A. Distribution And Sales Channels

1. Legal Constraints: Trading and distribution activities are reserved primarily for Vietnamese companies. If a foreign company without a commercial presence in Vietnam wants to sell externally manufactured goods to a Vietnamese customer, it is generally necessary to deal through a local agent or distributor. Moreover, foreign companies are not permitted to establish their own distribution or retail operation inside Vietnam. As a matter of policy, foreign investment in projects solely for trading and distribution has been restricted. There are few exceptions, one being a foreign company licensed to manufacture. However, the licensed foreign company may distribute and market only the products that it produces in Vietnam.

To date, only one foreign investment license in the distribution sector has been approved. In April 1996, Tait Asia of Hong Kong and the T&C Group of Companies, a private Vietnamese company, were licensed as a joint venture to engage in warehousing, delivery, and marketing consulting. While this is a fundamental step in the right direction, the new joint venture is not allowed to take title to the goods or directly receive payment for the goods. These services will be provided by the local partner outside of the joint venture.

2. Distribution Channels: Vietnam's sales and distribution channels consist of a fragmented network of state-owned import-export companies, private and state-owned wholesalers, independent Vietnamese agents and distributors, and small retail outlets limited to small family-run or state-owned stores and market kiosks. The formal distribution channels often overlap with a sophisticated network of parallel channels for smuggled goods.

3. Importing and Exporting: A company engaged in direct export or import must have a license issued by the Ministry of Trade. Import-export activity is mainly reserved for state-owned companies and a handful of Vietnamese private companies. Private local companies must have a minimum working capital of $200,000 and a minimum level of annual turnover. Foreign-invested enterprises may be granted a license to export or import specific products as specified in their investment license. Other companies, including foreign enterprises, without an import-export license must facilitate trading activities through licensed companies, which, on average, charge a commission of 2-3% of the value of the shipment. Under Vietnamese law, the importer acts as the consignee and, thus, holds title to the shipment until a subsequent sale is made. As such, it is important to identify a reliable importer to avoid an impasse should things run awry.

4. Wholesale: Wholesalers can be those state-owned trading companies or private local wholesalers, with or without an import license. The goods are stored in their warehouses and moved by their vehicles. Be aware that a warehouse may often be little more than a storage space with minimal or no facilities and equipment. Delivery vehicles may be a hodgepodge collection of old or reconditioned trucks, buses and vans, many from the former Soviet Union. These typewholesalers are usually poorly capitalized and, hence, unable to upgrade their business infrastructure.

With the opening of the economy, fledging private enterprises have revitalized the distribution sector, previously dominated by state-owned enterprises. Private distributors generally do not have import rights and still must secure the services of a licensed importer, although this is changing. According to the law, they need to have a license to hold inventory and handle distribution, which typically encompasses a broad scope of products and activities. They characteristically lack capital and experience to provide a basic range of services: proper warehousing, inventory and quality control, reliable delivery, marketing and after-sales service. They tend, however, to be more dexterous and business-oriented than their state-owned counterparts. Coordinated marketing is difficult as many are independent operators who operate with a trader's mindset.

5. Retail: The retail landscape is undergoing rapid transformation, providing more sales outlets for proper merchandising and display of products. A number of Western-style mini-markets and privately owned convenience-style stores are cropping up in the major urban areas. In Ho Chi Minh City, for example, there are over 20 mini-markets, with the larger ones concentrated in Districts 1 and 3; and in Hanoi, about 10 are operating. Showrooms and service centers for specialized products such as electronics, appliances and industrial goods, offer wholesale and retail sales. The next phase of retailing will involve the development of shopping malls. Fully opened in September 1996, the Saigon Superbowl in Ho Chi Minh City is the first large scale entertainment and retail center, around 5,000 sqm. Apart from these urban centers, however, retail outlets are still comprised of family-run market stalls or small street-front shops.

In August 1996, the Ministry of Trade (MOT) recommended to the government that it allow foreign joint ventures participate in the operation of supermarkets. MOT proposed a limited number of stores to be tested on a pilot basis. The impetus for MOT's proposal is the need to facilitate management expertise, upgrade retail trade and deter the onslaught of counterfeit and inferior quality products in the market.

6. Alternatives: Short of investing under the foreign investment law in Vietnam, foreign companies may establish a representative office or cooperate with an international trading company with representative office status in Vietnam. Under representative office status, foreign companies or international trading companies are permitted to monitor the sales or distribution of their products in Vietnam. Typically, foreign companies hire and train local staff to act as sales and marketing representatives, who then oversee distribution and marketing. A number of foreign suppliers have resorted to the challenging and relatively costly task of establishing their own network of distributors and dealers. Apart of a long-term strategy, these companies are mobilizing significant capital to train local dealers or distributors in sales and basic infrastructure in the areas of transport and warehousing.

B. Use Of Agents/Distributors

1. Agency Agreement: Unless licensed under Vietnam's foreign investment law, a foreign company that wants to sell and market its goods in Vietnam must do so indirectly by appointing a local agent or distributor. In concept, the sales arrangement is not that dissimilar from worldwide trade practices. An agency arrangement involves a Vietnamese agent selling a foreign supplier's goods in Vietnam for a commission. Under this arrangement, the risk of non-payment rests with the foreign supplier, as the agent is only selling the goods on behalf of the foreign firm. Since Vietnam does not yet have a unified commercial code, the status of agency agreements is unclear, and enforcing them in the event of a dispute may be difficult.

2. Distributor Agreement: Under a distributorship arrangement, the protection provided by the legal recourse is clearer. The Vietnamese distributor buys the goods from the foreign supplier for re-sale in Vietnam and, technically, is liable for the full amount of the goods purchased. Although it is not subject to the foreign investment law, a distributorship arrangement is considered as a "foreign trade contract" and needs to be structured in compliance with Vietnam's regulations on foreign trade contracts. In principle, it is legally binding upon signing and needs to be deposited with the Ministry of Trade.

3. Legal and Practical Considerations: Currently, regulations on sales agents do not cover goods from foreign suppliers. New legislation on sales agents is currently in draft form. According to the draft law, the Ministry of Trade will regulate which Vietnamese entities can act as sales agents or distributors for imported goods. The agreement between the foreign and Vietnamese party will be recognized and upheld as long the Vietnamese sales agent is licensed by the Ministry of Trade.

Companies should conduct exhaustive due diligence be conducted on potential local agents or distributors to ensure that they have the specific permits, facilities, manpower, capital, and other requirements necessary to meet their assumed responsibilities. Commercial agreements should clearly document the rights and obligations of each party, as well as stipulations for dispute resolution.

C. Franchising

Under Vietnamese law, franchising agreements involving licensing and royalty payments or training and consulting services are regarded as technology inducement and require statutory approval. Although legal provisions on technology transfer (discussed in Section E) are considered comprehensive, the strict guidelines for and lengthy process of approval, as well as restrictions on payments and contract duration, have essentially limited licensing arrangements. This includes traditional franchising opportunities.

Despite these restrictions, several fashion outlets and fast food eateries are operating in Vietnam: Swatch, Revlon, Baskin-Robbins, Carvel Ice Cream and Texas Chicken, to name a few. In several cases, the commercial arrangement consists of an agency or distribution agreement. Baskin-Robbins opened its first shop in Ho Chi Minh City in 1995 through a licensing arrangement. An Indonesian company was licensed as a 100% foreign-owned enterprise to hold the Texas Chicken franchise, which is a part of the America's Favorite Chicken company operating Church's and Popeye's in the U.S. Analysts surmise that Texas Chicken is a unique license, and that such investments will be extremely limited.

With the recent expanded development of retail space in Ho Chi Minh City, foreign retailers have another possible means of establishing a commercial presence. A company may enter into some form of "sub-management" agreement as a concessionaire to operate the retail space within these buildings. The most notable example is the Saigon Superbowl development, which features stores like Jollibee fast food, Maybeline cosmetics and Adidas sporting goods.

D. Direct Marketing

Again, unless a company is licensed under the foreign investment law, its direct marketing activities must be conducted by a Vietnamese entity, such as a distributor or agent or local advertising company. Mass advertising and conventional direct marketing techniques used in more developed markets -- door-to-door sales, telemarketing, and catalog and mail order business -- are novel concepts to the Vietnamese consumer. The logistical barriers to direct marketing include the lack of comprehensive data on "neighborhood" profiles, consumer and commercial mailing lists, and limited individual telephone ownership. However, consumer telemarketing could be an effective selling tool, as the majority of the urban and rural families tend to stay at home in the evenings. Several cosmetic and lingerie companies are experimenting with door-to-door sales to Vietnamese consumers on a limited basis in Ho Chi Minh City. For business-to-business marketing, direct mailings are widely used; however, mailing list databases are typically created in-house.

E. Joint Ventures/Licensing

1. Scope of Joint Ventures: The most effective route for marketing and distributing goods in Vietnam is to invest under the foreign investment law (See Section VII.A). This option usually entails establishing a manufacturing operation. Under a licensed foreign investment project, foreign companies are permitted to handle their own marketing and distribution of those products produced in Vietnam. Foreign firms are not allowed to distribute or market product lines manufactured outside the country.

2. Potential Vietnamese Partners: As of early 1995, the formal commercial sector included nearly 26,000 registered domestic enterprises with the following breakdown: state-owned (6,019), private (13,532), limited companies (5,034) and other forms (1,327). As a percentage of group capital, state-run enterprises dominated at 86.5% with an average capital base of $732,000. By comparison, private enterprises accounted for only 3.3% of total capital with an average capital base of $13,000, and limited liability companies at 6.3% and $63,000, respectively.

Although 70-75% of all foreign investment in Vietnam is in the form of a joint venture, less than 50 joint ventures have a private firm as a Vietnamese partner. Local private firms generally lack formal mechanisms to facilitate contacts with potential foreign investors, while government ministries and provincial authorities usually promote their own enterprises. Private firms must contend with greater government-imposed controls than their state-run counterparts -- specifically access to land, trading licenses, and entry barriers in some business sectors. Also, private firms' capital base and limited access to long-term credit restricts them to smaller size ventures.

3. Technology Transfers: Technology can be transferred by outright sale, licensing or contribution as capital of a foreign invested enterprise or business cooperation contract. The Ministry of Science Technology and Environment (MOSTE) has primary authority to approve any technology transfer contracts. Although the law on technology transfer is considered comprehensive, the implementing regulations render technology transfers in practice to be very difficult. The key areas to note are strict requirements for precise details on the timetable for the delivery of technology; provisions requiring extensive warranties; the limited duration of contracts; and restrictions on royalty rates that can be charged. Replacement legislation presently in draft form, together with relevant provisions of the new Civil Code passed in October 1995, are expected to address some of these areas of concern.

F. Steps To Establishing An Office

There are two options for initiating a commercial presence in Vietnam. A legal entity can be established by applying for either a representative office license or foreign investment project license, under Vietnam's Foreign Investment Law. The representative office is a logical first step for foreign investors to take inorder to determine the potential of the market and the practicality of making an investment. For foreign investors, there are four types of foreign investment project licenses: the Business Cooperation Contract, the Joint-Venture, the 100% Foreign-Owned Corporation and the Build-Operate-Transfer Project (discussed in detail in Section VII.A.).

1. Nature of a Representative Office: A representative office is the easiest, but most restricted, route to establishing an official presence in Vietnam. The license is issued by the Ministry of Trade (MOT) and allows for a narrow scope of activities, as stipulated in the "Regulations on Establishment and Operation of Representative Offices of Foreign Economic Organizations in Vietnam." According to the regulations, foreign investors may rent office space and residential accommodations and employ local staff and a limited number of expatriate staff. A representative commercial office is usually established to conduct a limited range of business operations. Permitted activities include market research and monitoring marketing and sales programs carried out by its overseas head office, as well as pursuing long-term investment activities. As the representative office is regarded as a commercial liaison and not an operating entity, it is strictly prohibited from engaging in any revenue-generating activities, such as trading, rendering professional services, revenue collection, or subleasing its office space.

The representative office license permits the foreign company to open only one office, at one site. Should the firm wish to open a second office in the same city or, more commonly, in a different city, a branch office license is required. Experts advise that a foreign company should decide at the time of application whether it wants more than one representative office in Vietnam. It is easier to obtain licenses for a representative office and one or more branch offices when all are applied for simultaneously. If an additional license application is made at a later date, the Ministry of Trade may require documentation on the performance of the first representative office's operations.

The term branch office has a second meaning under the laws of Vietnam. The branch office license can also refer to a 100% foreign-owned business which operates in selected service sectors. These sectors are restricted and tightly monitored by the Vietnamese government e.g. banking, law, insurance. Many of these firms first enter Vietnam as representative offices and later apply for the branch license. Various government authorities have jurisdiction over specific sectors, e.g. the Ministry of Justice for law firms, the Ministry of Finance for insurance companies and the State Bank for banks. General regulations governing branches of foreign companies have not yet been finalized. Branch office licenses in these restricted sectors can be difficult to obtain.

2. Tax Considerations: A representative office is exempt from corporate tax and auditing requirements. If the representative office signs a commercial contract with a Vietnamese entity on behalf of its foreign company, it is subject to a foreign contractor's tax on the funds paid to its corporate headquarters. Income tax for Vietnamese staff and expatriate staff must be paid in accordance with relevant regulations.

3. Other Considerations: Representative offices have recently come under severe scrutiny by the local people's committees, police, and tax and labor authorities, especially with respect to foreign service providers who claim they are not rendering services on-the-ground, but are merely facilitating services actually provided by their head office. Eligibility requirements have increasingly become tighter. By the end of 1995, MOT had granted representative office licenses to about 1,800 foreign firms, with Singapore (243), Japan (231), Hong Kong (207), U.S. (140) and France (125) leading the pack.

4. Application Procedures: The procedure to establish a representative office is relatively straightforward. An application must be submitted to the Ministry of Trade (MOT) and the local People's Committee. In addition to the standard form, supporting documentation required includes a detailed company profile, notarized copies of the foreign company's certificate of incorporation, charter, certificate of its financial status, and other documents. The application and profile must be prepared in English and Vietnamese and both sets of documents must be duly executed. Applicants have 90 days to register with the local people's committee once the license has been issued. The fee for a representative office license is $5,000 and a branch representative office license is $4,000. The license is usually valid for three years and may be extended for additional three-year periods.

G. Selling Factors/Techniques

1. Development of Consumerism: The proliferation of foreign brands in the Vietnamese market underscores the relative pace of the development of consumerism. The impetus for the high rate of trial usage and purchases of foreign products is that the products are perceived to be of better quality. Even among foreign products, there is a general hierarchy placed on a product's perceived quality based on its country of origin. Vietnamese consumers tend to prefer Japanese, US, and European brands over Chinese or locally made products and Vietnamese brands. However, one side-effect of the constant flow of new brands into the market is frequent brand switching among consumers. Ultimately, brand loyalty is built on price, proven quality and availability; awareness of brands comes from curiosity, word of mouth, promotions and advertisements.

2. Market segmentation: One key to market segmentation in Vietnam is geography, including urban versus rural. Vietnam may roughly be seen as three separate economic regions surrounding core urban centers: the South centered on Ho Chi Minh City, the North based in Hanoi, and the Central focused on Danang. The main distinctions are consumer purchasing ability and brand awareness and recognition. In terms of estimated GDP per capita, Ho Chi Minh City leads at $810, with Hanoi following at $630, versus the national average of $220. However, some experts believe that the true figures could be double in Ho Chi Minh City and Hanoi. Currently, consumerism is strongest in Ho Chi Minh City where there is a concentrated and growing population of middle-class consumers. Consumers in the South also tend to exhibit a greater degree of brand awareness than consumers in the North or Central. This is principally due to extensive contact with Westerners prior to 1975 and the influence of returning Overseas Vietnamese. These defining factors have had an impact on market demand disparities, market entry strategies, product-line segmentation and marketing mix. For many companies, the near term marketing goal is to penetrate Ho Chi Minh City, as experts estimate that 70-80% of all foreign consumer goods are purchased in Ho Chi Minh City.

3. Product Information: Complementing conventional channels of mass communication, foreign companies are actively utilizing trade fairs, product seminars and demonstrations, and point-of-sales materials. The aim is not only to promote their merchandise, but also to educate the sellers and end-users. Many foreign products do not yet need to be adapted to local tastes and conditions. However, efforts to familiarize the buyer as to the usage and usefulness of the product may be necessary to move the good from the shelf to the buyer's hand. Much equipment is new to the local marketplace, and suppliers have found that it is useful to provide more detailed product information in the Vietnamese language to their agents or distributors. Organizers should keep in mind that authorization from local authorities is required to conduct seminars, workshops or press conferences.

4. Practical Considerations: Whether the target group is the Vietnamese consumer or the multinational company, U.S. firms will need to foster strong relationships and maintain regular communication with the Vietnamese representative or sales agent and/or distributor of their product. Not only are many products competing for limited shelf, showroom or warehouse space, but Vietnamese representatives are also often carrying multiple brands of the same product line. A close relationship allows the foreign supplier to keep abreast of the changes and developments in the local market conditions. This approach also ensures that the Vietnamese partner is updated on product information and motivated to prioritize the marketing of the product.

H. Advertising and Trade Promotion

1. Development of the Advertising Industry: Advertising has been permitted only since 1990 and remains under the central government's control. Decree 194/CP is an effort to regulate how foreign products are advertised. Under the degree, advertisement for tobacco and liquor (excluding beer) are prohibited in the mass media. Pharmaceuticals, agro-chemicals, cosmetics and toiletries require registration and approvals from the appropriate ministries before being advertised. The industry's development is currently hampered by evolving legal parameters and strict supervision as the government takes cautious steps toward formulating a definitive policy. Another barrier is the arbitrary nature of enforcement and interpretation of the regulations.

The law also requires that only licensed Vietnamese companies may place advertisements. Many international advertising agencies are present in Vietnam; however, their services are limited due to their representative office status. Foreign advertising firms are working closely with licensed Vietnamese advertising companies in order to provide the range of services to support the needs of their international clients.

2. Advertising Trends: Total national advertising expenditure on broadcasting, print media and outdoor advertising has escalated from less than $20 million in 1993 to over $150 million in 1995. It is estimated that the breakdown of media advertising expenditures is 50% television, 25% for major newspapers and magazines, and 20% for billboards. Due to lack of facilities and quality supplies, production typically takes place offshore. Local production is gaining momentum as it gains with better access to equipment and technology.

3. Television: Television is the preferred advertising medium, and is the most cost-effective and efficient means of reaching the consumer. According to Neilsen Survey Research Group (SRG) of Vietnam, ownership of television sets is 92% per household in Ho Chi Minh City and 96% in Hanoi. There are five major television stations and one national broadcaster (VTV). With the emergence of satellite dishes, many households also watch international programs (e.g. BCC, CNN, Star TV). For a 30-second spot, foreign advertisers can pay from a low of $150 to a high of $2,200, depending on the day of the week, time of the day and station location. Television costs have jumped about 500% since early 1994. The top five product categories advertised on television in 1995 were non-alcoholic beverages ($4.12 mil), pharmaceuticals ($2.35 mil), toiletries ($2.33 mil), electrical products ($2.11 mil) and foodstuff ($1.96 mil).

4. Print Media: High literacy rates among the population, a surge in new publications, and increased print media circulation to support the print media's growing popularity as an effective channel for advertising. Regulations place limits on space allocated for advertisements, and rates are steep. In addition to advertisements, companies can also purchase, for a small fee, editorials or write-ups about their products. There are over 400 newspapers and publications in Vietnam; few have nationwide circulation. The more popular ones are "Nhan Dan" (The People), "Tuoi Tre" (Youth), "Saigon Giai Phong" (Saigon Liberation) and "Lao Dong" (Labor). English newspapers and publications include the Saigon Times Daily, Vietnam News, Vietnam Economic Times, Vietnam Business Journal and Vietnam Investment Review.

5. Outdoor Advertising: Outdoor advertising ranges from billboards and signboards to public transport, building walls, bus stops, wash and service stations, among others. Rates are as high as $250/m2/year. Many placements are illegal, so firms should check to see if the advertising agency has proper permits to lease the space.

6. Radio: Radio is not yet being widely used as a channel for promotion. The current listener base consists mainly of the rural population and the elderly in urban centers. Today, this audience represents a cross-section of the population with limited buying power for many foreign goods. As radio programming is improved and modernized to western standards, this vehicle for advertising is expected to grow.

7. Trade Fairs: Trade fairs are fairly numerous and broad in terms of industry coverage. Many are co-sponsored by government ministries. The Vietnam Chamber of Commerce and Industry and Vinexad sponsor fairs with international organizers such as CP Exhibition of Hong Kong and Reed Tradex in Bangkok. Common venues are the Giang Vo Exhibition Center, the Viet-Xo Cultural House, and the Army Guest House, all in Hanoi; and in Ho Chi Minh City, the Reunification Palace, international hotels and Ho Chi Minh City International Exhibition and Convention Center. Trade events offer opportunities to contact potential dealers, trading companies and end-users. Although the events are generally well organized and publicized, attendees tend to include many curious onlookers queuing up for promotional items. Booth rentals average around $100/m2.

I. Pricing Products

1. Price as a Message Signal: Price plays an important role in the consumer's perception of the product. Althought Vietnamese consumers expect to pay a premium for a foreign label or brand, in practice, the actual number of consumers who are willing to pay the higher price is small. Most Vietnamese buyers are price-sensitive. With the abundance of less expensive products in the form of smuggled or counterfeit goods and similar Asian brands, competition is keen. Market analysts agree that an exception can be made for consumer durables. Many Vietnamese view the purchase of big-ticket consumer items as a status symbol cum investment; therefore, they want to buy the best in terms of quality and durability to maximize re-sale value or have multiple functions. In a society where having a side-business and holding a regular job is common, for example a Honda Dream motorcycle can be used for private transport as well as a delivery vehicle.

2. Practical Considerations: On the trade level, additional costs in the areas of import taxes, customs service fees, and delivery delays can quickly cut into margins. The fragmented distribution system creates multiple layers of wholesalers, dealers and vendors, which means that markups at each stage are required in order to move the goods along the distribution chain. Moreover, foreign suppliers are often frustrated by their inability to exert control over their product's pricing. Random and frequent price fluctuations are common as many local distributors and wholesalers under-cut prices to achieve a faster turnover or withhold goods to prop-up prices. One important pricing cycle to note is the consumerism behavior linked with the Lunar New Year celebration in late February/early March. As there is a flurry of buying in the few months preceding the festival and little activity immediately afterwards, price hikes and reductions follow accordingly.

J. Sales Service/Customer Support

1. Sales Service: After-sales service and customer support are an important component of sales, as they can distinguish a company from its competitors. Samsung, for example, has taken the after-sales service one step further to establish a home maintenance service for its television sets. Multinational companies, particularly, will expect access to their supplier in the country, rather than to receive support from a regional base. Warranty guarantees are also an effective marketing tool to assure customers that they are buying a genuine and quality product.

2. Staff Training: Customer service is a relatively new concept in Vietnam's marketplace, which was until recently dominated by state-owned enterprises. Foreign firms may need to invest in customer service training for front-line local staff.

3. Practical Considerations: As a part of marketing and distribution, foreign suppliers are not permitted to provide direct sales service and customer support unless they have a licensed foreign investment project in Vietnam. These services must be provided by a Vietnamese company.

K. Selling To The Government

The government will need to procure a significant amount of equipment in order to modernize its administrative structure. The IT 2000 campaign to "computerize the economy by the year 2000" is but one indicator of the potential sales volume of equipment and services that can be provided by foreign companies, given the prevalence of out-dated equipment in the local market.

1. Bids for Government Purchases: Government procurement practice can be characterized as a multi-layered decision-making process which often appears to lack transparency and decision-making efficiencies. Although the Ministry of Finance allocates funds, government procurement needs are determined by various departments within a ministry and agency involved. Competition can be by direct negotiation, limited tender, open tender or appointed tender. Currently, ministries and agencies have different rules on minimum values for the purchase of material or equipment which must be subject to competitive bidding. Contracts that are highly valued, such as for infrastructure bid evaluation and selection are ultimately awarded by the Prime Minister's Office. No consolidated or regular listing of government tenders exists; however, some solicitations are announced in the Vietnamese language newspapers (Nhan Dan and Saigon Giai Phong) and in the English language newspapers (Vietnam News and Vietnam Investment Review).

2. Practical Considerations: Keys to winning government contracts include a high degree of involvement and communication between the foreign supplier, local distributor and relevant government entity. Interaction begins during the planning stages of budgeting. In practice, establishing rapport and credibility as well as educating the government as to how the product or service can support its needs take place well before the bid is publicly announced. Although the timing for tender opening, bid closing and award notification varies from project to project, preparation of government budgets generally occurs between January to June, with actual purchases made in July and August. Experienced foreign suppliers caution that even after awards are made, negotiations on price, specifications and payment terms maywell continue.

3. New Bidding Regulations: To provide more structure and transparency to the bidding process for infrastructure projects, the government issued Decree 43/CP issued in July 1996, covering three general areas: 1) consultant selection; 2) equipment supply and construction and; 3)project promotion. Infrastructure projects that are required to tender by international open bid under the new regulations.

L. Protecting Your Product From IPR Infringement

1. IPR Infringements: In Vietnam, infringements on IPR are pervasive, ranging from software and compact disk piracy to photocopied comic books and English dictionaries, tennis rackets and the sale of counterfeit drugs. The problem stems from the government's lack of sufficient controls and enforcement mechanisms; the public's lack of knowledge of the law and understanding of the concept of private ownership of IPR; and the end-user's limited purchasing power relative to the price of the foreign product. Although foreign firms can choose to prosecute offenders through Vietnam's courts, given Vietnam's nascent judicial system, the efficacy of this route is clearly limited. The experience of several major international companies, such as Walt Disney and Oxford University Press, indicate that informal negotiation and settlement supported by educational campaigns are more effective approaches to the problem. Microsoft and IBM have conducted public seminars to educate consumers on the benefits of purchasing original software.

2. Trademarks: Under Vietnam's law on trademarks, a trademark needs to be registered with the National Office of Industrial Property (NOIP) in Hanoi, which is governed by the Ministry of Science, Technology and Environment. Vietnam's law grants title of protection based on the "first to file" rule, and unregistered trademarks are not protected. As trademarks registered before 1982 may be invalid, U.S. firms should file immediately if they have not already done so. Trademark protection is granted for 10 years. Unlimited renewals are available for additional periods of 10 years. Vietnam is a party to the Madrid Agreement on International Registration of Marks.

3. Copyrights: Registration of copyrights is made to the Ministry of Culture and Information. A new copyright law was passed in December 1994, expanding the scope of prior legislation to include computer software and works by anonymous and foreign authors. Previously, the law limited the scope of coverage and protection only to Vietnamese citizens and their works. Under the new regime, foreign works qualify for copyright protection if 1) Vietnam is the first place of publication or 2) Vietnam follows within 30 days after first publication elsewhere. However, a complete set of regulations on the implementation of the law has not yet been released. Moreover, the law also stipulates that for foreign works to be protected in Vietnam, a reciprocal copyright agreement or multilateral commitment on behalf of both countries to protect each other's works must be in place. To date, no such agreement has been reached between the U.S. and Vietnam, although a bilateral copyright agreement is under consideration. If Vietnam joins the Berne and Universal Copyright Convention, such an agreement would exist.

3. Inventions and Industrial Designs: The procedure for registration and the protection given to patents and industrial designs are similar to that of trademarks. For patents, an application needs to be lodged with NOIP in Hanoi. Protection is valid for 15 years for patents and 6 years for utility solutions (petty patents). The Industrial Property Department will grant protection to industrial designs up to 5 years. Vietnam is a signatory to the Paris Convention, Stockholm Convention and the Patent Cooperation Treaty.

M. Need For Local Legal Services

1. Foreign Law Firms: As Vietnamese law firms still lack expertise in commercial and international law, foreign investors should consider the services of a foreign law firm in Vietnam. Although registered foreign law firms in Vietnam are technically restricted from advising on Vietnamese law, they are permitted to advise on foreign or international law. Since foreign law firms can retain the services of a Vietnamese law firm when necessary, they are capable of providing a full range of services to their international clients.

2. Vietnamese Law Firms: The services of local law firms encompass investment, law and consulting services. Services range from preparing applications for representative offices, trademark registration, and feasibility studies to conducting market research and identifying investment opportunities. As many are an extension of a particular ministry or government agency, they are well-connected with key decision makers and can facilitate access to officials, provide insight regarding government policy, and advise on negotiation techniques.

3. Practical Considerations: There are many foreign and Vietnamese consultants in Vietnam offering a range of services to foreign investors. It is important that investors verify the qualifications of a potential consultant, including trade references, before contracting his or her services. For an investment project license, many foreign investors have hired Vietnamese consultants to prepare the feasibility study. It is also common for the ministry with oversight responsibility to recommend its affiliate consulting company to work with the foreign investor.

Last update: March 1997 by VACETS