Fortune Cover Story
Apr 12, 2006
Hello, Vietnam

Three decades after the war, U.S. companies of that era are seeking new footholds.

By Sheridan Prasso

Thirty years after the fall of Saigon, there's a surprising twist to the business environment in modern Vietnam: The U.S. companies that were most closely associated with what's known here as the “American War” are being welcomed back by the Vietnamese government, mostly with open arms.

The companies that built weapons systems and bombs, as well as those that built the planes and helicopters that dropped them, have come back to do business and compete for contracts. The list includes Raytheon, Boeing, Sikorsky and Bell. And they are joined by the companies, including Dow Chemical, DuPont and Monsanto, that made Agent Orange, the chemical defoliant still blamed today for birth defects among children. “They are welcome,” says Pham Chi Lan, a senior official in the Hanoi government who advises the prime minister on economic development. “We have waited a long time for them to come back.”

That surprisingly forgiving attitude stems at least in part from a healthy pragmatism on the part of the country's leaders. They have seen what foreign investment and trade have done for archrival China and are eager not to be completely eclipsed. “In general,” says Lan, “Vietnamese leaders balance the problems of history with the need for new relations today.”

The economic indicators in Vietnam have been welcoming as well. GDP growth has clocked in at around 7 percent and above for the past several years. With 7.2 percent growth in 2004, Vietnam has one of the fastest-growing economies in Asia; it is expected to grow 7.5 percent in 2005, according to World Bank calculations. Two-way trade between the U.S. and Vietnam surged to $7 billion in 2004, from just $3 billion in 2002, according to the American Chamber of Commerce in Vietnam, following the 2001 agreement that normalized trade relations and phased in U.S. access to Vietnam's consumer and financial markets.

Open Arms
Representatives of American companies confirm the open-arms policy, saying they have found smooth sailing in getting government licenses to operate here. “DuPont has no difficulties doing business in Vietnam,” says Le Hoc Lanh Van, a Vietnamese national who serves as the general manager for DuPont's Vietnam operations in Ho Chi Minh City. “We have gotten much high-level support.”

Van reports that DuPont's business has been growing about 15 percent per year over the past five years, mostly in sales of industrial polymers used for making packaging, as well as in crop protection products, including herbicides, insecticides and fungicides. He declined to give sales figures. “People don't remember the war,” Van says. “The government and the population now, they don't care about the past. They understand that it's capital, technology and management expertise that are needed to grow the economy.”

Even those for whom the war is not a faint memory have been able to make a distinction between the companies that were involved in the war effort then and the same companies seeking to do business in Vietnam today. “For most Vietnamese, it's more about the people who were doing the spraying, rather than the companies that created [the spray]. They're thinking it's the U.S. military, not the companies. They're pragmatic enough to realize that you can't hold a grudge against a company that potentially is going to invest millions of dollars in your country,” according to an American expert on Vietnamese culture who asked not to be identified.

“They are very pragmatic,” agrees Fred Burke, a Ho Chi Minh City-based American lawyer for Baker & McKenzie, who has been helping companies navigate Vietnamese legal regulations for more than a decade. “They want good technology at a good price. If you were a defense contractor, a Raytheon or a Lockheed, you are very welcome here. The Vietnamese need to modernize their army. If Vietnam isn't able to mount a respectable defense of its borders, there's going to be a tempting power vacuum [for China], because power abhors a vacuum.”

Details of any talks with American weapons contractors to upgrade the Vietnamese military, which for the last three decades relied mostly on antiquated Soviet-made hardware, are generally kept under wraps. But the Vietnamese government, without any evident irony, did invite Sikorsky Aircraft and Bell Helicopter to an aviation conference in October 2004…quot;an event cosponsored by Lockheed Martin…quot;where they both bid for a government contract to supply EMS and search-and-rescue helicopters. Sikorsky, of course, started developing the Blackhawk helicopter gunship during the war, while Bell made the now-retired Huey, the large snub-nosed transport chopper known for the distinctive “whomp-whomp” sound of its propeller blades. Some 2,500 Hueys were downed in Vietnam by the time U.S. troops pulled out in 1973, and a number are on display as visible testaments to the Vietnamese victory over America in museums all over the country.

Raytheon International, which made weapons systems, radar for military purposes and Hawk surface-to-air missiles used during the war, completed one of the first commercial contracts between a major U.S. corporation and the government of Vietnam since the lifting of the trade embargo in 1994. The contract was for installing a TracView Airspace Management System, or air-traffic control system, at the Tan Son Nhat International Airport in Ho Chi Minh City (Saigon) in 2000.

That state-of-the-art system is one reason that United Airlines was able to get Federal Aviation Administration approval to launch the first direct flights from the U.S. to Saigon since the war. The inaugural flight of a packed Boeing 747-400 jetliner landed on Dec. 10, 2004, to much fanfare. Those 747's flying daily to and from San Francisco are expected to “directly contribute to continued economic growth through increased trade, tourism and cultural relations between our two countries,” Seth D. Winnick, the U.S. Consul General in Ho Chi Minh City, said in a statement. Boeing, the maker of the B-52 and B-57 bombers that dropped thousands of tons of explosives and sprayed the population with napalm and Agent Orange, is in the process of delivering four B777's to state-run Vietnam Airlines. The plane manufacturer also announced in December that Vietnam Airlines will buy four next-generation 7E7 Dreamliners in 2008, at a price of $500 million.

Agent Orange: A Lingering Thorn
It's not a total love-fest, however. A lawsuit was filed in U.S. District Court in Brooklyn in 2003 by the Vietnamese Association of Victims of Agent Orange. The suit, brought under the Alien Tort Claims law that allows victims of U.S. companies' malfeasance overseas to bring a case for compensation in the U.S., has powerful backers in the government in Hanoi. The Association has official sanction; news of the suit's progress is published regularly in the official Vietnamese media. The Vietnamese seek damages from 37 chemical companies, including Monsanto, Dow and DuPont, as well as funding for environmental cleanup efforts. The judge hearing the case, Jack B. Weinstein, is the same one who urged the U.S. chemical companies to settle claims by American Vietnam War veterans wanting compensation for health troubles back in the early 1980s. Seven chemical companies agreed to pay out $180 million in 1985.

Now the same case is back, this time with Vietnamese victims claiming damages. The trial is set for Feb. 28. In the meantime, the Association has collected nearly 10 million Vietnamese signatures of support, according to official press reports, and even depositors at Vietcombank find themselves facing a plea to support the law suit each time they make an ATM withdrawal .

The Vietnamese government contends that 4.8 million people exposed to toxic chemicals during the war are suffering from “incurable diseases,” including cancer and birth defects. But international experts say it may be impossible to prove that the rates of cancer and defects are any higher in Vietnam due to Agent Orange than any other country affected by war, and that many of the birth defects blamed on Agent Orange are due to severe malnutrition that struck in the aftermath of the war.

Legal battles aside, companies are finding business as usual in Vietnam. Most set up their offices in the mid-1990s after President Bill Clinton lifted the U.S. Trade Embargo against Vietnam, and they report that they have benefited from Vietnam's growth spurt in the last few years, unhindered by any changes in government attitudes or any lawsuit-related negative perceptions. “It's probably the most sensitive issue in the bilateral relationship,” attorney Burke says. “But there's never been any hint of recrimination or discrimination against the chemical companies doing business here. Vietnam's agriculture depends on it.”

“We certainly feel welcome to do business in Vietnam,” confirms Simon Teo, Dow's chief representative in Vietnam who presides over annual sales of about $30 million of epoxy resins, liquid separation equipment, industrial and specialty chemicals, and pesticides.

Dow does point out its philanthropic pursuits. “Not only do we pursue profits, as all businesses must, but also environmental protection and contribution to the community that we do business in,” says Dow's Bangkok spokesman Vorapong Vorasuntharosot. The company has helped rural hospitals improve the quality of drinking water and donated bicycles and books to the needy.

Boosting philanthropy here may be what's at the heart of the government's case, if in fact the Agent Orange suit fails to yield any settlement for the plaintiffs. “Even multinational corporations that did not have a role in the past do something to help the poor in Vietnam, like BP, for example, which takes a part of its profit to provide assistance here,” says government official Lan.

While awaiting a legal outcome, the chemical companies may be reluctant to make significant investments in Vietnam, says Burke, other than through sales and representative offices, just in case the lawsuit fails in New York and the Vietnamese government seeks compensation through local courts and seizes local assets. DuPont is the only chemical company with an actual plant in Vietnam.

One reason Vietnam is not expected to press too far, however, is that if it proves there's lingering damage to its soil and water, that would render Vietnamese agricultural products less desirable abroad. Vietnam is the world's largest exporter of black pepper and Robusta coffee, and the second-largest exporter of rice after Thailand. “The potential damage to trade is more than they'd get in a settlement,” Burke says. In the final analysis, the Vietnamese seem to know they must continue on an economic expansion track, and they'll need help from both friends and former enemies to do it.