have “knee jerk reactions” regarding the subject matter of the piece.”

While these two Hanoi-based (Not Pop Studio in Tay Ho, and Minh Son Gallery in Ba Dinh district) artists have different backgrounds, styles, and inspirations, they have produced and presented art all over the world. Both artists are currently interested in having their works displayed in either New York City or San Francisco—please contact Knee Jerk or Nguyen Minh Son directly for more information. For more information on street art in Hanoi, please see here.

What will be the next step for Vietnam’s art, music, and other cultural scenes overall? It’s anyone’s guess, but if recent interest is any indication then there are exciting times for the tattoo, street art, and motorcycle communities in Vietnam. Surprisingly, to some, Vietnam is a suitable place for creation after all and Hanoi is one of its centers.

Being an Expat

We’re a bit late with the post this week as we spent last week in Saigon. What a change it’s been since last year: massive construction on Nguyen Hue, new buildings, and new faces as some familiar ones have moved on. Saigon is definitely a city in flux–the growing pains are evident trying to navigate around District 1 or District 2–and it seems like it will be that way for awhile as the metro takes shape.

Anecdotally, if an expat in Vietnam makes it to two years in Vietnam then s/he either stays for the long haul or heads to a different place. Thus, there is a staggered mass exodus every two years—which means that the expat community that is present today was largely not around five or more years ago.

In many ways, being an expat in Vietnam is about survival: who can outlast, adapt, and add value in ways that locals and foreign companies will appreciate and are willing to pay for. At the same time, the decision to invest more into Vietnam can be difficult (especially for expat entrepreneurs). Another way to look at it is how integrated should one be in Vietnamese society?

While there are benefits (business rights, visa, and so on) that come with a local spouse anywhere, whatever costs savings by living in a developing nation are wiped out if one is sending his/her child to a quality private school. So there are other considerations for entrepreneurs attempting to integrate into Vietnam beyond learning Vietnamese and moving into a fringe/edge business—especially for older expats. Indeed, it can be hard to change over from a lifestyle business to a scalable business model.

Finding the right balance in Vietnam can be challenging for many people. For example, there is the uninhibited nightlife in Saigon, and there are the midnight curfews in Hanoi. Business meetings can last from two to three hours and even longer if the booze is flowing and the bonds are strengthening. Where does the line for business and personal relationships end? Sometimes, it can be hard to distinguish whether it’s a friend or a business associate who is picking up the check–and sometimes it’s both.

There is a small town feel here—less so than Vientiane or Phnom Penh—but it’s not uncommon to run into the same circle of people in various establishments or at least to meet people who know the same ones that you do. For expats who want to be successful here and in Southeast Asia, Vietnam should be a long term plan. There is no doubt that Saigon, Da Nang (Hoi An included) and Hanoi attract different kinds of expats. But too often, a segment of expats seem to fall into a cycle of complacency, vices, and distractions. Out of those three cities, it’s perhaps easiest to lose a sense of self in the sprawling metropolis of Saigon; the loneliness of being an expat can contribute to a less-than-healthy lifestyle as well.

For certain, mistakes will be made both in business and social settings in a new environment and setting—no one is perfect. The key is to learn from mistakes and to not repeat them again. Even when some people have reached their wits end after being here for years, other opportunities have popped up which have compelled them to stay—but it’s only because they’ve tried and failed previously that they were noticed–and had the reputation to be suitable for a new project. But what drives people to “leave Vietnam for a third time?” Or to stay in Vietnam for years and never learn the language beyond a basic level?

The real opportunity here is to create and shape markets. Vietnam is still in “tree growing” mode. Sure, one day there will be a harvest—but it takes time, money, and other resources to educate consumers, stakeholders, and to build/create a marketplace. To that end, Vietnam needs more entrepreneurial talent, more STEM (Science, Technology, Engineering, Mathematics) talent that knows what it takes to bring a product to the global market, and more people who are interested in Vietnam from a cultural point of view instead of a bia hoi/bia om focus. But, how to attract such talent?

For starters, lower the risk of coming to Vietnam and doing business here (corporate governance), lower the barriers to raising capital here for startups (beyond incorporating in Singapore and keeping a local team here), and promote finding ways to leverage local talent to create products and services that can be differentiated.

Another major pitfall for expats is to adopt local ways of thinking and doing things. It’s very easy to complain and to succumb to some of the craziness that permeates interactions in the workplace and beyond. Staying rooted, being patient, and remaining steadfast during negotiations are valuable qualities to have ample supplies of. However, also knowing when to quit due to wasting time, the expectation of charity, or unprofessional expat or local counterparts can save many headaches for everyone involved. It’s definitely easier said than done and is a skill that takes time to develop.

Above all, expats should find that their tolerance for healthy and smart risks will have increased after living/working in Asia. Whether it’s riding a motorbike to/from work in the middle of crazy traffic patterns, or dating someone from another culture, or seizing a new opportunity, each experience will help shape confidence and character in future situations.

Living and working in a new country is a risk itself—why stop there? Vietnam is not perfect—no country is. But finding the good in situations and people is more of the result of attitude instead of focusing on all the current problems. Part of the trouble is that the more things change, the more they stay the same—especially here, just with fewer expats that you know. In that sense, finding what’s right about Vietnam can be harder than usual. If you’re in a city that you don’t like, then move somewhere else. If you’ve tried a few cities and still aren’t happy then move to another country. This place isn’t for everyone and staying true to oneself and being ethical/moral seems to be a challenge for many, including westerners. Nothing worthwhile is easy.

For those that stay in this part of the world, have a strong sense of self, and see opportunities, “if a whole country is blind and you have one eye, then you can be king.”

 

Economic Context in the Greater Region and the World

Vietnam is party to several regional and global organizations. Ever since doi moi (“Renovation”) in 1986, institutions encouraging regional economic and financial cooperation between South Asian countries have played a major role in Vietnamese development. Below, we will examine some of various organizations and partnerships that Vietnam is a part of.

East Asia Summit (EAS)

Since 2005, the East Asia Summit encourages cooperation in several fields from energy to education. Concerning the economy and finance, the last summit in Brunei reaffirmed the common will to increase cooperation in economy and finance with more “liberal initiatives.” Myanmar will organize the 9th edition of the East Asia Summit in November, 2014.

Regional Comprehensive Economic Partnership (RCEP)

The Regional Comprehensive Economic Partnership aims to gather 10 ASEAN members and six non-ASEAN members to improve economic cooperation in the region. Today, RCEP totals 46% of the global population and generated 24% of the global GDP in 2012.

RCEP plans to standardize Free-Trade Agreement (FTA) rules to simplify its implementation by companies. Also, the establishment of common incentives serves to “democratize” the use of tax incentives for both large and small enterprises. According to Kohei Shiino, deputy director of JETRO (Japan External Trade Organization) Singapore, RCEP will “bring about big advantages for Vietnam’s garment and textile industry.” For example, the ASEAN-Japan tax incentives on exporting Vietnam-made goods in Japan only concern products with ASEAN or Japan origins. However, 33% of Vietnamese apparel materials cannot benefit from tax incentives due to their Chinese origins. The implementation of common incentives should help to avoid similar situations in the future.

Looking forward, the fifth round of negotiations in December in New Delhi, this economic partnership seems to have a bright future ahead of it. The Asian Development Bank argues that RCEP will increase revenues by 664 billion dollars in 2025 – which would equal 0.6% of the global GDP due to goods, services, assets and labor exchanges between these countries.

However, Vietnam will have to face the challenge of joining RCEP, while being an active member of the Trans-Pacific Partnership (TPP). The potential conflict between the TPP – led by the United States and RCEP, driven by China–(both wanting to shape economic partnerships with Southeast Asia countries) could put Hanoi in a difficult position. Indeed, both political and security implications in the context of an economic partnership can be conflicting between China’s and United States’ interests. Concerning the future role of Vietnam, ASEAN observers consider a potential split of Asian countries in two sides: Singapore, Malaysia and Vietnam would tend to turn to TPP whereas other ASEAN countries would strengthen trading relations with China through RCEP.

On a smaller scale, Vietnam has to consider China’s predominance in the trade balance between the two countries. Although crude oil and coal are exported to China, Vietnamese industries abundantly import Chinese goods as raw material, machinery and equipment, steel, chemicals, and oil and fabrics. (This situation is probably due to the differing economies in North and South Vietnam.)

Asia-Pacific Economic Cooperation (APEC)

Created in 1989, the Asia-Pacific Economic Cooperation includes 21 countries in the Pacific region and congregates 40% of the global GDP. Since the establishment of APEC, average trade barriers have dropped from 16.9% to 5.5% in 2004.

Looking at numbers, Vietnam takes advantage of being a member of such a organization: from 1998 to 2006, capital flows of APEC members towards Vietnam reached $49.5 billion with 6,527 projects in operation. Moreover, 10 APEC members are part of the top 15 investors in Vietnam. As a consequence, Vietnam will be able to rely on future solid financial and economic partnerships to accelerate its integration into the world economy.

Association of Southeast Asian Nations (ASEAN)

Since July 1995, Vietnam has taken part in the Association of Southeast Asian Nation with nine other states. The effective growth of trade between ASEAN and Vietnam reflects the success of the partnership. According to Louis Taylor, CEO of the Standard Chartered Bank in Vietnam, Laos and Cambodia, “ASEAN is the third-largest export market for Vietnam, accounting for more than 10 per cent of the country’s total exports … [and] the second-largest supplier to the country, accounting for 20 per cent of the nation’s total imports.” In 2010, Vietnam hosted summits concerning ASEAN solidarity and connectivity and expressed “its desire to fulfill the goal of building the ASEAN Community by 2015.” Although increasing regional economic cooperation will generate changes in Vietnam’s economy, one-to-one treaties and agreements with neighboring countries also impact the market.

In March 2014, on the occasion of a visit of the Vice President of Myanmar Nyan Tun in Vietnam, the two countries concluded a bilateral agreement on a common objective in trade. Vietnam remains the ninth-largest foreign investor with $370 million invested in Myanmar, let alone the 18 Vietnamese companies registered in Myanmar. Moreover, in 2012, the trade volume amounted to $66 million. Both sides want to reach $500 million in trade by 2015, thanks to cooperation in agro-forestry, fisheries, banking, telecommunications, transport, oil and gas and tourism.

Bilateral Trade Agreements 
Vietnam is also working on increasing economic partnership with individual nations such as South Korea. On October 2
nd, President Park Geun-hye met Nguyen Phu Trong, the general secretary of the Communist Party of Vietnam during his state visit in Korea. Both sides agreed on signing a free trade agreement before the end of the year and improve cooperation in building transportation infrastructure in Vietnam.

Additionally, in 2012, India and Vietnam announced their common objective to reach $7 billion bilateral trade in 2015 and $15 billion by 2020. The Indian government expressed its wish to facilitate the access of Indian banks to the Vietnamese market, in order to develop trade and investment between both countries. The implementation of India-ASEAN free trade agreement by Vietnam and India helped both countries to reach $4 billion in bilateral trade in 2012.

Moreover, Vietnam appears to be the land of opportunities for Japanese small and medium enterprises (SME): a survey from business associations in the East Asian country show that 50% of Japanese SMEs planning investment abroad consider coming to Vietnam. Therefore, it should come as no surprise that the Japan External Trade Organization in Ho Chi Minh City welcomed 2,400 Japanese investors considering investment opportunities in Vietnam between April 2011 and January 2012.

The Takeaway and Key Milestones

We can observe several trends in regards to trade in Vietnam: the first general trend is the expansion of the range of products concerned by free trade agreements. The second phenomenon is the common will of improving existing trade conditions between countries. Finally, Vietnam actively tries to develop its trading partnerships with neighboring countries and is moving to increase cooperation on many subjects as well as to deepen economic relationships with a wide range of current and potential partners.

For foreign investors, the Vietnamese market should also become more attractive to Thai retailers with the upcoming ASEAN Economic Community in 2015. Meanwhile, the Vietnamese retail market is expected to grow 12% in 2014. The major news is that the TPP could be finalized later this year—if so then expect relations between the US and Vietnam to become even closer. [Update: as of February, 2015, the TPP has still not been finalized but the US has announced that it intends to be Vietnam’s number one trading partner after the TPP becomes finalized.]

Thanks to Louis Boulay, who contributed to this week’s post.

Sources:

Credit: Louis Boulay

Credit: Louis Boulay

Credit: Louis Boulay

Credit: Louis Boulay

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“Mid-Term Stocktake of Progress Towards the Bogor Goals and the Busan Roadmap to the Bogor Goals.” Asian-Pacific Economic Cooperation. Asian-Pacific Economic Cooperation, n.d. Web. 20 Oct. 2014.

NZST. “Regional Comprehensive Economic Partnership (RCEP).” Trade and Economic Relations. Trade and Economic Relations, 15 Sept. 2014. Web. 20 Oct. 2014.

Sojung, Yoon. “Korea, Vietnam Discuss Ways to Deepen Economic Cooperation.” Korea IT Times. Korea IT Times, 8 Oct. 2014. Web. 20 Oct. 2014.

Tran Thu, Tran. “Vietnam to Benefit Greatly from RCEP, Say Experts.” Vietnam to Benefit Greatly from RCEP, Say Experts. The Saigon Times, 18 June 2013. Web. 20 Oct. 2014.

Truong-Minh, Vu, and Nhat-Anh Nguyen. “The Potential of the TPP for Vietnam.” The Diplomat. The Diplomat, 4 Sept. 2014. Web. 19 Oct. 2014.

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Yoon, Suthichai. “TPP vs. RCEP: A New Washington-Beijing Tug-of-war?” The Nation. The Nation, 6 Dec. 2012. Web. 20 Oct. 2014.

Startup Israel–2014 Competition

On October 6, 2014, Hub.IT hosted an information session about Startup Israel–2014 Competition, an initiative organized by the Embassy of Israel in Vietnam in collaboration with Ministry of Science and Technology and Business Studies and Assistance Center (BSA). The information session was an opportunity for startup teams to ask Ambassador H.E Ms. Meirav Eilon Shahar questions about the competition as well as to learn more details about the application requirements.

During the event, Ambassador H.E Ms. Meirav Eilon Shahar (who has been Ambassador to Vietnam for about two years) explained that the competition launched about a month ago and it’s the first program of its kind that the Israeli Embassy in Hanoi is promoting. According to Hub.IT, approximately 30 startups were represented in the audience. The competition’s deadline was recently extended to accommodate an influx of new candidates.

The competition specifically seeks Vietnamese seed stage companies. The interesting feature of this competition is that the startups get to choose what to send to the review panel—so they need to determine the best way to present their startup’s idea, team, product, competitive advantage, etc.

The winners will be announced in mid-November and they will travel to Israel in December to take part is what has been termed a “study tour.” The exact details are unknown but suffice to say the Vietnamese entrepreneurs will meet similar startups, visit with incubators, take in lessons learned and connect with businesses in Israel, which already has a global outlook for its startup community.

Originally, the plan was to send startup founders for a few months to work with startup companies in Israel but that was deemed unrealistic due to the time commitment required. So, the project had to be adapted to the Vietnamese reality of being busy with managing a startup. Now, one representative from each team from each sector will go to Israel for primarily networking, learning from adaptation, and knowledge exchange. Ultimately, the organizational partners want to see the results of this first “class.” Maybe the results will be too limited so the project can be tweaked in the future or additional resources (except financial) can be added, such as tutoring.

The hope for the project is that the Vietnamese founders have the study tour to learn about the ecosystem and to make connections with Israeli founders. One of the big lessons learned is that startups involve failure—but despite failing one should try to improve for the next time.

According to a handout that was distributed to the participants:

“The competition brings together Vietnamese startups throughout the country to compete for the opportunity to take part in an intense startup study in Israel.

Only four representatives from four winning teams selected from the shortlist of 8 teams will go to Israel for the startup study tour in December 2014.

In order to eligible to apply for the competition, applicants need to meet the following criteria:

Age of submitting founder: 20-40

Sectors: Web/Mobile/Agriculture/Life Science

Stage of Startup: Seed Stage

Participants are responsible for reserving their intellectual property rights to the submitted products.

At least one member of the founding team of the startup should be fluent in English.”

Israeli Vietnamese Connection

The purpose of this project is to share experience with Vietnamese entrepreneurs and to expose Vietnamese startups to the Israeli startup scene. The startup scene in Israel is privately-led by businesses—although at a time it was largely government directed. The Israeli market is small; its population is approximately 8 million so everything has to be exported globally; this outward focus is true for all Israeli businesses. So in a sense, Israeli startups need to have a global view even from the onset whereas American startups can focus on the available 300+ million population. Indeed, even the VC presence is difficult in Israel but it was harder before; Israel in the 1980s was very different than today’s Israel—it improved over time, developed competition, and leveraged a strong teamwork ethic to foster innovation.

Israel is currently experiencing a debate over whether exit events by local startups and the resulting outflow of human capital is taking away innovation. Is it better to keep innovation in Israel at the expense of a potential exit? Startups in Israel simply go to US and maybe Japan. However, traditional entrepreneurs come to Vietnam as part of delegations and invest as small businesses.

Ambassador H.E Ms. Meirav Eilon Shahar revealed that the Minister of the Ministry of Science and Technology was in Israel last week for five days. During this time, the first joint committee was formed and Minister Nguyen Quan met with Israel’s chief scientist to learn more about the Israeli startup sector and the unique ecosystem in Israel. As a result, Israel and Vietnam signed a Memorandum of Understanding (MOU) to increase collaboration between the two nations in the fields of science and technology. In Vietnam, the Israeli Embassy in Hanoi is concentrating in private sector because government support is currently limited for startups.

A Winning Formula

Flexible criteria was purposely selected to be as inclusive as possible in order to spur creativity for the Vietnamese entrepreneurs who might connect with Israeli startup. What is important for startups to remember is to have the right product/market fit. It may be that the most important life experience is to go to another environment than one’s home country—in this instance for Vietnamese entrepreneurs to go abroad. Bobby Liu, founder of Hub.IT, explained, “I realized that we are only a few years behind Singapore, which started its accelerator in 2012. Being successful requires a lot of confidence. We have no choice but to explore since Vietnam may not have a suitable environment. Go somewhere else to explore: that’s what entrepreneurs do.”

Failure is a part of startups; entrepreneurs need to see and learn how to improve for the next time. It’s a long term haul—not a short-term win. One industry that Israel has focused on to grow and “own” is Homeland Security; in fact, Israel will be hosting the Israel Homeland Security convention next month which features information on cyber security, emergency preparedness, and law enforcement.

Considering there is no signup form, the challenge for startups is to submit an application that best portrays the product to the judging panel. So, 10 page proposals are out and the idea should be optimally refined to a single sentence of explanation (with supporting information). Hopefully, better judgment prevails here.

Interested parties can apply as outlined below (via handout):

An application in both English and Vietnamese includes general information about the startup and thorough business plans in PDF.

A video clip in English, no more than 2-3 minutes long, explaining why their company should be picked to go to Israel.

After screening of applications and video clips, 8 finalists will have interviews (in English) with a board of judges including representatives from the Embassy, the Ministry, and BSA. The final interview stage consists of presentation and Q&A session with judges.

Applications needs to be sent by email only to the following address: political@hanoi.mfa.gov.il

For more information, please contact Ms. Phan Thuy Trang; Mobile: 0914 551 528; Email: political@hanoi.mfa.gov.il or visit the Embassy Homepage or the Embassy’s Facebook page.

The deadline for submission is October 15, 2014 and only shortlisted candidates will be contacted.