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The Bootstrap Alley Tour in Hanoi

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Last Wednesday night, a panel of local and regional judges selected Echoes as the winner of the Bootstrap Alley Tour in Hanoi and set things in motion for the multi-national team to attend the upcoming Tech in Asia Singapore startup conference on May 6 and 7. The three judges were Ronnie Wee, founder and managing partner of Incuvest (based in Singapore); Quan Nguyen, venture partner at Inspire Ventures (based in Ho Chi Minh City); and Ben Liu, director of Kamia (based in Taipei).

Around 100 people squeezed into co-working space and incubator Hub.IT in Hanoi’s Hoan Kiem district for the event (as part of a ten city journey), which will lead up to the tri-annual Tech in Asia Singapore startup conference. Approximately sixty entries were trimmed down to the Top Five teams, each of which was given five minutes to make the case to win free tickets and accommodation, and a booth at the startup conference. After each pitch, the judges provided feedback and probed some of the teams’ assumptions. All entries had to be an internet, mobile, or hardware-software startup with, at minimum, a prototype ready to demo.

Advice, Experience, and Vision

Before the Top Five teams pitched, a fireside chat was held with the three visiting judges. During this segment, the judges shared their views on operating in Vietnam, the greater region, and why it’s important to think ahead. Between them, the judges have made investments in companies in Vietnam, greater Asia, and North America in spaces such as Internet of Things (IoT), education, logistics, internet services, and digital currencies.

For Ben Liu, one of the key considerations when evaluating a deal is the founder’s strategy and market, i.e., “have they convinced me that this team and this market are the best?” Teams should have a good understanding of what market comes next, and how to grow and accelerate; one of the best ways to do that is to reach out through your network and find local resources. It does not mean jumping into the market—first network, learn what you need to know and then make your move.

Ronnie Wee explained that investment decisions are based on the team and market execution—which means understanding a team’s thought process and execution plan. A team should be able to be a good regional player and understand the nuances of different markets. Look at potential partners, prove and show traction—a team’s thinking process should be clear for investors, meaning that a team has gone through and begun to identify gaps. Do research and validate your assumptions.

Quan Nguyen pointed out that a product by itself can’t stand alone: “Can you make your strategy happen? Do you have the connections?” Many startups don’t think about going abroad because a big opportunity can sometimes be scary. However, a team than can scale needs to have the ability to cross borders. Different scenarios require different plays (especially as an investor) so it’s important to have an idea where and how to exit.

Overall, the judges drove consistent points to the audience: thinking beyond your home market, building and having a network in place to form vital partnerships, and having a viable execution plan to scale the business.

The Top Five Teams

AZ Stack provides a way for developers to include peer-to-peer (P2P) calling and messaging over low bandwidth in their applications by simply adding a few lines of code. Founder Quang Mai Duy and the rest of his team are initially targeting local developers and software companies in order to gain traction.

#HotTab (meaning Hotel Tablet) was another strong contender for the top prize. Founder Sanjeev Sapkota had a vision to solve basic communication issues between hotel staff and guests via in-room tablets. The new in-room technology addresses guests needs and provides enhanced services by partnering with companies like Food Panda, GrabTaxi, TicketBox, and others.

OnOnPay is a way to top-up your mobile phone credit with the added bonus of receiving gifts, 20% more of the top-up value, lucky draws, or other rewards. Founder Sy Phong (who has experience in the telecommunications industry) is aiming to launch the service by May 2015.

GCall is a way for online retailers to provide customer service to shoppers in their own native languages. As shown on a mockup, the service itself appears on an online product’s page as a distinct icon so that a shopper can select the icon and be connected to a customer service representative (CSR). The CSR can then go ahead and help the customer with his/her purchase, which can range from answering questions to a more proactive approach.

The winning team, Echoes, presented a novel way to conduct audio tours but the tool itself can be customized to meet a variety of needs. The project, led by Josh Kopecek, originated from a Hanoi Soundwalk held in 2013. Echoes is essentially two parts: the creator web app and the consumer mobile app linking content with users. The team has several promising pilot projects in the works, including clients in Hanoi and Copenhagen, and at least one global brand has expressed interest in the technology behind Echoes.

Key Takeaways

Whether your model is a copycat or you are targeting a blue ocean, you still have to get the fundamentals down. The consensus was that the pitches were good, clear, and well rehearsed; one judge claimed that the Top Five in Hanoi were the best batch yet. Indeed, it was a great sight to see fresh faces, expats, locals, and visitors come together to witness the excitement, passion, and motivation that all the founders had for their respective products and services.

After the event, some of the teams received additional critical feedback directly from investors—advice which can be used to refine their pitches for the next time, thereby bringing them one step closer to realizing their dreams. More broadly, Wednesday’s event brought together and strengthened the open and inclusive startup community in Hanoi. Ultimately, Tech in Asia’s Bootstrap Alley Tour has helped raise the bar here in Hanoi.

The next stop on the Bootstrap Alley Tour will be in Hong Kong on March 10.

 

Vietnam Today

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Vietnam means different things to different people—some of these perceptions change every day, every year, or every visit and some of them remain frozen in time.

Tradition. An untapped opportunity. A glorious past. Increasing competition. The Fatherland. Independence. Echoes of war. A bright future. A rising dragon. The party. People of the sea. Resilience. Freedom. Children of the mountains. Liberalization. Home. Happiness.

So, what is Vietnam today? This post attempts to encapsulate daily life in Vietnam as a snapshot of some of the most common sights, sounds, and experiences in the country today. Some items on this list are not exclusive to Vietnam (or even Asia) but they are still noticeable in daily life in a major city like Ho Chi Minh City or Hanoi.

Vietnam is the land of…

1. “Selfies”

If you go out one night in either Hanoi or Ho Chi Minh City, you’ll probably find people taking selfies or self-captured photos. There are certain requirements for where and when one should take a selfie, including being with a significant other, before eating, being with friends, and generally anywhere and everywhere in between. The ubiquity of smart phones in Vietnam allows for the endless flow of media experiences to be captured, shared, and commented on to form an constant feedback loop.

2. Cafes

The cafe is an important part of life for Vietnamese. They are used for a bunch of core activities including meetings, relaxing, literally sitting around, playing games (multiplayer and single player), and to communicate status. Some common drinks are cafe sua da (also known as cafe no da in the north), xinh to xoai, and tra da. The cafe culture here is strong, rich, and all-encompassing but still very different in parts of the country.

3. iPhones

Not just smartphones, but Apple iPhones. These devices are seemingly everywhere and can be seen used by celebrities as well as (some) shopkeepers and street vendors. One way that the number of iOS devices increase in the country is through family: as people upgrade their handsets to the latest models, they pass on their older models to family members. There are millions of iOS devices in Vietnam but the app marketplace is largely fragmented with third party app portals.

4.Honking

A sea of traffic, clouds of exhaust, and incessant honking. Many Vietnamese drivers seem to use the horn simply because it is there. Another large portion seem to use the horn as if were sonar by sending out “pings.” The horns here seem to be at least 30% louder than US models and we could see custom horns emerge here similar to how there are custom ringtones for phones.

5. Wi-Fi

There is no need to ask if a venue has WiFi since it’s more efficient to ask what the password is (usually 12345678 or some similar variation). Almost every cafe or restaurant provides free Wi-Fi (that works when an undersea cable isn’t damaged). The widespread availability of Wi-Fi could pose a cyber security risk in the future, especially if the lax attitude toward privacy continues here.

6. Motorbikes

Vietnam is the world’s fourth largest market for motorbikes. During rush hour, motorbikes form rivers, which larger vehicles attempt to ford or cut through with impatience. Trying to navigate an intersection with other motorbikes is probably akin to being in a mechanized phalanx. Companies like Yamaha Motors Vietnam need to position themselves carefully considering that the Vietnamese dream is to drive to work in a car.

7. New construction

Drive around Hanoi and you can hear and see the future of Vietnam. Fly into Ho Chi Minh City and you can see the cranes that dot the city from above. Some future projects will be added to an already large real estate inventory (with outrageous prices per square meter) while smarter developers will find ways to differentiate their projects via advanced automation, control, and integration technologies in buildings to benefit end-users (and ultimately, to increase ROI).

8. Recycling

“Reduce, Reuse, Recycle” here is “Resell, Reuse, Repurpose.” Empty water bottles are collected and sold to recyclers. Anything that is not completely broken or destroyed is used or repurposed until it falls apart. It’s one of the most efficient aspects of Vietnam—especially when contrasted to some western habits of instantly replacing or upgrading appliances.

9. Name Brands

Nouveau riche are rising in status and increasing in numbers. Of course they are flocking to luxury brands but some lack the sophistication that usually comes with style. As they say, “money doesn’t buy class” so there is opportunity for etiquette schooling and training, especially in the north.

10. Youth

Young people are everywhere and although there are far too many banking and finance majors, they are the future of Vietnam (as cliched as it may be). A segment of them are break dancing, popping, locking, and dropping their ways into adulthood while those studying STEM subjects seem to be diving headlong into startups and IT outsourcing. Right now, many young Vietnamese idolize KPOP stars and are hungry for American culture—but they will all eventually craft their own styles.

11. Touch

Personal space does not exist here. Touching, at times inappropriately (from western point of view), is a way to communicate (since much of Vietnamese language relies on context). Couples (not just romantic ones) can be seen walking together in a semi-drunken stagger while talking loudly, laughing, or sharing some inside joke.  Be prepared to “pinball” off some people in crowded public spaces as space is at a premium. Co-workers regularly and playfully slap each other; a sign of affection.

12. Drinking

Drinking and Vietnam go hand-in-hand. Beer Hanoi, Beer Saigon, Beer Truc Bach (the finest beer in Vietnam), Beer Halong, Beer Hue—you get the idea (those are all beer brands, by the way). Then there is ruou, rice alcohol which can come in a variety of flavors. Drinking is an occasion for bonding, building soft relationships with counterparts, and for social (and professional) lubrication.

13. Smoking

Cigarettes, traditional bongs, and hookah. Non-smokers are in for a rough time in Vietnam—there’s always someone smoking nearby (usually Marlboro or Thanh Long brands). Smoking is allowed indoors and is encouraged in nightlife spaces. The air quality already is not great in major cities like Ho Chi Minh City and Hanoi—the longterm health implications of these combinations are alarming. Purchases and installations of air and water filtration systems will become more common as Vietnamese seek to protect their children from harmful exposure to pollutants.

14. Music

Music is used to attract customers on the street, to drown out one’s senses in nightclubs, and just because someone is in the mood to blast it. Young people on the street break out into impromptu ballads or sing along with songs in unison. Overall, music here is dangerously loud and Vietnamese will pay the price for these unsafe audio levels in the form of fees to audiologists.

15. Stares

Everyone stares here, especially if you are an attractive woman, a foreigner, or are different in any way, shape, or form—in that case then they stare at you as if you are an alien. A simple smile or wave can break the ice but coming from a culture where staring is considered impolite, it can be jarring to some.

20 Years (+/-)

Twenty years ago this list would have been radically different except for a few items. Most vehicles on the roads were bicycles at that time. Imagine what a snapshot of Vietnam will be in the year 2035 with approximately 110 million people. Unrecognizable? Some parts Bangkok and other parts Hong Kong? Sustainable eco-tourism? A center for innovation in Southeast Asia?

In the early 20th century, the population of Vietnam was about 20 million. Today, Vietnam has over 90 million people. Vietnam is rapidly changing; some changes are positive and while others are unclear. What will be Vietnam’s role as we continue deeper into the 21st century? Only time will tell but one thing is certain—the pace of change here will surely increase.

A traditional Tet meal on Lunar New Year’s Eve.

Tet in Vietnam

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Hanoi is currently shut down; countless stores are closed, it’s hard to find a meal in town (in certain areas), and at times, the city almost feels as if it is under curfew. However, Hanoi is not the only city that is experiencing these conditions–across the entire country, Vietnamese are currently in the middle of celebrating Tet, which marks the transition from the Year of the Horse to the Year of the Goat. This year, the Tet holiday (Tet Nguyen Dan) is officially observed from February 15 to February 23, but the New Year’s Day is on February 19.

To foreigners, Tet is New Year’s, Christmas, and Thanksgiving all rolled into one extended holiday. It is based on the same lunar calendar that other Asian cultures, such as the Chinese, Korean, and Japanese, subscribe to. Indeed, it can be difficult to celebrate Tet as an expat or tourist unless there are existing familial or close friendly ties with people here. For Vietnamese, the holiday is a time to remember ancestors and a time to spend with young and old family members alike. During Tet, people look back on the old year and look forward to the new year. Overall, people wish each other health, happiness, and success; and hand out lucky money to children and old people. For many Vietnamese, Tet is the only vacation that they will have the entire year, which is the main reason why there are so many pilgrimages to respective hometowns (where they gather with the rest of the family to have meals together).

To historians (and some Americans), hearing the holiday’s name may remind them of the Tet Offensive, which took ARVN and American forces by surprise in 1968 during the Second Indochina War when, before going into battle, General Vo Nguyen Giap ordered the forces under his command to “Crack the Sky, Shake the Earth.” As with many national holidays, Vietnam’s flag is flown from almost every home and business, reflecting the deep nationalism and patriotism that permeates every facet of Vietnamese society. In this sense, tradition, national sovereignty, and history are all intertwined in the celebration of the Tet Nguyen Dan holiday in Vietnam.

Preparing for Tet

In the days leading up to New Year’s Eve (February 18) there are a number of preparations that must be carried out for every family. These duties range from cleaning to paying off debts to stocking up for food to celebrate the holiday during “hibernation.” There are a number of fairs that pop up throughout the country, which allow Vietnamese to shop for essentials and new items to bring in the new year. All kinds of rooms, transportation, and everything else travel-related is nearly fully booked weeks in advance. Even getting a taxi in the days before Tet becomes a challenge (and the experience reminded your author of trying to get a taxi in San Francisco before Uber and Lyft were available) and makes running simple errands take even longer than usual. Traditionally, a family must clean their home (and vehicles) and prepare Tet food—some of which can take hours to make (like banh chung). However, in recent years the widespread availability of Tet foods at local markets have allowed some families to transition away from preparing Tet foods themselves.

But really, preparation for Tet begins weeks before—perhaps even as far back as the western New Year. There’s a festive attitude and laid back mindset that seems to swallow Vietnam entirely; it is a distinct “post-Tet” and “pre-Tet” atmosphere that affects everything from meetings to schedules to business deals. As early as January people are already looking forward to Tet and many business activities will be pushed into next (lunar) year. Thus, the focus around this time before Tet is on end-of-the-year parties for workers, which begin shortly after a workday and continue late into the night (as allowed by local ordinances).

That’s not to say that Tet isn’t a busy time—it is, just from a personal orientation (and relationship—but that too can blur the line between personal and professional) rather than a professional orientation. Everyone is rushing around to wrap up last minute items and to get everything ready for Tet and the subsequent shutdown. Flowers are everywhere; in the north, orange kumquat trees are preferred, while in the south yellow flowers are associated with Tet. Interestingly enough, a week before the Tet holiday, the kitchen gods must be appeased (by releasing fish) so that a family will have a good report for the Jade Emperor; this year even US Ambassador Ted Osius and his family joined in the festivities to release fish into Hoan Kiem lake.

All over town, “Mung Dang, Mung Xuan” banners are seen in various shapes and forms; it means, “greet the party, greet the spring.” Here, spring is the first three months of the year, the first season of the year, and the new start as well as the start of prosperity for the new year. (During this time, prisoners who are eligible for good behavior are released so that they too can spend the new year with their families and to have a “new start.”)

Then, starting on the day before New Year’s Eve most shops close their doors for at least several days. There is an eerie sense of calm in usually busy areas of the city and the few motorbikes and cars on the road are sparkling clean. Daily trash pickup occur earlier than expected to accommodate the vigorous spring cleaning and the Tet fairs have all shut down, replaced by flower sellers. The first day of the new year is on the horizon.

Tet Arrives

The last meal of the year is one of the most important because it brings family, the ultimate glue of Vietnamese society, together: banh chung, the traditional Tet cake, is the most widely known Tet food but there are several other side dishes that are only prepared for Tet. If Hanoians don’t stay at home to bring in the new year with family then they go to Hoan Kiem lake (also known as Ho Guom) to see the fireworks. Another popular gathering point is My Dinh stadium, which was built several years ago as part of a sports initiative for the New Tu Liem District and where we celebrated the new year.

Vietnamese began assembling around My Dinh stadium early in the night so as midnight approached the area was full of motorbikes and cars. As the fireworks began shortly after midnight almost everyone took out their smartphones and began recording the illuminating display overhead. Those who weren’t transfixed by the fireworks were riding (at times, driving so fast that they appeared to fly) their motorcycles between the improvised lanes of spectators. Some riders honked loudly while others waved Vietnam’s flag behind them, procession style. About twenty minutes later, when the fireworks had ended, a mass exodus began and the entire area transformed into a frenzied parking lot. It is considered good luck and tradition to bring home a tree branch so several were on sale on the side of a few roads leading away from My Dinh stadium–there were also envelopes for lucky money as well as giant red balloons which had the traditional new year greeting, Chuc Mung Nam Moi (Happy New Year!), on them. Some children who were riding on the back of motorbikes wished those around them a “Happy New Year” as their parents looked on approvingly.

Superstitions dictate many activities in Vietnam so it is important to pay respect to spirits, especially ancestral ones. Some Vietnamese rush to the pagodas in the early hours of the new year in order to be the first to pay respect to ancestors, spirits, ghosts, and other otherworldly elements. For those who can wait until daylight, the pagoda is perhaps even more crowded than shortly after midnight. For us, we started the new year off with a bottle of Hanoi beer and then proceeded to go home to rest after a long and enlightening night.

The first official visitor of the new year at a house needs to be good (character, esteem, success, etc.) in order to bring the family good luck for the rest of the year. Tet is celebrated in a series of days: traditionally, the first day is for the father’s family, the second day is for the mother’s family and the third day is for teachers. Lucky money, “li xi,” is presented to older family members as a sign of respect—as well as to younger children (up to around 21, in some cases). $2 bills are given out to children (with particular attention paid to the serial numbers or other significant numbers) and all money must be in crisp, new condition. The numbers two, six, and eight are particularly auspicious numbers in Vietnam.

The Effects of Tet

Tet is a deeply family-oriented and nationwide experience. Any manager must be aware of the impact that Tet has on the country during the actual holiday but also for the schedules that it may impact. Business will mostly return to normal within 15 days after Tet but in reality the economic climate is affected for five or six weeks before and after Tet. For example, to some, it is considered bad luck to do real estate transactions in the first lunar month (until March 19). A few years ago, many stores and shops used to be closed. But now there are places that remain open for tourists and expats. Many workers look forward to the Tet bonus or “13th month salary” (and some workers even plan job changes around it) which can drive up the costs for a company–or negatively impact morale if the Tet bonus is not aligned with workers’ expectations.

Tet has its origins in the old agrarian society in Vietnam—it gave workers a chance to rest before doing hard work on the fields. However, as Vietnam has shifted to a service oriented economy, some have called to get rid of or shorten Tet because of productivity and other economic losses. Sometimes, there are some negative elements that are associated with the holiday season. For example, criminal activity can sometimes increase shortly before Tet as a result of people trying to pay off their debts. However, the real danger during Tet is the drunken driving and traffic accidents. One reason is lack of experience: people rent cars to drive to their hometowns and do not really have experience or skills to drive larger vehicles (since most of the time they are driving motorbikes).

However, good food, which is only cooked at this time of the year, can lift the spirits of everyone—-although if you are a foreigner, finding a meal can be a challenge with the exception of chains and larger retailers. But basically, it is the few days per year when everyone is nice to each other (or so we have been told by locals). Most expats leave during the holiday, but Tet in Vietnam is something that you should try to experience for yourself. The bottom is line is: do not underestimate Tet, its significance, or the impact it has on plans and travel—the impact on business here is real. But do not worry–soon, the hustle and bustle will be back, the deals and money will start flowing again, and things will be back to normal (for better or for worse).

We wish you and your family a happy, healthy, and prosperous Year of the Goat–Chuc Mung Nam Moi!

War scraps in a hotel–none of this has been certified free from UXO.

Phonsavan, Xiengkhouang Province

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Phonsavan is the capital of Xiengkhouang Province, arguably the most heavily bombed area of the most heavily bombed country (per capita), Laos, in the world. Phonsavan itself is a relatively new city—the old capital Muang Khoun, about 30 kilometers south of Phonsavan, was largely affected by the Second Indochina War (Vietnam War). In fact, the old capital was so damaged by the bombing that many of the original stupas were destroyed.

Besides these and other artifacts of war (e.g., a crumbling French hospital), the surrounding landscape here is quiet and peaceful; the sun pierces through limited cloud formations to form stunning arrays of light and long stretches of crisp blue sky seem to hang overhead indefinitely. At night stars and other space objects are clearly visible to the naked eye—a rare sight coming from hazy and smoggy Hanoi.

The main strip of Phonsavan has the distinct feel of an Old West town, especially with the backdrop of nearby rolling hills. At times, “Montana” comes to mind, however this thought is quickly squeezed out of mind when the surprising amount of Vietnamese and Chinese signage comes into focus. Throughout Phonsavan there is a healthy mix of Chinese and Vietnamese nationals; the Vietnamese influence is most visible in the form of late night pho restaurants and neon red lit massage parlors (tam quat) dotted on the main strip.

Passing through Phonsavan, it’s easy to spot the Vietnamese—they drive more erratically (locals here drive recklessly enough when compared to Vientiane drivers but Vietnamese-driven buses were described to us as “torpedoes”), speak more loudly, and have more aggressive demeanors (work ethic and attitude) than the laid-back Lao locals. Your author stopped by a banh mi shop on the side of the road and asked one Vietnamese man who had been in Phonsavan for five months what he thought of Lao people; he held out his right hand, rubbed his fingers together with his thumb, and quickly shook his head while grimacing. Nothing more needed to be said.

Interacting with Locals

At a local club called Dok Mai Daeng (“red flower” in Lao) young Hmong people dance in relentless synchronization which eventually morphs into equal parts mosh pit and dance battle as the music picks up in tempo and the MC directs their abundant energy from center stage. Young men lift each other up and attempt to publicly determine who between them is taller, pausing every so often to forcefully crash and jump into young women on the dance floor—who equally seem to enjoy the rough contact. In between songs, all parties return to their respective tables or the young men find suitable partners to dance slowly to, depending on the next song. Interesting as it may be, this excited and loud scene is a far cry from the typical expat experience in Phonsavan.

The consistent westerner expat community in Phonsavan is fairly small with a majority of backpackers and tourists rounding out the western presence; the latter mostly in town to check out the mysterious Plain of Jars or using the town as a rest stop on the way to Luang Prabang. The Plain of Jars (PDJ according to the French abbreviation) is the main tourist attraction nearby, with a different feel from backpacker tubing in Vang Vieng or high-end resort tourism in Luang Prabang. Most nights, longterm expats can be found at Bamboozle, a restaurant run by a Scot named Mark, and perhaps the best place in town to find a quality meal. These “local” expats are almost certainly working for an NGO or doing volunteer work in town related to the continued effects of the bombing campaigns from decades ago.

Mines Advisory Group (MAG) is out in the field on a daily basis and there are a number of other NGOs (such as UXO Lao) that focus on Unexploded Ordnance (UXO), ranging from clearance to victim support assistance. The UXO sector in Laos (“mine action” in the official parlance) comprises three areas: clearance, mine risk education, and victim assistance. These services are badly needed here because an estimated 30% of the more than 270 million cluster submunitions dropped on Laos failed to explode. To put that figure in perspective, an average of one sortie (a roundtrip flight by one aircraft) was conducted every eight minutes for nine years (1964-1973).

Besides UXO, the biggest enemy these days could be boredom in Phonsavan, which can lead to heavy drinking for locals and expats alike in this rural area. Drinking is part of daily life in Lao PDR, and in Phonsanvan the national past time doesn’t divert too far away from its core. Runway Club, the largest nightclub in the area (and nestled in a bus depot), serves as another collection point in the “night life” funnel for the locals. Post-curfew, anyone who is still in the mood to continue the night reunites at one of several late night Vietnamese restaurants, which can also house snooker tables. As in much of Asia, driving is a hazard, but in Phonsavan the activity takes a higher form of danger—especially with drunken drivers careening down the main strip late at night and others making impromptu U-turns without advance warning. It’s interesting to note that at every location we went to in Phonsavan, we were either the only westerners in a venue or we were surrounded by fellow westerners, a highly segregated experience.

A Mix of History, Cultures, and Futures

A local official whom we spoke to at “Beer Party” Restaurant in Phonsavan described Lao culture as the following :

1. Having enough rice to eat;

2. Having a house to live in;

3. Having friends and relatives to come over and drink with; and

4. Having a partner to share life with.

However, this official also spoke about the foreign exchange of technical skills with Lao people, i.e., needing advanced knowledge from other places. This official was the second person out of six or seven who proceeded to come to our table to introduce themselves to us and speak with us in a mix of Lao, English, and Vietnamese (in that order). One constant throughout the entire experience was the warmth and hospitable nature of the Lao people—always smiling, always greeting, and always trying to help foreigners adjust to the local settings.

Even when the subject turned to the Secret War, and the massive bombing campaign carried out by the US government during the 1960s and 1970s, our counterparts seemed apologetic when referencing what had partly transpired where we were standing over 30 years ago. On this subject, we had an experience which ended up being the most sobering of all during the time we spent at this local eatery: one man, a chemistry teacher at a local teacher’s college, explained to us that his father had been killed by the bombing. It wasn’t clear whether his father was a civilian, Pathet Lao, or Royalist supporter, but this man was still visibly affected by events leading up to the revolution in 1975.

Chinese and Vietnamese influence in Xiengkhoang Province during that time took on a different form but presently, the Chinese focus on the commercial development projects while the Vietnamese focus on residential construction; these activities give one the distinct feeling of the area being carved up for neighborly consumption (or competition, depending on perspective). One 27-year-old Chinese national whom we spoke to at Desa Restaurant had been in Lao PDR for about a year; he had learned the language by spending time working in the chemicals sector.

Almost as soon as we had sat down at our own table, we were quickly invited to his table where he had been drinking with three other similarly aged Lao colleagues. Together, we shared several rounds of Beerlao and exchanged questions and answers about our respective backgrounds; at one point, one of the Lao men expressed his desire to visit the US in the future while the others nodded in unison. Our other discussion topics ranged from marriage to work to travel plans. Toward the end of our night, we toasted our newfound friendships with each other: three Lao nationals, two Americans, and one Chinese citizen sitting together in a local hangout in one of the most heavily bombed areas in the world.

Taking a Closer Look at the IPP

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In our last post, we outlined the IPP, explained its goals, and touched upon some of the challenges ahead for the program’s stakeholders. This week we are going to take a deeper look at the IPP and the cultural, comparative, and collaborative challenges ahead for the program in Vietnam.

Last weekend we sat down with Chris Zobrist, the Senior Innovation Partnerships Expert at the IPP, and he shared his thoughts on operating in Vietnam, the potential for entrepreneurship and innovation on a local level, and how the IPP factors into the changing landscape in Vietnam.

  • Can you share a bit about yourself? What’s your background, your role in your organization, and where are you located?

CZ: I’m currently working as Senior Innovation Partnerships Expert for IPP, which is a joint program funded by the Foreign Ministry of Finland and the Ministry of Science and Technology of Vietnam.  My background is as both an entrepreneur, having started many businesses over the last 15 years, as well as an entrepreneurship educator, spending part of my time teaching entrepreneurship and developing curriculum in several universities in Vietnam.

  • What kind of opportunities do you see in Vietnam over the next five years?

CZ: Vietnam has a lot of talent, especially in engineering and software development, and there are already a few high-growth companies as well as local start-ups planting entrepreneurial seeds here.

  • What’s the best way to establish trust with Vietnamese business counterparts?

CZ: It depends a lot on the individual with whom you are trying to build a relationship, specifically in terms of their background.  Generally, the best way to get to know someone is through someone they already know and trust, as in many cultures, Vietnamese really value social capital, and this can be transferred from one person to another through a proper introduction.  Besides introductions, sharing meals, and drinking together are also good ways of building trusting relationships which is an essential element of working together.

  • What’s the biggest difference between American and Vietnamese mentalities?

CZ: Coming from a developed country that churns out high quality products as well as infrastructure (roads, public buildings, etc), Americans as well as people from other developed countries have a natural expectation to see and make things at a high standard of quality.  Vietnam is still a developing country, so many things are made with what little resources were available, and so the expectation for quality coming from domestically produced goods is not high.

  • What’s the hardest part about doing business in Vietnam?

CZ: Ensuring high quality standards.

  • Do you have a favorite quote?

CZ: “I’m all for progress, it’s change I object to.” – Mark Twain, I like this quote because it is the most apt description of the greatest challenge facing entrepreneurs and innovators in almost every context, and especially true in a country like Vietnam.

  • What are the biggest differences between Hanoi and Saigon in terms of doing business?

CZ: Saigonese are generally much more open to new people and ideas, as long as there’s a clear opportunity and logic in place.  Hanoians are much more conservative, so even if they are presented with an attractive opportunity, they will be reluctant to mobilize the needed resources to capitalize on it.

  • What are the necessary attributes to succeed in Vietnam?

CZ: Social networks and building trusting relationships are keys to success in Vietnam.

  • Do you have any advice for expats/locals who want to be entrepreneurs in Vietnam?

CZ: Entrepreneurship is a team effort, so if you want to be successful, you need to learn how to network and collaborate with others to get things done.

Entrepreneurship, Innovation, and the IPP

During our discussion, Mr. Zobrist made it clear that the IPP is looking for people who have the necessary motivation, connections, and capacity to scale a company globally. That means that local companies will eventually have to implement international accounting standards, utilize English as an official working language (especially if looking to raise funding from foreigner investors), and clearly communicate a company’s Unique Selling Proposition (USP) across markets and cultures (differentiation).

While it might sound challenging, what the IPP is seeking to achieve isn’t impossible because it’s already been done before in Japan. Mr. Zobrist pointed out that Japan went from a ravaged post-World War 2 economy to the world’s second largest economy in the 1990s. What enabled Japan to be successful in its economic transformation was a stark shift in the workforce mindset, which even facilitated new vocabulary to implement innovative solutions.

Before this paradigm shift in Japan, specific industry terms did not exist to describe small batch, high quality production to factory workers. The Japanese created their own processes with their own resources to drive economic growth in 20 years; Japanese engineers, managers, and leaders took innovative ideas, applied them to manufacturing and processes and the result was innovative products from brands such as Sony, Honda, and Toyota. Thus, the development of a new technical language was necessary, which involved a social level (individuals, units, company culture, etc.) of change in innovation, and ultimately led to a change in output of manufacturing (lean manufacturing).

Vietnam currently has a similar language challenge ahead of it; for example, the terms doanh nhân and doanh nghiệp can mean “entrepreneur” or “businessman” and are used interchangeably (and sometimes ambiguously) in Vietnamese. Along those same lines, sáng tạo means “creation” while đổi mới means “renovation” so combining the two (sáng tạo đổi mới) is the closest meaning to “innovation” (literally “creative renovation”) in Vietnamese. The language will have to evolve in order to reflect the high standards and creative thinking that are necessary to maintain a competitive advantage in the global marketplace.

An ecosystem like Vietnam’s needs both entrepreneurship and innovation in order to foster the creation of high growth and innovative companies with a global outlook. If a company chooses to keep the status quo then it will stagnate, or worse, die. Copying existing models can be valuable, yes, but not nearly as valuable as new ideas that lead to the creation of value for a large number of customers or stakeholders. High growth companies are innovative and innovation requires change–there is no getting around this fact.

New language can shape new segments of a culture and creating new and/or dedicated Vietnamese words for entrepreneurship and innovation will allow the exchange of new ideas more efficiently and also help to facilitate a change in mindset–goals that the IPP hopes to realize once its integrated system is fully operational (good inputs producing good outputs).

The IPP seeks to perfect the way of building innovation systems in order to turn them loose and harness the innovative and entrepreneurial resources here in Vietnam. Then, the IPP can develop iteratively by building and expanding on foundational knowledge (training individuals and teams who can then train other individuals and teams and so on). In short, the IPP is building a Minimum Viable Product (MVP), learning from the outcomes, and making the necessary changes (quickly and fully) in order to make the process of creating high growth and innovative companies more effective and efficient in the future.

When the first phase of IPP finished at the end of 2012 there were some major lessons that were learned, leading to a promotion of transparency, accountability, and momentum for IPP Phase 2 (which began in January). This public-private partnership, comprised of a core curriculum and fellowship program, will eventually fully integrate entrepreneurship and innovation–but this process will require time, talent, and commitment at the individual, community, and governmental levels if it is to succeed in its mission.

Toward the end of our conversation, Mr. Zobrist pointed out that the IPP will have its final evaluation in 2018 but for now, the short term focus is on capacity building and making grants available to suitable applicants in this “wilderness stage.” However, the first significant indicators of progress could be as early as the end of this year or in early 2016 as the Fast Track training draws to a close and the New Innovative Companies are eligible for external funding on Demo Day.

With approximately 200 Expressions of Interests submitted to the IPP for New Innovative Companies, we look forward to seeing what kinds of teams are selected for the IPP–and more importantly, what kinds of teams, trends, and lessons emerge from the other side of the Fast Track Training.

Thanks to Chris Zobrist for sharing his time with us.

The Innovation Partnership Program

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Can innovation and entrepreneurship be taught? Does Vietnam have the ability to produce innovative and high growth companies to take on global markets? Are there people here who have the time, talent, and commitment to make an impact in the Vietnamese ecosystem?

The governments, donors, and people behind the Innovation Partnership Program (IPP) certainly believe so and with good reason.

Well, what is the IPP?

According to the IPP website:

“Innovation Partnership Program (IPP) is an Official Development Assistance (ODA) program financed jointly by the Governments of Vietnam and Finland. IPP is in its second phase running through 2014-2018.

Working closely with key national and international partners the program aims to scale up innovation training in Vietnam and improve support mechanisms for new innovative companies targeting international markets. Besides providing seed funding and connections for the best teams in Vietnam, IPP builds the capacity of public and private stakeholders through entrepreneurship and innovation training programs.”

The IPP focuses on three different but related areas: developing people, developing companies, and developing the ecosystem.

The Fellowship Program will develop future business leaders and entrepreneurs in Vietnam who will then lead the Fast Track training for the New Innovative Companies.

The New Innovative Companies component will help high growth Vietnamese companies bring a product or service to the global marketplace via Fast Track training and expense reimbursement.

And finally, the IPP will work with Innovation System Development Teams by providing funding for organizations that will raise standards, develop new resources, and positively impact the entrepreneur ecosystem in Vietnam.

In short:

“IPP supports Vietnam’s overall goal of becoming an industrialized middle-income knowledge economy by the year 2020. The program objective is to boost sustainable economic growth in Vietnam through the increased production and export of innovative products and services.”

One can think of the IPP as a pilot program, leading the way for other actors in the local ecosystem to continue on and influence the course of Vietnam’s entrepreneur development from a global perspective. The IPP is currently in its second phase; the conceptual portion started in September and the implementation phase has been ongoing since December. The Fellowship program is scheduled to begin around April, 2015.

The Innovation Fellowship Program

The Fellowship Program will consist of 20 fellows who will be trained by top international and local talent. The fellows will focus on innovation entrepreneurship, and once trained (over the course of two months), they will lead the Fast Track Training (six months) for selected new innovative companies. Trainers from Silicon Valley and other startup communities will come to Vietnam and work with the 20 motivated young people.

In addition to the fellowship requirements, the fellows will be selected on the basis of two primary criteria:

  1. Can they learn how to be entrepreneurs and innovators?
  2. Can they take best practices from the fellowship program and teach others?

In other words, do they have the capacity and attitude to make an impact after graduating from the fellowship program?

The fellowship requires a 40 hour per week commitment and will consist of some classroom and about 80% field work. Fellows will spend most of their time figuring out what customers need and how to find/create value in fulfilling those needs. Each week, the fellows will cover a new framework and ultimately practice and reinforce the learned concepts by the end of the week. The fellows will each receive a $1,000 allowance per month for duration of the fellowship program; the goal is to focus and train a core group of people to have all the tools necessary to create successful companies in Vietnam.

The IPP is currently seeking two local trainers who, if selected, will receive two weeks of training at Stanford University in the US, in addition to a highly competitive salary for the two months of training.

New Innovative Companies

Innovation, high growth, global; these are the words used to describe the kind of companies that the IPP is looking to fund, and eventually, is looking to see created here on a consistent basis.

The New Innovative Companies to be selected will be held to milestones and operational requirements for the duration of the program. The IPP will restrict what funding is used for (which is intended to be used on salaries and training related to development) and will cover only up to 70% of total expenses incurred by the new innovative companies. If people within the new innovative company are being paid, or external consultants are used, then the fees and services must be directly related to business activities. Thus, the new innovative companies will need to show accounting records, show payroll stubs, and show that a bank transfer took place or that the fees were paid out accordingly.

Once new innovative companies are selected, they will be injected into the six-month Fast Track Program (led by the Innovation Fellows) which will culminate in a demo day with the hope that 20 or so investors will be present and ready to look at each new innovative company for potential investment. The IPP does not to take any equity share in exchange for funding (because ODA requires it). Also, there will be no corporate governance oversight by the IPP for the new innovative companies. However, the IPP will have the power to remove teams, whether it’s because of a violation or if it’s clear that a new innovative company won’t be ready to present a compelling final pitch when the fast track training is completed in December 2015 or January 2016.

Innovative System Development Team

Local or international companies that want to be involved in Vietnam’s entrepreneurship ecosystem transformation can opt to form a consortium and submit their plans for developing specific new parts or for enhancing existing parts.

According to the IPP website:

“IPP’s grants are for covering 70% of internal and external human resource costs related to the innovation project. The first phase grant is approx. €50,000 [approximately 1.2 billion VND]. The most successful teams can receive an additional grant of maximum €200,000 [approximately 4.8 billion VND].

The potential content of the projects may include, but are not limited to, development of a new incubator, creation of new services for existing incubators, planning of a new funding program in the province, adding startup services to existing technology park or initiating a regional cluster growth program.”

To that end, expansion and funding activities, and, most importantly, imagination will be critical to finding new ways to leverage the funding to provide new resources to aspiring and dedicated Vietnamese entrepreneurs.

What’s Ahead for the IPP

February 23 is the deadline to apply for the Fellowship Program, but there is no set deadline to submit an Expression of Interest for the New Innovative Company and Innovation System Developers portions. In the longterm, IPP seeks to train individual people—not just companies. The real value of IPP is in developing people–the human talent–and getting them to share their newfound knowledge with others. Building teams takes time, and even longer to reach the point of creating high-growth companies so things won’t change here overnight, but the program is a great opportunity to head in the right direction.

One huge part of the challenge ahead for all those involved with the IPP is creating a proper technical vocabulary in Vietnamese, and in the long term, a cultural shift for attitudes toward entrepreneurship and innovation within the training programs. While the IPP has a fund amount of approximately $10 million—and it will certainly go further in Vietnam than elsewhere in the west—it will be the people on the ground, in the training sessions, and taking risks to create something great who will show the world just what’s possible in Vietnam.

Setting Expectations Across Cultures

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Lately, we’ve been meeting with university students from Foreign Trade University, Diplomatic Academy of Vietnam, and Banking Academy of Vietnam—and we’ve also been encountering some newcomers in Vietnam.

We’ve previously covered the youth in Vietnam, in particular how the true potential of Vietnam is embedded in its youth and in finding creative solutions to global problems, e.g., frugal innovation. Overall, we still maintain our high aspirations for the young Vietnamese that we have encountered and even higher expectations for the future of Vietnam because of them. We have also previously covered communication here in Vietnam but this week we are going to set the stage for interactions between foreigners and locals because there can be a lot of misreading and miscommunication between cultures, especially when there is a mismatch of expectations from the onset. It’s important to point out that Vietnam itself is not homogenous–there are great differences (accents, attitudes, allowance for risk) between north, south, and central areas of the country.

From an Outsider’s Perspective

Overall, there are some very traditional aspects in Vietnam to consider; it’s a patriarch society where saving face is crucial and most sensitive subjects are handled indirectly. Social events are a dance of respect, camaraderie building, and copious amount of alcohol. In the Vietnamese language, there are different ways to address the person you are speaking to, depending on if s/he is older or younger than you, your parents, and his/her position in society or environment relative to yours. Thus, a situation that would be normal between colleagues in the west would be very different here as age and relationships would come into play if there was ever a dispute.

The following are advice and suggestions for new expats (compiled from experience, anecdotes, and research)—not all of it applies to every encounter, rather these are themes that seem to permeate through interactions here and that we have reached consensus on.

Everyday and specific problems aren’t fully addressed as they are a sign of weakness (saving face); anything that is perceived as being negative is shunned. For example, we asked a client what their hardware defect rate is for their product line. Their response was, “we aim to have a hardware defect rate of 1%.” However, that response didn’t inform us what the current hardware defect rate is.

A lack of negative points in a discussion needs exposure; things will get swept under the rug. In the worst cases, problems will be actively hidden.

Figure out when yes really means yes; get a commitment from your counterpart. Trust but verify. Don’t believe it until you see it (completion or payment). Often, we find that people here are very good at going from A-Z but they miss the required steps in the middle unless questioned and, in some cases, led down a path of logic. You will have to guide many elements of scope or else they will fall through the cracks.

Don’t listen to what people say, look at what they do.

Your author worked on a project in HCMC a couple of years ago. One of our local partners missed five deadlines in a three month period which caused multiple issues with the client. Who was more foolish? Our partner for continuing to miss deadlines or us for believing him after he missed the second deadline?

If you are working on a project beware of unreasonable timelines and expectations, especially if there is a set date for delivery (such as an event). A common tactic is to give responsibilities away close to a deadline, and then assign blame when things go awry—especially for subordinates. However, those same people will take credit when things go well. Don’t do things for free or deviate outside your scope or else you will be blamed if something goes wrong.

It’s not uncommon for local managers to request an “urgent” item the night before (via text message) for a sub 12-hour turnaround or even as an employee is walking out the door at 8:00 PM before the weekend.

Many local partners will want to proceed ad hoc and may be concerned about “protecting” the end customer. Sometimes, the price of a good or service is secondary when trying to close a deal, especially through an intermediary.

The concept of “allies” and “enemies” within an organization is very prominent in local organizations; this phenomenon can be especially noticeable at the C-level in large or public organizations. Think tree trunks and roots for each position.

Give options but not more than two; there are many masters of “getting you to do work for free” here.

You will be stared at in the streets a lot. Smile back to break the ice.

Common Questions and Phrases

In the course of meeting Vietnamese, you will be bombarded with questions about your personal life and work in Vietnam. In no particular order:

Where are you from?

Are you married?

What do you think of Vietnam?

Do you have any brothers or sisters?

Where do you live in Hanoi?

How long have you been here?

Are you an English teacher?

You’ll also have to diplomatically handle some uncommon statements (in the west), such as:

“You’re handsome.”

“I’m training to be a good wife.”

“You should find a Vietnamese girlfriend or wife.”

“You would make a good wife.”

Above all, your nationality can either be an advantage or a disadvantage—but very few people here are overtly anti-American, anti-French, or anti-Chinese (although last year’s riots are an exception).

Working Effectively with Foreigners

Foreign companies will have increasingly higher requirements for local workers as FDI amounts increase. Local consumers will also demand better customer service or brand experiences as their purchasing power increases. The following advice has been compiled from students, workers, your author, and others who have worked with locals on a variety of projects at different levels—this advice is specifically for students.

Ideas without execution are delusions.

Show up five minutes early to meetings—don’t show up late; every time someone is late then s/he has to get caught up with events that already happened.

Say “I don’t know how to do that” when you actually don’t know. It’s better to ask questions before doing something than to do it wrong the first time. And you will actually save time instead of doing things over and over again.

Be focused in meetings. And be quiet when others are talking.

Listen to the one who is speaking. Again, don’t talk over others; it’s rude.

Actually give your opinion when asked for it—somebody asked you because s/he cares and you probably have insight that the person who asked you doesn’t have.

When everyone is agreeing about an issue, try to take the opposite position—groupthink is how companies are ruined.

Ask: “what can I do to help?” Follow through. The greatest shortage of resources in Southeast Asia is quality talent who can understand “glocal” requirements, i.e., global and local.

Don’t make silly excuses for whatever reason you are late or don’t feel like working (rain or traffic). Illness, a death in the family, and/or caring for an ill or injured family member are not silly excuses.

Think critically. Be skeptical; talk is cheap.

Prioritize. Write down your goals and tell someone. Most people will be happy to help or mentor.

Say no when you actually don’t agree with something.

Work in advance to meet the deadline. Organize work smartly to have time to think, plan, do, and win.

Ask for help when you need to; not the day before a deadline. Don’t wait until the last minute, it shows a lack of respect for a person’s time.

If you see a problem, mention it and try to come up with a solution for the problem.

Don’t think outside of the box, expand your box.

Don’t ever say “cannot” or “impossible” or “so sorry, please sympathize with me.” It wastes everyone’s time, including yours.

Be confident but remain humble, always. People acting like a “big boss” and shouting and screaming at others is not viewed well in the west. Steve Jobs was an exception.

Try to keep things professional; try to keep an open mind. Don’t be sexist; don’t make fun of your teammates.

Think through ideas to the end. How will you do that? And then what comes after?

Everyone has good ideas and no one has a monopoly on good ideas.

Don’t ask people outright for tangible help: money, job, free work. Try to help them first or ask what their biggest problem is and how you can help.

People who cannot follow through cannot be trusted—this goes for expats and locals.

Trust takes a long time to build and can be lost in a moment—don’t abuse someone’s trust.

The Biggest Piece

The advice offered above is non-exhaustive and has western bias according to Hofstede’s dimensions. The best thing to do is to talk to people; if you are a newly arrived expat then you should be talking to someone new every day. If you are a student and want to know more about foreign customs then ask someone from that country. Reading about it and doing it are two different things and the best way to learn something is by doing it.

The first time you do something is the hardest–eventually you’ll get the hang of it and will be more efficient and effective at it, whether it’s communicating requirements, asking to make sure something is done, or conflict resolution (or avoidance). Like the variety of photos in the gallery, Vietnam has many faces, shapes, forms, and settings. Don’t try to stereotype or label what you see, but instead try to understand why things are the way they are–that’s way more important to do than criticizing it or condemning it. Once you understand something, then you can see where the opportunities lie–even across cultures.

 

2015: A Milestone Year Ahead for Vietnam

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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.

 

 

Vietnam 2014: Year in Review

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Firsts and Notable Events

Tomorrow is the last day of the year in the Gregorian calendar but the Year of the Horse in the Vietnamese lunar calendar extends until mid February, 2015. Overall, 2014 marked many firsts for Vietnam: the first McDonald’s opened in Ho Chi Minh City shortly before Tet (the lunar new year). The first Rolls-Royce dealership opened in Hanoi in August, and the first mobile game out of Vietnam, Flappy Bird, went viral (and is now currently only officially available on Amazon Fire TV). Notably, Lotte Center Hanoi opened on September 2, Vietnam’s Independence Day, (after five years of construction) and Formation 8 sponsored a bi-city Hackathon, demonstrating that there is continued interest in the growing startup ecosystem in Vietnam from outside investors.

More recently on Christmas Day (December 25) Hanoi received a “gift” in the form of the new airport terminal that opened for its first flight but the terminal won’t be fully operational until December 31. The four-story, 139,000 square meter Terminal 2 has cost several hundred million dollars to build and it will accommodate a growing number of travelers to Vietnam. However, not all of 2014 happenings were rosy; the falling price of oil, anti-China protests in the middle of the year, and continued reports of Vietnam’s public debt increasing were some of the more worrisome developments during the past year.

Trade Impacts: Sanctions and Price Swings

In the last six months the price of oil has dropped by 40% and it’s certainly quite a different situation from this time of the year in 2007 as oil was about to break the $100 per barrel mark. Consumers in the west will certainly enjoy going to the gas stations once again and the increased disposable income will provide short term benefits for their economies. Similarly, the price of gas in Vietnam has been falling as well, as it is regulated by the Ministry of Finance and the Ministry of Industry and Trade. We will most likely see a cycle of global oil production slowing down, new oil projects put on hold, and then the price of oil skyrocketing back up, perhaps even before the end of next year.

For 2015, Vietnam’s GDP was projected to grow 6.2% if the price of oil had stayed at $100 per barrel and for every $1 the price of a barrel of oil loses, the State budget would lose VND 1-1.2 trillion (approximately $5.1 million). Oil export revenue makes up an estimated 10.2% of the total budget revenue which is  lower than in previous years. However, the budget revenue target is VND 911.1 trillion (over $42 billion) so the change in the price of oil still impacts the budget and will continue to as the price of oil continues to fluctuate.

At the same time, EU and US sanctions against Russia (and the Russian counter-sanctions) also provide an opportunity for Vietnam to increase its exports (in particular seafood and fruit) to Russian consumers, who will still demand or need products that were readily available to them earlier this year. The complicating factor for Vietnamese exporters will be the declining value of the Russian ruble, currently in free fall (and valued at approximately half of its worth at this time last year). Still, Vietnam and Russia recently concluded negotiations for the Customs Union agreement, which is expected to increase trade between the two countries to $10 billion by 2020.

Changing Skylines and Construction Interruptions

If you’ve been to Nguyen Hue street in Saigon’s District 1 recently then you know what a eyesore the metro construction project has been there (and in District 2). Earlier this year, the cost projections for the project were revised from $1.1 billion to a staggering $2.7 billion. On the opposite side of the country, the $1 billion metro project in Hanoi hasn’t progressed much since construction began in 2012. Completion dates for both projects keep getting pushed back as well—something that will most likely continue to happen before the current projected completion dates.

Now is construction season in Hanoi, mostly due to the cooler weather and attempts to finish projects before Tet so families can spend the holiday in their new homes. However, for the neighbors of such a construction project it can mean a significant decline in the quality of life for the duration of demolition and building. Construction can begin anywhere from 5:30 to 6:30 AM every day of the week and last until 6:30 PM with a break in the middle of the day for a lunch and siesta (usually one to two hours). At night, trucks delivering supplies for the next workday can arrive at 11:00 PM, 1:00 AM, and 3:00 AM due to lack of required permits to transport the goods during the day. For residential construction in narrow alleyways, workers can block nearby entrances, leave a mess, and contribute to the local noise and air pollution with jackhammers and gas-powered pulleys (in the last six months, your author has experienced three such projects). Surprisingly, many Vietnamese don’t seem to mind the noise and delays, unless they are traffic related.

For a changing city, cranes perched across a skyline are the sight of progress. But perhaps the costs of construction projects can also be measured in psychological effects due to the disruption in daily schedules. The noise of progress is far more intruding than the sight of progress and it has lasting impacts on future generations. Still, if not construction then other sonic interruptions such as public karaoke, horn honking, or motorcycle engine revving will emerge through the city soundscape. For sure, anyone who has visited Hanoi has learned to appreciate silence in this loud, chaotic, and flowing city.

Clear Winners

In 2014, Korea and Japan deepened their relationships with Vietnam on cultural, educational, and economic levels. Additionally, Vietnam established or renegotiated a number of bi-lateral trade agreements with states such as Lao PDR, Israel, Macedonia, and others.

Additionally, Samsung selected Vietnam as the location for a $3 billion manufacturing facility. It already has a $2 billion plant here so Samsung’s selection of Vietnam shows its faith that Vietnam’s business climate will continue to meet Samsung’s future production needs; this development continues the trend of manufacturing shifting away from China. Vietnam’s largest export value for 2014 is still cellphones and components—something that has remained unchanged since last year.

Furthermore, Mercedes-Benz Vietnam had the best first-half of the year ever since setting up in Vietnam— and one could make the case that it’s the unofficial vehicle brand of Hanoi given how seemingly ubiquitous the models are throughout the city. It will be interesting to see how the brand finishes out the year once the final numbers moved are tallied. To that extent, luxury brands here continued to do well, overall (though there are emerging signs that some Vietnamese may be living beyond their means).

Last but not least, the World Cup was a huge winner in 2014, no doubt causing the loss of serious amounts of productivity over the summer as Vietnamese workers stayed up until 5:00 AM or later to catch the games in Brazil. Not everyone was a winner though, as those who gambled away their fortunes or homes were left with low spirits. Still, the World Cup was a chance for Vietnamese families and friends to get together and share the communal experience of watching the nation’s undisputed favorite sport.

Undoubtedly, 2014 was many things for Vietnam (not all of it covered in this post), but it certainly wasn’t dull. We hope that you will continue to join us in 2015 as Vietnam and Southeast Asia continue to ascend. Happy New Year to you and yours wherever you are in the world!

Cheers!

The crowd at the AMX Seminar at the Hanoi Daewoo Hotel on December 3, 2014.

Building a Brand in Vietnam

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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.