Vk Econ Impact On Vn 2010630 For Release

2010
The Impact of Overseas
Vietnamese Investment on
Vietnam

Thanh “Tino” N. Dinh,
MBA Candidate Class of 2010
Darden Graduate Business School,
Special Research Elective under supervision
of Professor Peter Rodriguez,
3/3/2010

Tino Dinh | dinht10@alum.darden.edu

Contents

Page

Executive Summary 3

I. The Study
A. Introduction 7
B. Intent 7
C. Scope of Study 7
D. Methodology 8

II. Data and Analysis
A. Sources of Overseas Vietnamese Investment 10
B. Remittances 11
C. Recorded Investment Projects and Viet Kieu-led Enterprises 13
D. Characteristics of Viet Kieu-led Enterprises 16
E. Asset Management 19
F. Intellectual Capital 20
G. Assessment 24
H. Trends for Overseas Vietnamese Investment 25

III. Recommendations
A. Significant Business Opportunities 27
Policy Recommendations
B. Protecting Rights: Systemic Legal Reform 29
C. Diaspora Emerging: Building Institutional Capacity and Market Platforms 31
D. Building Trust: A Path Towards Reconciliation 32
E. Conclusion 34

Knowledge Gaps 36
References 37

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Copyright Pending. Not to be reproduced or disseminated without permission of author.


Tables
1. Methodology and Sources for Estimating OV Investment (Pg. 9)
2. Notable Viet Kieu-led Financial Management Firms and MNC Operations in Vietnam (Pg 20)
3. Ash Institute Assessment of Vietnam Higher Education. Measures of intellectual productivity
(Pg 22)
4. Vietnamese students attending US Schools (Pg. 23)
5. Summary of Major Components of OV Investment (Pg. 24)
6. Evolution of Major Components of OV Investment: Scale vs. Returns (Pg. 25)
7. Summary of OV Investment Obstacles, Business Opportunities, and Policy Recommendations
(Pg. 34)
8.
Exhibits
1. GDP Growth and Major Historical Events of the Socialist Republic of Vietnam, 1975-2008
2. 2008 Estimated Worldwide Overseas Vietnamese Remittances
3. Remittance Compared to Other Forms of Foreign Investment in 2008
4. 2008 Foreign Sources of Capital as Percentage of GDP
5. Total 1988-2008 FDI by Source
6. 2008 Licensed Foreign Direct Investment Projects by Province
7. 2008 Foreign Direct investment Projects Licensed by Kind of Activity
8. Major SRV Branches of Government and functions of relevant economic policymaking
institutions
9. Vietnamese Laws Pertinent to OV Investment

About the Study

This research project was conducted from August 2009 to March 2010. The information cutoff date for
this report is March 3, 2010. I alone accept full responsibility for any errors, omissions, mistakes, or
shortcomings. The views expressed in this report are based on my judgment and my synthesis of the
work of other scholars and hence do not necessarily reflect the opinion of the University of Virginia, its
faculty, or my academic advisor, Professor Peter Rodriguez, Associate Dean for International Affairs.

About the Author

Thanh “Tino” Dinh was born in the United States to Vietnamese refugees who fled the country in 1975.
He served for eight years as a US Air Force officer, specializing in Asian politico-military affairs and was
stationed in Texas, South Korea, Hawaii, Iraq, and Washington DC. Following military service, Tino works
as a management consultant to the US federal government. He has a B.S. in Asian Studies and minor in
Mandarin from the US Air Force Academy and an MBA from the University of Virginia’s Darden Graduate
School of Business. You may contact him with any comments, questions, or feedback at:

Dinht10@alum.darden.edu

Or via LinkedIn

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Executive Summary

Since 1975, the 3.75 million-strong Vietnamese diaspora have made significant contributions
(roughly $9.6 billion+) to the economy of the Socialist Republic of Vietnam ($90 billion GDP in 2009).
This is significant because Vietnam is now one of the world’s fastest growing economies, averaging 7-9%
GDP growth since 1990. However, the overseas Vietnamese community, the government of Vietnam,
and other major economic actors in Vietnam have been unable to create a comprehensive portrait of
overseas Vietnamese investment in Vietnam. All make the assumptions that: overseas Vietnamese
investment is an important source of foreign capital inflow, that actual investment greatly exceeds any
officially recorded value, and that it is in Vietnam’s best interest to cultivate this investment. This is also
the premise of this study. However, this project hypothesizes that the potential impact of overseas
Vietnamese investment in actual US dollar terms is much larger than the actual impact due to a variety
of structural barriers.

The Study

This study is an attempt to comprehensively assess the impact that overseas Vietnamese (OV)
investors and entrepreneurs have on Vietnam’s economy. However, the value of the study lies in its
approach as an analytical framework, rather than definitive set of answers. Accordingly, it draws upon a
number of sources to characterize the amount and nature of OV investment in Vietnam, including
economic statistics sourced from the Vietnamese government, multi-lateral institutions, and the US
government. This project uses published scholarly studies and research reports to address various
specific issues and anecdotal reporting such as media and expert interviews to fill any gaps or make
projections.

Data and Analysis

Overseas Vietnamese investment manifests itself in different forms. Remittance channels
provide an informal corridor for large amounts of cash meant primarily for consumption, but
increasingly as a means of capital or credit for small family businesses. As a proxy for other forms of OV
investment , remittance payments suggests that OV investments are very difficult to track and may in
fact be much larger than recorded amounts indicate. OV ventures and investment funds show some
promise, but also suffer the most risk. These ventures exhibit several common characteristics:
concentration in the South, towards SME, and towards low value-added, cash-based business models
like real estate and processing and distribution of non-durable goods. Even more significant, OV serve as
influential gatekeepers to other sources of foreign investment funds and projects. Finally, the enormous
potential of OV intellectual capital stands apart as the means through which OV can have the largest
impact on Vietnam’s economy. Taken together, aggregate OV investment is on par with the largest
foreign investors in Vietnam. However, this investment tends to be diffused throughout the economy,
rather than concentrated in high-visibility development projects. OV investment tends to be more
embedded within the overall economy. The investment components can be summarized as follows:

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Summary of Major Components of OV Investment
Component Sub-components Estimated Significance
(destination) Amount to Date
Remittance (for Investment in family- $3.9 billion Serves as key distribution
investment) run businesses channel for OV capital
Recorded investment Real estate, start-ups, $ 2 billion Potential of OV-led ventures and
projects and ventures joint ventures projects is not being maximized
Asset management Portfolio funds, start- $2.5 billion OVs serve as influential
ups, real-estate, IT, gatekeepers for foreign
mfg or infrastructure investments, projects
Intellectual capital R+D/IP, scientific Undetermined Greatest potential for value-
expertise, mgt know- creation, innovation exists in gap
how, educational b/w OV supply and local demand
institutions for intellectual capital
Total $8.45 billion + Quantitatively, would make OV
the 7th largest foreign investor
(Ex. 7). Larger socio-economic
impact unquantifiable.

Larger demographic and social forces such as cultural adaptation, migration patterns as well Vietnam’s
economic growth and the development of its own internal capabilities will reduce the overall
significance of OV investment. However, OV intellectual capital still has the greatest potential to
transform Vietnam’s economy, since Vietnam’s educational institutions and capacity to innovate still
greatly lag its economic reforms.

Recommendations

Apathy, risks (legal, financial, and community sanctions), and mistrust between Vietnam and the
OV community inhibit OV investment. These root causes manifest themselves in the form of structural
barriers such as governance problems and market inefficiencies. However, such challenges present
unique opportunities for innovation and value-creation. Commercial entities and public or community
institutions that can successfully address these root causes could help accelerate both Vietnam’s
development and reconciliation between Vietnam and its diaspora. This study provides some policy
recommendations. It is incumbent upon Vietnam to clarify its stance towards OV investors and embark
upon systemic, rights-based legal reform to attract OV investment. For its part, the OV community has
thus far proven incapable of developing institutions or companies capable of mobilizing and allocating
OV capital efficiently and transparently across the diaspora. The OV community must develop these
capabilities in order to protect its interests and maintain its relevance. Most importantly, leaders and
influencers in Hanoi and the OV community must embark upon a genuine confidence-building process
to create a virtuous cycle whereby economic development and reconciliation efforts are mutually re-
enforcing.

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The following table summarizes the barriers to OV investments and suggests business
innovation or policy changes which could mitigate or eliminate these barriers.

Summary of OV Investment Obstacles, Business Opportunities, and Policy Recommendations
Root Barrier to Business Policy Recommendation
Cause Investment Opportunity
Apathy Cultural Acculturation
distance Services
Risk Legal Risk Information and - Hanoi: Clarify legal status and rights of OV
Risk Protection - OVC: Establish internationally recognized,
Services independent forum for OV-owned businesses
operating in Vietnam to represent collective
interests

Systemic Information and - Hanoi: rights-based legal reform; consistent
corruption Risk Protection enforcement
Services - Hanoi, OVC: Independent, critical media

Bureaucracy - Information - Hanoi: Streamline, consolidate, and automate
and Risk administrative process across agencies for
Protection receiving business permits and licenses (e-
Services
government)
- Market
Platforms

Financial risk; - Market
market Platforms
inefficiencies - Financial
Services
Lack of OV - Market - OVC: Coordinating or cooperative mechanism for
Community Platforms promotion of economic development in OV
Capacity and - Financial community and Vietnam across public,
Markets Services
commercial, and civil society spheres
- Establish independent research institute for OV-
centered economic, social science research
Principles Mistrust - Educational - Hanoi, OVC: Reconciliation process
institutions
and services

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The Study THE STUDY
 WHAT IS THE SIGNIFICANCE OF
Introduction
THIS STUDY?
Throughout the post-war period in 1975 and continuing  WHO ARE OVERSEAS
even today, overseas Vietnamese refugees and officially VIETNAMESE (OV)?
sponsored guest laborers have continued to remit increasing  HOW IS OVERSEAS VIETNAMESE
amounts of cash to their families in Vietnam, thus playing a INVESTMENT DEFINED?
significant role in the country’s economic development. Prior to  WHAT IS THE OBJECTIVE OF THIS
Doi Moi, remittances served as a lifeline for many Vietnamese STUDY?
suffering from dire poverty1. Vietnam struggled economically
and began to question the Soviet model of economics. Vietnam began market-oriented reforms under
its Doi Moi program in 1986, seeking to emulate Deng Xiaopeng’s economic reform policies for China.
From the mid 1990s to the present, Vietnam’s GDP growth has
accelerated to 7-9%, second only to China2. Key diplomatic and
economic milestones have helped accelerate Vietnam’s Terminology: This study uses the terms
integration into the global economy. See Exhibit 1 for a overseas Vietnamese OV, OV community,
chronology of key economic events. Viet Kieu, Little Saigon, and Vietnamese
diaspora interchangeably to refer to the
Since at least the mid-1990s, anecdotal evidence population of people who self-identify
indicates an increasing amount of overseas Vietnamese have themselves ethnically, culturally, or
retuned to do business in Vietnam. 3 Indeed, Vietnam has begun politically as Vietnamese and who reside
to actively court OV investment since 1990, particularly in terms outside of the Socialist Republic of
of knowledge transfer activities like TOKTEN4and various Vietnam.
government-facilitated OV organizations.5 6 Accordingly, Vietnam Vietnam, SRV, and Hanoi refer to the
has officially recognized the importance of OV investment. Article government of the Socialist Republic of
25 of the 1992 SRV Constitution 7explicitly encourages OV Vietnam.
investment, while Vietnam’s Five Year Socio-Economic Plan for
Anglicized spellings are used for
2006-2010 calls for overseas Vietnamese to contribute to
convenience (i.e. ‘Vietnam’ instead of
Vietnam’s human resource development.8
‘Việt-Nam’)

1
Based on author’s family experiences of sending remittances to relatives since 1975.
2
Source: World Bank statistics.
3
Variety of media reports from Economist, OC County Register, San Jose Mercury News, LA Times, New York Times
as early as late 1990s and with increasing frequency from 2005-2010. Also, establishment of social networking
groups on LinkedIn and Facebook documenting activities and membership.
4
Transfer of Knowledge Through Expatriate Nationals (TOKTEN) was a joint program between the Vietnamese
government, UN Volunteer Program, and UN Development Program to use expatriate Vietnamese to help build
capacity from 1990-2002.
5
Overseas Vietnamese Business Association
6
Overseas Vietnamese Club for Science and Technology
7
1992 Constitution of the Socialist Republic of Vietnam, Chapter Two: Economic System. Embassy of Vietnam-USA
8
SRV Ministry of Planning and Investment. “The Five Year Socio-Economic Development Plan: 2006-2010”. March
2009. (Sections on remittance: Pg. 67, human capital: Pg. 87).

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On November 22-24, 2009, the Vietnamese government sponsored its first Overseas
Vietnamese Conference, drawing 1,000 Viet Kieu business persons, entrepreneurs, and investors.9
Academic experts from Vietnamese government, OV community, and international organizations all
agree that OV investment on Vietnam’s economy is significant and growing. However, the scale and
nature of overseas Vietnamese investment and its degree of influence on Vietnam’s overall economic
development remain unclear, as OV investment remains an opaque phenomenon for a variety of
reasons.

Intent

Thus, there is wide acknowledgement of the importance of OV investment, yet a large gap in
understanding the scale, characteristics, and effect of this type of investment. Through this study, I take
a practitioner’s approach towards attempting to address these gaps. Furthermore, I hypothesize that
the full potential OV investment has not yet been fully realized. Thus, the purpose of this study is to: 1)
measure and assess overseas Vietnamese economic investment into Vietnam, 2) determine the impact
that this investment has on Vietnam’s overall economy relative to other sources of foreign investment, 3)
identify barriers to OV investment, and 4) suggest ways that entrepreneurs, policymakers, and
community leaders in Hanoi and amongst the overseas community can overcome these barriers to
create economic opportunity for Vietnamese people domestically and worldwide.

Rather than seeking to be the definitive source for a dynamic topic, I hope that this study will
instead by a starting point for an open, honest, ongoing and civil discussion of mutual interest and
benefit for all stakeholders concerned. In particular, I hope that this study will inject some unique
synthesis and data into a lively dialogue between policymakers, investors, entrepreneurs, and economic
development professionals interested in Vietnam’s blossoming economy. Most important, I strongly
desire that this study will contribute towards sincere, transparent, and conciliatory dialogue between
the overseas Vietnamese community around the world and the government of the Socialist Republic of
Vietnam. It is my personal belief that without a genuine spirit of reconciliation, the enormous potential
of overseas Vietnamese to contribute to Vietnam will never be completely realized. All of these
stakeholders share an interest in enhancing economic development and creating business opportunity
in Vietnam.

Scope of Study

This study is purposefully focused on recorded investment projects and remittances from those
Vietnamese who fled to the West due to political persecution, investment types and sources whose
economic significance and measurability make for a more useful study.

This study is intended to be the beginning of ongoing dialogue and applied research on the
burgeoning and dynamic economic relationship between Vietnam and overseas Vietnamese. Readers
should assess its quality on its relevance, rigor, and whether or not its conclusions are actionable. There
may be broader implications for other emerging markets looking to garner investment from their

9
“Plan before PM would provide incentives to Viet-Kieu talent”. Lookatvietnam.com. November 25, 2009.

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diaspora populations. There are many topics related to OV investment that are not included in this brief
study, but are quite relevant to the overall objectives of identifying business opportunities and spurring
economic development in Vietnam. See Knowledge Gaps at the end of the paper.

Methodology and Sources

This study is limited primarily to publicly available statistics and information. Besides informal
surveys, this study does not use original field surveys and data collection efforts.

To the extent possible, this study attempts to use existing, primary sources of empirical data
drawn from a combination of official, published data from various SRV government ministries, multi-
lateral institutions10 (World Bank, International Monetary Fund, the Asian Development Bank, and the
United Nations), and from commercial reports. This study also integrates pre-existing studies on
relevant sub-topics and draws upon interviews, correspondence, or published testimonies from
recognized international experts on Vietnam’s economy as well as those with business experience in
Vietnam. As will be discussed in the body of the paper, identifying verifiable empirical measurements of
Viet Kieu-based investments has been the underlying challenge of this entire study. There is no
centralized, internationally-recognized statistical authority on the Vietnamese diaspora and its
“economy”. This study operates on the fundamental assumption that projections of total OV investment
can be reasonably estimated using government-recorded remittances and investments as a baseline.
Anecdotal sources, such as media reports or estimates by those with acknowledged academic expertise
or practical first-hand experience in Vietnam are used to fill in any gaps, provide operating assumptions,
and inform reasonable estimates. As stated by the Intent section, the study—especially its data
components—are intended to be a starting point for future research and discussion of a topic that is
inherently difficult to measure. Any projections or calculations err towards conservatism.

10
Most multi-lateral institutional sources of data are based on SRV-provided data

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Table 1. Methodology and Sources for Estimating OV Investment

Anecdoctal
Vietnam Multi-lateral US Scholarly
Reports
Government Sources Government Studies,
(media,
Sources (WB/IMF, Sources Research
interviews,
(GSO) UN, ADB) (Census) Reports
surveys)

Overseas Vietnamese Investment

(Size, Characteristics, Effect)

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Analyzing Overseas Vietnamese Investment
DATA AND ANALYSIS
Sources of OV Investment
 WHERE DOES OV INVESTMENT
The first challenge in assessing OV investment is COME FROM?
determining where it comes from, on a national level if not a  HOW LARGE IS AGGREGATE OV
household level. To answer this question, one must have INVESTMENT?
accurate census statistics for the total ethnic Vietnamese  WHAT IS THE SIGNIFICANCE OF
population outside of Vietnam, an intricate problem set in its OV INVESTMENT IN THE
own right. OVERALL VIETNAMESE
ECONOMY?
Available studies based on immigration statistics and  WHERE DOES OV INVESTMENT
historical research show that an overwhelming majority of GO AND WHAT IS IT USED FOR?
Vietnam’s 1.5 million political refugees have re-settled in the  WHAT IS THE NET EFFECT OF OV
United States, most notably in Orange County and San Jose, INVESTMENT ON VIETNAM’S
California and in Houston, Texas.11 Orange County, California ECONOMIC DEVELOPMENT?
has the highest concentration of Vietnamese outside of  WHAT ARE THE FUTURE TRENDS
Vietnam (more than 150,000)12 who have created a unique OF OV INVESTMENT?
ethnic enclave officially recognized as “Little Saigon”.
Vietnamese government sources estimate the worldwide income of overseas Vietnamese communities
to be $50-$60 billion, of which more than one-half is earned by the Vietnamese-American community.13
The National Vietnamese-American Chamber of Commerce estimates that Vietnamese-owned
businesses in the United States generated $25 billion in cash receipts, based on projections from US
Census Bureau data.14 However, the same data also indicates that Vietnamese-Americans as a whole are
a relatively socio-economically disadvantaged group whose small business revenues lag other ethnic
Asian-owned firms in the United States.15

Significant numbers of refugees received asylum in other OECD countries, especially Canada,
Australia, France, Germany, and other EU nations. Another group of approximately 210,000 migrant
laborers were Vietnamese officially sponsored by the government to work or study in sister Eastern Bloc
states such as the Soviet states, Poland, then-Czechoslovakia, and East Germany. These migrants
eventually chose to remain in Eastern Europe16. A fourth wave of migrants includes officially sponsored
non-skilled, temporary expatriate laborers or cross-border workers sent to Cambodia, Taiwan, South
Korea, Malaysia and UAE, as well as foreign brides who have married husbands in Taiwan and South

11
Migration Policy Institute. “State Proportion of Vietnamese-Born Population in the United States”. US Census
Bureau/American Community Survey 2006.
12
Based on projections from 2000 US Census data.
13
“Capital from Viet Kieu poised to flow to Vietnam”. Vietnam Economic Times. August 27, 2009.
14
Interview with Katie Dang, Executive Director of National Vietnamese-American Chamber of Commerce. January
29, 2009. Estimate based on projection of 16% annual growth from US Census Bureau 2002 Survey of Small
Business
15
US Census Bureau. “2002 Survey of Business Owners: Asian-Owned Firms”. Revised August 29, 2006.
16
Sidel, Mark. “Vietnamese-American Diaspora Philanthropy to Vietnam. Prepared for The Philanthropic Initiative,
Inc. and The Global Equity Initiative, Harvard University. Supported by the Hewlett Foundation. May 2007.

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Korea. Of course, there is an untracked population of Vietnamese victims of human trafficking and illegal
migrants for whom this study does not apply. As Exhibit 2 shows, Vietnamese-Americans form the bulk
of OV population worldwide and tend to dominate the political and cultural dynamics for the rest of the
global OV community, including the majority of OV economic wealth worldwide.

This diaspora population of approximately 3.75 million Vietnamese, especially refugees who
have permanently settled in OECD countries has generated a large class of people who have the wealth
and/or the desire to invest in Vietnam.17 There are numerous drivers for OV investment in Vietnam.
Some are motivated by family obligations, whether imposed or by a desire to assist family members to
become self-sufficient. Others are driven by a sense of patriotism or ethnic and cultural affinity. Some
are opportunists who see an undervalued market. Many OV are inclined to assist in humanitarian or
charitable activities such as microfinance ventures. Regardless of motivation, Viet Kieu participation in
Vietnam’s economic growth is significant and growing as the following analysis will argue.

Remittances

Remittance provides a useful proxy for determining the potential aggregate capital flow
between the Vietnamese diaspora and Vietnam. The scale of remittance is the most visible indicator of
the Vietnamese diaspora’s effect on Vietnam’s economy. Exhibit 2 approximates the geographic
distribution of overseas Vietnamese and the respective amounts of remittance produced in 2008. This
total estimate is based on Vietnam’s officially recorded remittance total of $7.2 billion for 200818 as well
as a conservatively estimated $1 billion in cash physically carried by the 509,627 Viet Kieu who traveled
to Vietnam to visit relatives that year.19 Within the larger context of the overall Vietnamese economy,
Exhibits 3 and 4 respectively show the significance of remittance compared to other foreign sources of
financial capital and sources of capital as percentage of GDP.

Economist Lan Pham of the University of Minnesota has conducted an extensive study of
overseas Vietnamese remittances, concluding that remittances from the West (especially the United
States, Australia, and Canada) are three to four times larger than other sources and tend to flow to
wealthier, urban households, especially in HCM City and Ca Mau province on the southern tip of the
Vietnam. Furthermore, Pham notes that these remittances will filter down towards rural households
and outwards towards the center of the country.20 Anthropologist Ivan Small of Cornell notes that there
is a rising trend of remittances coming from export workers in Malaysia, Taiwan, and South Korea and
going towards poorer, rural households.21 Key policy decisions, reflecting a loosening of restrictions in
foreign capital inflow, included a repeal of a 5-percent tax in 1997 and the repeal of a law allowing

17
The return of the boat people. (2008, April). The Economist, 387(8577), 9. Retrieved February 5, 2010, from
ABI/INFORM Global. (Document ID: 1469393961).
18
Source: World Bank Estimates Based on IMF BoP Statistics Yearbook 2008
19
Source: Vietnam National Administration of Tourism figures for the purpose of “visiting relatives”
20
Pham, L.. Access to credit, remittances, and household welfare: The case of Viet Nam. Ph.D. dissertation,
University of Minnesota, United States -- Minnesota. Retrieved February 10, 2010, from Dissertations & Theses:
Full Text.(Publication No. AAT 3324437). Pgs. 49-59.
21
Phone conversation with Ivan Small, PhD candidate, Cornell University, Department of Anthropology. February
10, 2010.

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withdrawals only in local currency. Before these decisions, remittances tended to flow largely through
informal channels to evade taxation and control. Also, the state’s desire to keep track of and attract
remittances resulted in a growth of foreign and local wire transfer services.22 As a result, recorded
remittances have increased sharply over the last decade.

Actual remittances are likely much larger than recorded values. Even the Vietnamese
government is unable to track all informal forms of remittances, which are used to avoid the high costs
of transfer services23. Whatever the amount, remittances have undoubtedly played a large role in
reducing poverty, fueling domestic consumption, and boosting household savings. Many Vietnamese
prefer remittances because they trust this informal channel more than formal banking and transfer
services, which are rapidly growing but still immature.24 In contrast to the sharp drop in FDI in 2008-09
(see Exhibit 3), the decline of remittance payments was more muted. The decline in remittances can be
explained by adverse economic conditions affecting Vietnamese immigrants in industrialized nations.
However, the relative stability of remittances in comparison to other foreign sources of capital flow into
Vietnam can best be explained by enduring family obligations. An overheating economy, concerns over
fiscal or monetary policy, and other macro-economic or business climate issues that can scare away
foreign portfolio investors25 are less likely to deter family members from sending money home to
Vietnam. For now, overseas remittances serve as a more stable source of revenue and remain a critical
component of buoying household income.26

David Dapice of Harvard’s Ash Institute opines that remittance serves to shore up inadequate
capacity in government-funded social services.27 Remittance is often sent to relatives to take care of
aging relatives, pay for health care, pay for education, purchase large items such as motorbikes or
household appliances, or provide subsistence income.28 Remittances do have some negative effects,
including inflationary pressure on the dong, already overheated from other forms of FDI and a recently
de-valued by the State Bank in November of 200929 and perhaps even discouraging some recipients
from seeking employment.30 For the long term, remittance is dependent upon migration patterns and
sociological trends. In the West, as OV become more assimilated within the culture of their host
countries, they will feel less compelled to remit money to distant relatives on a recurring basis. Also, as

22
Pham, L. Ibid. Pg. 41-42.
23
Flanigan, James. “Little Saigon Exports Its Propserity”. New York Times. January 19, 2006.
24
Truong, T., Small, I., and Vuong, D. “Vietnam: Practices and Patterns of Diaspora Giving”. Diasporic Giving: An
Agent of Change in Asia-Pacific Communities Conference. Conference paper. Hanoi: May 21-23, 2008. Pg. 256.
Accessed via Google on February 11, 2009
25
Balfour, Frederick. “Vietnam is Hot. Don’t Get Burned”. Businessweek.com. April 18, 2005.
26
Phone conversation with Ivan Small, PhD candidate, Cornell University, Department of Anthropology. February
10, 2010.
27
David Dapice, Economist for the Vietnam Program at the Ash Institute for Democratic Governance and
Innovation (Harvard JFK School of Government). Email exchange. January 26, 2009.
28
Author’s personal family experience, 1975-2003.
29
Johnston, Tim. “Vietnamese confidence fades on bubble fears”. FT.com. January 4, 2010.
30
Amojelar, Darwin. “Remittances may cause inflation”. Manilatimes.net. December 17, 2009. Citing ADB Working
Paper, “Remittances in Asia: Implications for the Fight against Poverty and the Pursuit of Economic Growth”.

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Vietnam’s domestic economy grows, local households will no longer be as dependent on remittances as
a source of income.

However, remittances are also a significant channel for investment. Widespread anecdotal
evidence indicates that a significant portion of remittances go toward helping family members start or
run businesses, launching ventures in partnership with family, launching ventures using family members’
names purely as legal proxies, or to purchase real estate (for residence, as speculative investments, or
both).31 Remittance serves as a significant source of credit for urban recipients. What government
officials, academics, and investors cannot determine thus far is what actual proportion of remittance
goes towards investing in businesses. Pham of Minnesota notes that existing empirical surveys cannot
currently determine how of much of remittances go towards investment versus consumption or savings
since remittances and other revenue streams are “fungible”. 32

The amount of investment-related remittances can only be guessed at. For example, an
arbitrarily conservative estimate of 10% of the estimated total $7.94 billion in 2009 is $794 million.
Furthermore, this amount is diffused throughout the Vietnamese economy across a large number of
households in small increments of $500-$1000 dollars per household—a source of investment capital
effecting areas well beyond the reach of formal banks and FDI. The challenge of identifying business
opportunities and crafting policies to attract investment (to be discussed in Recommendations) is most
daunting for this critical investment channel. Key take-aways from examining the flow of overseas
Vietnamese remittances are:

1) Remittances offer a more steadfast flow of revenue than either FDI or ODA and may be even
be the largest current source of foreign capital inflow.
2) Remittances are an important source of investment capital and credit for a large number of
families, though exactly how much no one knows for sure.
3) The patterns of remittance flow (itself a function of migration patterns) may serve as a
proxy for how Viet Kieu-sourced investment capital flows, now and in the future.
4) Remittance as an informal channel for disseminating cash and capital, is the preferred to
more formal channels because of the public’s lack of trust in Vietnam’s still-evolving
financial services sector. Policies regulating this sector will determine whether remittances
will compete with or help grow the commercial banking in Vietnam.

Recorded Investment Projects and Viet Kieu-led Enterprises

Apart from investment through remittances, Viet Kieu have embarked upon an increasing
number of officially licensed investment projects. Vietnamese officials, in announcing their
understanding of the significance of Viet Kieu economic contributions, cite that OV have invested a
cumulative $2 billion across 3000 projects by 2008.33 Unfortunately, Vietnamese government sources

31
From author’s personal family experience, 2005.
32
Lan Pham, University of Minnesota, Department of Applied Economics. E-mail correspondence on February 10,
2010.
33
“Overseas Vietnamese Business Association Set-up”. Vietnam Foreign Press Center. August 11, 2009.

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contacted for this study including the Government Statistics Office, the MPI Foreign Investment Agency,
OVBA, and the Vietnamese Chamber of Commerce and Industry were unable to provide a detailed
breakdown of these projects by time, location, sector, country of origin, and success rate. The Ministry
of Foreign Affairs assesses that a two-thirds of the 3000 OV-led projects to date are “effective”.34
Exhibit 5 compares OV investment against other nations’ FDI from 1988 to 2008, showing that OV as a
whole are the 16th largest foreign investors in Vietnam.

In addition to investments in discrete projects, Viet Kieu entrepreneurs have created numerous
enterprises, especially small to medium enterprises and start-up firms, in Vietnam. These ventures
include both wholly-owned firms and joint ventures with local Vietnamese firms and interests. Success
stories frequently cited by the media include the 70-shop and growing Highlands Coffee retail chain
founded by David Thai in 1998 35 36, the gaming and animation studio Glass Egg Digital Media founded by
Phil Tran in 199537, and a bevy of firms founded by experienced Vietnamese-Americans entrepreneurs
from Silicon Valley38. The managing general partner of venture capital firm IDG Ventures-Vietnam (see
Table 2 below) is Dr. Henry Nguyen, an Ivy League-educated medical doctor with a Kellog MBA who also
happens to be married to Prime Minister Nguyen Tan Dung’s daughter.39 These examples should not be
surprising, as overseas Vietnamese (whether political refugees or economic migrants) are a self-
selecting group in terms of risk-tolerance. In the United States, ethnic Vietnamese are more likely than
other Americans to own their own businesses.40

Yet for every success story, there are failures—mundane and spectacular—that serve as a stark
warning to overseas Vietnamese aspiring to start their own ventures in Vietnam. Three powerful
anecdotes stand out for the overseas Vietnamese community. In 2003, Vietnamese-French Nguyen Gia
Thieu’s $40 million business Dong Nam Telecom Services was targeted for a state crackdown on charges
of tax evasion by local rivals with strong Party connections.41 In 1998, Vietnamese-Dutch Trinh Van Binh
served 18 months in prison and had his $20-30 million worth of investments and assets confiscated,
despite allegations that were later proven false. 1997, Vietnamese-Australian Nguyen Tan Truc and his
investment firm Peregrine Capital enjoyed strong Party connections, but were similarly targeted after
his Party patrons lost out in an internal power struggle in Hanoi.42 Detailed, publicly available statistics
on the actual failure rate of officially-licensed Viet Kieu businesses, especially compared to that of local

34
Banh, Hai. “Bringing them back”. VnEconomy News. December 8, 2009
35
Highlands Coffee corporate website. “About Us/History”.
36
Rian Maelzar. “The Highlands Coffee Company is Percolating”. Nightly Business Report Transcript. October 4,
2007.
37
Glass Egg Digital Media corporate website/Who We Are
38
Boudreau, John. “ ’Little San Jose’: Vietnamese take Silicon Valley tech culture to Vietnam”. San Jose Mercury
News. May 18, 2008. Accessed via “Le Viet-Nam aujourd hui” blog on February 10, 2010:
39
“A Marriage Made in Vietnam”. “Little Saigon Inside” blog. January 29, 2009.
40
U.S. Census Burueau. “American Community Survey 2007: Selected Population Profile in the United States,
Vietnamese Alone or in any population”; 8.5% for Vietnamese, 6.7% national average
41
Wain, Barry. “Falling to earth”. Far Eastern Economic Review. May 15, 2003. Pg. 46-48. Accessed via
ABI/INFORM Global on February 5, 2010.
42
Do, Trinh. “When Is the Right Time for Vietnamese Americans to Invest in Vietnam?” Nha Magazine. December
10, 2005. Accessed via New American Media on February 5, 2010

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businesses, are unavailable to corroborate how representative these anecdotes are. However, even if
one accepts the Government’s assertion that two-thirds of Viet Kieu businesses succeed, the larger OV
community still remains acutely sensitive to the failures.

Hanoi appears to be aware of both the potential and concerns of OV investors. Accordingly, the
government has passed a series of laws since 1992 specifying the legal status and economic rights of
Overseas Vietnamese, as shown in Exhibit 8.

Vietnam’s larger governance reform and anti-
Successful Viet Kieu Entrepreneurs all
corruption efforts have largely had a positive effect in
have:
attracting FDI and positive reviews from multi-lateral
institutions like ADB.43 However, it is too early to 1. Trustworthy local partners
empirically determine the effect that these OV- 2. Language and cultural fluency
specific policies have had on Viet Kieu investment to 3. Humility and eagerness to learn
date. Though welcome, formal statutes and decrees 4. Appropriate prices
to date often suffer from poor implementation and 5. An exit strategy or back-up plan
capricious enforcement44 45. The lack of administrative
coordination across government agencies provides a
formidable barrier to any foreign business venture,
including Viet Kieu-led ventures.

Not waiting for legal reform, a movement inside and outside Vietnam has grown to formalize OV
entrepreneurial and business networks, in order to share knowledge and pool resources amidst a
shifting business and policy environment. The Ministry of Foreign Affairs established the State
Commission on Overseas Vietnamese46 which oversees the pseudo-governmental Overseas Vietnamese
Business Association47, to represent and promote overseas Vietnamese business interests in Vietnam.

The San Jose-based Vietnamese-American Entrepreneur Association (VAEA)48 was created to
promote normalized ties between OV entrepreneurs and Vietnam. However, any business organization
affiliated or friendly with Hanoi is viewed with suspicion and even hostility from the mainstream
Vietnamese-American community, which controls the bulk of OV economic resources. A group which
may be more representational of OV business interests internationally and within Vietnam is the
Vietnamese Strategic Ventures Network (VSVN, formerly the Vietnamese Silicon Valley Network),
founded by California-based Vietnamese-American technology entrepreneurs. VSVN boasts a
worldwide network if more than 1500 business and technology professionals from around the world

43
Asian Development Bank. “Part II.D: ADB’s Assessment of the Government’s Development Strategy”. Country
Strategy and Program Update 2007-2010: Viet-Nam, Socialist Republic of. September 2006
44
Do, Trinh, Ibid.
45
Don Danh, co-founder of VSVN and SVP of Emerging Markets at East-West Bank of California. Phone
conversation on February 22, 2010.
46
“Structure of the Vietnamese Foreign Ministry”. Ministry of Foreign Affairs website in English
47
Overseas Vietnamese Business Club
48
Vietnamese-American Entrepreneurs Association website

16 | P a g e


interested in cultivating technology industry-related business relationships between the diaspora and
Vietnam.49

The risk appetite of potential and current Viet Kieu entrepreneurs and investors is not driven by
solely economic, nor even legal considerations. They are concerned about politically-motivated attacks
from both Hanoi and Little Saigon. In Vietnam, Hanoi has repeatedly demonstrated its intolerance of
“peaceful evolution”, i.e. democratic reform or public questioning of its authority. Accordingly, the
Government remains quite suspicious of grassroots organizations outside of its purview, whether for
civil society or commercial purposes. In Orange County, California’s Little Saigon, the heart of the global
OV community, there is a similar form of ideological intolerance. Despite the increasing personal and
commercial contacts between Vietnam and its diaspora, the OV community is viscerally opposed to any
activity perceived to legitimize the rule of the Communist Party of Vietnam. Ironically many Viet Kieu
businesses are caught in the middle, alternately accused of being “hostile forces and spies” by Hanoi or
“Communist traitors” by anti-Communist activists. 50

Characteristics of Viet Kieu-led Enterprises

Though anecdotal, the individual stories of OV entrepreneurs in Vietnam all share remarkably
consistent themes. Pending a wider data collection and survey effort of Viet Kieu businesses in the
future, case studies of prominent Viet Kieu ventures that have both succeeded and failed offer telling
lessons about the exaggerated risk profile that a frontier market like Vietnam.

Professor Ming-Jer Chen of the Darden School of Business authored a seminal work on how Chinese
cultural practices and the Confucian worldview are manifest in modern Chinese (mainland and diaspora)
business practices in “Inside Chinese Business”51. Though no such authoritative work exists for the much
less established Vietnamese diaspora, Vietnamese businesses (domestic and diaspora) clearly exhibit
very similar characteristics. Common characteristics of Viet-Kieu led ventures which echo many Chinese
business practices include: concentration in geography, size, and sector, and a preference for simple,
cash-based business models.

However, OV businesses also reflect the unique historical and political circumstances which led to
the creation of the diaspora post-1975. And unlike overseas Chinese entrepreneurs who enjoy the
benefit of ‘launching pads’ such as Taiwan, Hong Kong, and Singapore into mainland China, OV ventures
have no such structural advantages. Thus, the risk profile is even more extreme for overseas Vietnamese
returnees, who are met with heightened expectations (or suspicion) from the Vietnamese public and
heightened scrutiny from Hanoi. Common characteristics for OV-led businesses are as follows:

 Concentration in the South (see Exhibit 6)
Mirroring the pattern with remittances, most OV-led business ventures prefer to establish
themselves in HCM City and surrounding provinces. This is most certainly the case with OV from

49
Vietnam Strategic Ventures Network website
50
Boudreau, John. Ibid.
51
Chen, Ming-Jer. Inside Chinese Business. Boston: Harvard Business School Press, 2001.

17 | P a g e


OECD countries, almost all of whom are former South Vietnamese refugees with extensive
family connections in the south. The geographic concentration reflects the fact that most Viet
Kieu, especially from the West, have family origins in the South (the territory of the former
Republic of Vietnam). Thus, it is not surprising that their Vietnam-directed investment activity
disproportionately benefits the greater Ho Chi Minh City area. As a result, HCM City (formerly
Saigon) remains the commercial engine of Vietnam. However, many former South Vietnamese
citizens were previously internally-displaced persons with family roots in northern and central
Vietnam. Hence, some OV investments and businesses establish themselves in these regions.
Also, successful OV from Eastern Europe (a smaller cohort, see Exhibit 2) are largely from the
north and have concentrated their investments around Hanoi and the heavily-populated Red
River Delta. Large scale tourism development projects on the central Coast have attracted
foreign investment capital, which may have future spillover effects in attracting OV investment
in ancillary industries (real estate, services).

 Mostly Small Businesses
OV-led firms tend to be small to medium enterprises52. One reason is that that overseas
Vietnamese as a group control less assets relative to other large foreign investors, given that the
bulk of the diaspora has only existed since 1975. Also, both Vietnam and the overseas
Vietnamese community lack OV-tailored institutional or formal coordination mechanisms for
identifying business partners, eliciting funds from third party investors, or sharing resources. The
growth of OV-focused business organizations may close this gap. Finally, most Viet Kieu
businesses (besides stars like Highlands Coffee or Glass Egg Digital Media) generally prefer to
keep a low profile to purposefully avoid public or regulatory scrutiny or escalate competition
from rivals53, as past high-profile failures of overly-ambitious Viet Kieu entrepreneurs have
taught them. For Vietnamese-American-led businesses, there is also some pressure to avoid
provoking community censure or sanctions from Little Saigon.

 Real Estate, Manufacturing, and IT (see Exhibit 7)
Real estate development projects appear to be the overwhelming preference for OV investors.
In this case, Viet Kieu (and other foreign) speculation on real estate has driven Vietnam’s urban
housing market and has led Vietnamese policymakers towards adopting pro-investment laws
that permit overseas Vietnamese ownership of residential property (see Exhibit 9). IT services,
especially business process outsourcing (BPO) and lower-end coding functions are a distant, but
fast growing second most popular choice for OV-led ventures. The tech sector shows the most
promise as significant foreign investment from the likes of Intel and Microsoft54 and the
proliferation of knowledge illuminate a path up the value chain. The third most popular type of

52
Phone interview with Dat Trinh (Darden ‘00), CFO of Levlad, LLC on December 7, 2009.
53
Trinh, Dat. Ibid.
54
Microsoft press announcement. “Microsoft and Government of Vietnam partner to accelerate
toward a vibrant Vietnamese ICT economy”. May 21, 2007.

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venture is for light manufacturing and supply, including apparel, furniture, and machine parts.
Ancillary supply-chain businesses include food processing55, distribution, and export-import
businesses.56

These industry preferences reflect the pattern of economic development across the ASEAN
economies, which have been disproportionately been driven by overseas Chinese-run business
conglomerates. As Joe Studwell articulates in “Asian Godfathers”, Southeast Asian and Hong Kong
business tycoons have concentrated their efforts on maintaining opaque, local monopolies on services
and extracting rent from real estate and natural resources, whereas Northeast Asian (Japan, Korea,
Taiwan) firms have been able to create “branded, technology-developing export companies” that are
publicly traded and compete on a global scale. Studwell argues that the hard work and high savings of
low-wage workers in the manufacturing sector have buoyed ASEAN economies, despite the vagrantly
self-serving policies and corruption of the economic elite in collusion with the political elite.57 Chen may
argue differently, that low-key, cash-based business models reflect Sino-centric cultural and competitive
preferences. Vietnam (and perhaps China) appears to be at a crossroads, assessing the ASEAN path of
fast, easy money against the harder, Northeast Asian path of developing innovative, value-added
exports.

 Cash Is King
The size and sector concentration reflects some key preferences of Viet Kieu businesses: a) to
expatriate revenue quickly, b) a preference for tangible, easily-understood investments, c) a
preference for cash transactions to avoid taxes, regulatory scrutiny, and unfavorable foreign
exchange rates which serves as a secondary form of taxation. 58

A characteristic of many overseas Vietnamese-owned businesses, especially in the United States
is for simple, cashed-based business models that offer a tangible, discrete product or service. This holds
true for Vietnamese-American businesses, large or small, successful or unsuccessful. This preference for
cash stems from a cultural distrust for third-party financial services providers and tax authorities and
was re-enforced by a traumatic refugee experience in which people were able to re-build their lives with
literally the clothes on their backs (and the gold and jewelry sewn into the lining of their clothing as they
fled Vietnam). Thus, for most OV ventures in Vietnam and abroad, “cash is king”.

These characteristics (geography, scale, sector, business model) stem from certain core assumptions
held by OV businesses, shaped by a combination of experience and belief systems.

1) OV entrepreneurs and investors fundamentally do not trust Vietnam’s legal system to protect
their legal rights from the State, nor their economic rights from competitors, partners, or even

55
Gittelsohn, John. “Real estate developer Frank Jao and silent partners have put $10 million into projects in his
former homeland, suggesting a sea change in political climate.” Orange County Register. September 30, 2006.
Accessed via “VietQ” blog on February 9, 2010
56
Trinh, Dat. Ibid.
57
Studwell, Joe. Asian Godfathers: Money and Power in Hong Kong and South-East Asia. London: Profile Books,
2007. Pg. 110-111.
58
Trinh, Dat. Ibid.

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customers who would defraud them. OV businesses, like their local counterparts, adapt their
business models accordingly.
2) In the absence of law, OV entrepreneurs and investors do not know whom to trust. Overseas
Vietnamese, not yet in Vietnam, do not have enough information to make informed decisions
on the very risky prospect of starting or investing in a business in Vietnam. All they have is
hearsay from family and friends, uncritical state media, and anecdotal business media reports.
OV entrepreneurs and investors trust only personal connections, which incur social obligations.
Though one could argue that this is traditional Vietnamese, and indeed Asian business culture.
3) If it is true that most OV businesses intentionally limit themselves in scope and industry to avoid
scrutiny, they negate the value proposition of OV investment. Small, cash-based businesses and
“rentier”-driven industries such as real estate, low value-added operations such as food
processing and apparel manufacturing, do not contribute to the world-class innovation that
Vietnam needs to compete in the long-term.

Asset Management

Overseas Vietnamese function not only as a source of capital, but as influential intermediaries
directing the flow of foreign investment towards Vietnam and within the country. This is the true
economic strength of the OV diaspora. Portfolio investing, including asset management companies,
financial advisory services, and private equity/venture capital (PE/VC) firms have grown tremendously in
Vietnam, servicing a wide range of companies from SME and start-ups (including the OV-led ventures
mentioned previously) to large scale resorts and industrial parks. Investors in the funds managed by
these firms include non-OV institutional investors and private individuals. The cohort of OV investors
who are wealthy, interested in investing in Vietnam, and financially sophisticated is likely very small,
given the socio-economic demographics of worldwide OV. Vietnamese business culture, whether in
Vietnam or overseas, is still very much based on personal relationships and trust. This culture tends to
favor the remittance or direct venture investment channels mentioned previously.

However, this may change with a growth in the number of Vietnam-focused financial
instruments catering to the growing numbers of wealthy Vietnamese worldwide59. Already, many
overseas Vietnamese and even more foreign-educated Vietnamese finance professionals lead these
entities in facilitating major deals and developing investment strategies. In a similar fashion, OV
executives in major multi-national corporations steer major corporate investments towards Vietnam or
direct operations within Vietnam, as was the case with Tran Trong Phuc60, a Vietnamese-American
engineer and executive with Intel, who influenced the decision for the technology giant to locate a $1
billion manufacturing facility outside Saigon in 2006, with production slated for Q3 of 201061. Indeed,
Don Danh, co-founder of VSVN, believes that many OV executives raise the prospects of Vietnam as a

59
Various media reports suggest wealthiest Vietnamese (domestic or overseas) are Vietnamese-American hotelier
Tran Dinh Truong ($1 billon+ in assets) and internet entrepreneur Tran Dung ($1.8 billion IPO in 2000). Richest
Vietnamese may be Truong Gia Binh, chairman and CEO of FPT, an ICT firm ($143 million from stocks).
60
De Ramos, Abe. “Vietnam technology: don’t miss Saigon”. CFO Asia. July 21, 2006.
61
LePedus, Mark. “Vietnam sees delays in IC manufacturing push”. EETimes.com. August 21, 2009. Acccessed via
EIU Global Technology Forum on March 3, 2010.

20 | P a g e


sourcing destination or new market with their strategic planners not only to seek financial return, but
out of a sense of patriotic duty to assist in the country’s development..62 Thus, these OV financiers and
executives serve as the gatekeepers of foreign capital, serving as yet another means by which OV direct
the flow of investment funds into Vietnam from abroad—in this case, actual FDI.

Table 2. Notable Viet Kieu-led Financial Management Firms and MNC Operations in Vietnam

Fund or Firm Type/Industry Total Portfolio OV managers
Assets in Holdings
Vietnam
VinaCapital Asset mgt $2 billion Mixed-real 2/7 of mgt team, including CEO and
Group63 estate, SME, co-founder Don Lam (Canada)
infrastructure,
PE/VC
Intel Computer $1 billion Chip mfg plant; VN/Laos/Cambodia Country
Corporation hardware mfg Manager Than Trong Phuc (USA)
Mekong Family of $300 Mixed—mfg, 4/21 on invest mgt staff ; all mid-
Capital64 65 private equity million chemicals, IT level and junior
funds
Vietnam Jointly managed $250 Unknown Chief Economist, Pham Chi Thanh
Capital hedge fund million (USA)
Partners, LLC66
IDG Ventures Venture capital $100 Technology 4/13 members of mgt team,
Vietnam67 fund million including Managing Partner Henry
Nguyen (USA)

Intellectual Capital

Ernest Bower, of the Center for Strategic and International Studies’ Southeast Asia Program,
notes that Vietnam needs Viet Kieu not only for their financial capital, but more importantly for their
innovation and brainpower. 68 Perhaps the most precious form of investment that overseas Vietnamese
can offer Vietnam is intellectual capital, in the form of contributing their knowledge and expertise.
Though most of the Vietnamese diaspora was born from the tragedy of war, the wonderful irony is that
the war spread Vietnamese people around the world, allowing a great many to become honed in the

62
Don Danh. Phone conversation on February 22, 2010.
63
VinaCapital Group corporate profile:
64
Mekong Capital corporate website
65
Blinch, Jenny. “Mekong Capital in fundraising for Fund III”. Pei Asia: the magazine and website for private equity
in Asia, Australia, and the Middle East. September 25, 2009. A
66
Vietnam Capital Partners, LLC corporate website
67
IDG Ventures Vietnam is part of IDG Ventures, a global network of VC funds totaling $3.6 billion (corporate site)
68
Ernest Bower. Phone conversation on February 22, 2010. Earnest Bower is the lead Vietnam expert at CSIS, a
partner at Brooks Bowers Asia, and the former chairman of the US-ASEAN Business Council.

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world’s most prestigious educational, commercial, and public institutions. This population, now entering
a third generation of students receiving Western education, has the potential to provide tremendous
and immediate value to Vietnam’s economy and society. Indeed, many of the brightest minds in the
Vietnamese diaspora have gravitated towards the sciences and engineering, rather than business.69

The actual numbers of potential contributors are small. For example, US Census statistics from
2007 indicate that Vietnamese-Americans’ educational attainment rates and income levels lag national
averages: 7.8% of the 1,050,886 Vietnamese-Americans age 25 and up have graduate degrees,
compared with 10.1% of the general US population.70 The numbers narrow further still by filtering for
motivation, sufficient language capability, and skills relevant to the appropriate Vietnamese market
demand. Still, 81, 969 graduate-educated Vietnamese-Americans provide a powerful pool from which
Vietnam can draw human capital. More importantly, these statistics do not reflect the tremendous
academic and professional accomplishments of ethnic Vietnamese in the United States and beyond.
Accomplished OV scientists and innovators are living reminders that Vietnamese people, when placed in
the right environment, can accomplish great things.

This promising supply of talent has the potential of having an outsize effect on Vietnam’s rather
severe educational deficit. Vietnam’s intellectual capital deficit, even compared to its ASEAN neighbors,
cannot be understated, according to a study by Harvard’s Ash Institute. The study argues that
fundamental governance and management issues rather than resource constraints plague Vietnam’s
education system. The level of Vietnam’s educational modernization has not kept pace with its rapid
economic rise. Professor Hoang Tuy, a distinguished mathematician and one of Vietnam’s most revered
scientists authored a scathing criticism of Vietnamese academia, declaring it unable to produce the type
of minds Vietnam needs to compete in the global economy. Hoang argues that Vietnamese academia
has failed to attract foreign-educated intellectuals and scholars from abroad because it relies on
patriotic appeals, rather than offering meaningful incentives such as academic freedom, promotion, or
competitive salaries. Even former Prime Minister Pham Van Khai has publicly acknowledged Vietnam’s
educational and scientific shortcomings. This stands in stark contrast to the perception that many
Western firms have of a young, motivated, and educated workforce. The Ash Institute study presents
the following comparison of Vietnam’s academic output relative to other APEC nations:71

69
Examples of accomplished overseas Vietnamese too numerous to list. In sciences and academia alone, includes
Rhodes Scholars, tenured professors, numerous world-renowned researchers and engineers, including NASA
astronaut Eugene Trinh.
70
U.S. Census Burueau. “American Community Survey 2007: Selected Population Profile in the United States,
Vietnamese Alone or in any population”.
71
Valley, Thomas J. and Wilkinson, Ben. “Vietnamese Higher Education: Crisis and Response”. Harvard Kennedy-
Ash Institute. November 2008.

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Table 3. Ash Institute Assessment of Vietnam Higher Education. Measures of intellectual productivity

Vietnam is in dire need of OV intellectual capital. Even more than specific intellectual property
(IP) and the talent of world-class experts, Hanoi strongly desires the internal capability to produce its
own globally competitive IP. Vietnam needs OV expertise to help them “catch fish” in the short-term
and to learn “how to catch fish” in the long-term. To these ends, Hanoi has placed special emphasis on
acquiring OV scientific and technical talent. This type of capacity is the objective of official professional
exchanges like TOKTEN, foundation-funded advisory projects, and educational exchanges like the
Vietnam Education Fund72 or Fulbright scholarships. The HCM City Committee for Overseas Vietnamese
established the 130-member Overseas Science and Technology Club to facilitate scientific exchange
between Vietnamese and Viet Kieu scientists.73 Yet Hanoi’s patriotic appeals have had a limited effect on
its own foreign-trained academics, much less on OV scholars. Vietnam should look to how nations like
Israel, China, India, Taiwan, and South Korea have managed to cultivate diaspora talent.

Beyond scientific knowledge, Vietnam needs management know-how. This is especially the case
in Vietnam’s rapidly-evolving banking and telecommunications industries.74 Chris Harvey, General
Director of VietnamWorks.com75, notes that Vietnam suffers from a “talent deficit” of middle
management expertise. This deficit is a function of Vietnam’s young, post-unification demographics76 ,

72
Vietnam Education Fund, an education exchange funded by US Congress
73
Huong, Cat. “Overseas tech club established”. Youth Union of Ministry of Science and Technology. January 4,
2006.
74
Bowers, Ernest. Ibid.
75
Email exchange with Mr. Harvey in November 2008.
76
“Important Take-Aways from MBA Asia Trip 2008”. Santa Clara Univeristy-Leavey School of Business. Accessed
via Google February. 2, 2010.

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an education system not aligned to the needs of a market economy77, and an infusion of foreign capital
that currently exceeds local management capacity. Expatriate Western managers have filled some of
these needs. The number of Western-educated Vietnamese post-graduates is climbing steadily as the
Institute for International Education reports:

Table 4. Vietnamese students attending US Schools78

10000
9000
8000
7000
6000
Undergraduate
5000
Graduate
4000
Other
3000
2000
1000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009

Yet it will take a patient and sustained effort of Western-trained managers working side by side
with their local Vietnamese counterparts over the next several years to fully impart, develop, and adapt
leading international management practices and technical methodologies within the Vietnamese
context. Many overseas Vietnamese, whether formally or informally, offer a unique channel for building
local management capabilities.

Some key points regarding Viet Kieu as the gatekeepers for financial capital and the source for
intellectual capital:

1) The true economic influence of the Vietnamese diaspora rests not with sourcing investments
(through remittances, projects, or ventures), but with their role as influential gatekeepers for
other sources of foreign investment, whether PE/VC fund, tourist resort, or manufacturing
facility.
2) The single greatest asset of the Vietnamese diaspora is its intellectual capital. Though small in
quantity, the quality of scientific and technical expertise could offer transformative value to
Vietnam’s modernization.

77
Marklein, Mary Beth. “Vietnam, other nations look to US-style community colleges”. USAToday/Education.
September 9, 2009.
78
Source: Institute for International Education. Provided courtesy of the Institute for Vietnamese Culture and
Education.

24 | P a g e


3) Besides scientific knowledge, OV have management know-how that could contribute towards
Vietnam’s overall capacity to maximize and sustain returns on its FDI
4) Many Vietnamese worldwide voluntarily seek to contribute their know-how and expertise out of
a sense of patriotism to Vietnam. However, Vietnam must be willing to take the measures
necessary to modernize its educational system to attract and build upon the contributions of OV
intellectuals and experts.

Assessment

Though it is problematic to aggregate remittance-sourced investments, investment projects,
start-ups, portfolio investments, and alternative sources of funds in one lump sum, it is important to
understand the net effect of total OV investments on the Vietnamese economy. A more holistic view will
be more useful in deriving useful conclusions both for Vietnamese policymakers looking to attract OV
investment and for potential OV investors and entrepreneurs looking for business opportunities. The
major components of OV investments can be summarized as follows:

Table 5. Summary of Major Components of OV Investment
Component Sub-components Estimated Significance
(destination) Amount to Date
Remittance (for Investment in family- $3.9 billion79 Serves as key distribution
investment) run businesses channel for OV capital
Recorded investment Real estate, start-ups, $ 2 billion Potential of OV-led ventures and
projects and ventures joint ventures projects is not being maximized
Asset management Portfolio funds, start- $3.7 billion OVs serve as influential
ups, real-estate, IT, gatekeepers for foreign
mfg or infrastructure investments, projects
Intellectual capital R+D/IP, scientific Undetermined80 Greatest potential for value-
expertise, mgt know- creation, innovation exists in gap
how, educational b/w OV supply and local demand
institutions for intellectual capital
Total $9.6 billion + Quantitatively, would make OV
the 7th largest foreign investor
(Ex. 7). Larger socio-economic
impact unquantifiable.

79
For illustrative purposes, 10% of total recorded remittances from 2000-2009 ($39.5 billion)
80
Given more time and resources, a rough estimate could be determined by identifying all IP from overseas
Vietnamese and calculating the profits that have resulted from commercializing patents, publications, etc.

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Trends for Overseas Vietnamese Investment

To understand the evolution of the diaspora’s role in Vietnam’s economy, commercial and
political decision-makers alike must take a truly long-term view of the investment profile of the various
components of OV investment. Projecting these profiles over the next generation and beyond is based
largely on presumptions about larger demographic trends rather than available data.

Table 6. Evolution of Major Components of OV Investment: Scale vs. Returns

Table 4 conceptually forecasts the long-term trends for various components of OV investments,
juxtaposing scale versus relative rates of return. Thus, remittances provide a large source of investments,
but such investments are spread across a large number of “mom and pop” businesses with low returns.
Furthermore, remittances as a whole will decline as sources shift from affluent Vietnamese in the West
towards cross-border workers and migrant laborers. OV-led ventures and projects may have a large
potential in the short to mid-term, but may eventually be eclipsed by domestic and other foreign
ventures. However, the power that Viet Kieu asset managers have as gatekeepers for foreign capital
should be directly correlated with the rise in FDI. Finally, OV-sourced intellectual capital is presently
small but has a very rich potential for long-term financial and social returns.

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These generational shifts in OV investment reflect larger social, political, and economic forces:

 Window of Influence Closing
For OV investment and ventures, the window for competitive advantage vis-à-vis foreign and
domestic enterprises, is closing. For the most part, the cohort of OV that may have the most
capital and knowledge to contribute to Vietnam are those raised and educated in the West. This
group is the most acculturated and assimilated, having the credentials and contacts to succeed
in their respective home countries. Ironically, their assimilation means that they are less likely to
have strong personal connections with local Vietnamese. Hence, they are less likely to pursue
investment or business opportunities in Vietnam, nor have the language or cultural fluency to
succeed even if they tried. As Don Danh of VSVN opines, local Vietnamese would rather do
business with a foreigner than a Viet Kieu with whom there is little cultural familiarity and who
may carry a hidden agenda (i.e. political “baggage”).81 In this sense, Viet Kieu will have
diminishing influence in shaping Vietnam’s economic future.

 Migration Patterns for Diaspora Shifting
Modern and affordable means of travel and communication may offset the growing cultural rift
between the diaspora and Vietnam. Also, migration pull factors such as immigration policies of
recipient nations and push factors such the search for employment or educational opportunities,
will have many unforeseeable effects on the growth of the diaspora population and the nature
of their interaction with Vietnam.

 Vietnam’s Capacity Improves
As Vietnam accelerates its integration into the global economy, its financial sector will
modernize. Third parties (international, domestic, or joint) such as formal banking and
insurance services will offer a compelling alternative to informal sources of capital or credit like
remittances.
In terms of human capital, Vietnam’s educational reform will favor discreet scientific and
technical skills over less tangible education in managerial skills, critical thinking, and the ability
to innovate. These behavioral skills will gradually flow from foreign-educated Vietnamese, OV,
and expatriates to local managers over time. Beyond this, fundamental shifts in the education
system and cultural norms will be needed to produce “world class” leaders needed to lead and
create multi-national companies originating from Vietnam.

81
Danh, Don. Ibid.

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Recommendations
ASSESSMENT AND
Anyone interested in doing business in Vietnam or
RECOMMENDATIONS
helping its economy grow should pay attention to the
 WHAT ARE THE BARRIERS FOR
significant, yet underappreciated role played by OV investment.
OV INVESTMENT?
OV investment, in terms of scale and scope, is an important
 WHAT BUSINESS
component of Vietnam’s overall economic modernization. In
OPPORTUNITIES EXIST FOR OV
the face of larger social and demographic forces, cultivating OV
INVESTMENT AND OV
investment poses interesting challenges and opportunities. It is
ENTREPRENEURS?
also vital to identify the root causes and resulting barriers
 HOW CAN VIETNAM
impeding OV investment and the social benefits that could
ENCOURAGE MORE OV
accompany it. Three root causes impede OV investment today:
INVESTMENT?
apathy, risk, and principles. Apathy arises from the cultural
separation between more assimilated OV and Vietnam.
Financial and legal risk stems from Vietnam’s current lack of transparent institutional frameworks and
market mechanisms. Finally, the OV community has conflicting attitudes about doing business in
Vietnam as a result of their anguished history. Commercial entities and public or community institutions
that can successfully address these root causes could help accelerate both Vietnam’s development and
reconciliation between Vietnam and its diaspora.

Significant Business Opportunities

The broad, long-term trends and root causes for impeding OV investment create interesting
opportunities for entrepreneurs and investors interested in profiting from or influencing the economic
integration of Vietnam and its diaspora going forward.

If investors and entrepreneurs, international and domestic, seek to maximize short-term (1-5
years) returns, then it is logical to continue the current investment patterns in value-extracting projects:
real estate speculation, commodities processing and distribution, and light manufacturing of non-
durable goods. Beyond this short term, Vietnam’s labor cost advantage will eventually be eroded and
foreign investors will likely seek arbitrage further down the poor nation development ladder. In this
sense, Vietnam faces the very real risk of being cursed by its blessings in natural resources as many sub-
Saharan African and Middle Eastern nations have.

However, if investing parties are interested in enduring, long-term returns that can last for
generations, they should look to value-creating enterprises that will help to modernize Vietnam’s
national capabilities and hence create new investment opportunities for the future. The following
opportunities suggest ways for enterprises (OV, foreign, or local) to unlock the vast potential of
Vietnam’s human, vice natural, resources.

 Educational Institutions and Services
Vietnam has a large unfulfilled demand for international-standard education and training
services, from graduate education to technical certifications. A commercial or not-for-profit
organization staffed by OV experts could offer an effective platform for these services. The

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market for English language instruction and admissions coaching, whether for the children of
affluent families or for rising young professionals, will grow as it has throughout Asia.

 Financial Services
There is a tremendous market for attracting OV investment and allocating it in Vietnam in a way
that emphasizes transparency on par with returns. This market includes the gamut of financial
services from consumer banking and wire transfer services to forming private equity/venture
capital funds to a vertically-integrated, full-services company. There may even be a day when
capital flowing outward from Vietnam exceeds inward flowing OV capital.

 Market Platforms
Much like what Alibaba.com and baidu.com have done for China, e-commerce platforms have
the ability to create efficient markets for goods and services across borders. There is a rapidly
growing effort to emulate this model in Vietnam, whether for IT and business process
outsourcing, to exports and imports of handicrafts to finding local manufacturing partners.
Given the vast potential, the competition to develop a globally recognized “go to” brand or
website for trade in Vietnam is particularly fierce.

 Information and Risk Protection Services
As with many emerging markets, accurate, timely business information in Vietnam remains
opaque for a variety of reasons. Hence, locally-based sourcing and due-diligence firms manage
to carve out profitable niches as translators of Vietnamese language and culture and brokers of
information and contacts. Such firms also facilitate means of by-passing or mitigating costs
incurred by weak governance---administrative delay and corruption. Such firms succeed by
cultivating ties to influential business, administrative, and political players over many years. An
innovative firm that could scale these services through the power of social media or in
combination with an e-commerce provider or lending operation could become a powerful
player.

 Acculturation Services
The widening cultural gap between Westernized Vietnamese and Vietnam provides an
opportunity for acculturation services. Readily available air corridors and telecommunications
with Vietnam bridge the physical, if not cultural distance. Acculturation services would cater to
OV looking to re-discover their roots and for the growing population of affluent Vietnamese who
crave experiences and information from abroad.
Acculturation services could include: Vietnamese language instruction for OV who desire to
return for business or personal reasons, customized tourism services for Vietnamese visiting
overseas or for OV visiting Vietnam, entertainment and media companies, and community-
based language and cultural exchange programs.

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Policy Recommendations

Entrepreneurs, not-for-profit entities, corporations, and investors have a large role to play in
steering OV investments in Vietnam towards profitable and responsible outcomes. However,
policymakers in Vietnam and community leaders in Little Saigon have far more power and authority to
eliminate structural barriers and provide incentives for Viet Kieu investment.

The following recommendations are desirable not only from the perspective of actual
Vietnamese government and Party officials, but are useful for persons and organizations of influence
within the larger diaspora community who share an interest in assisting Vietnam achieve long-term
economic and social progress.

Protecting Rights: Systemic Legal Reform (see Exhibit 9)

The OV community’s apprehension of doing business in Vietnam stems from the perceived irony
of Vietnam having both too much and not enough government intervention. The fear of too much
government arises from stories of arbitrary reprisals or targeted repression by the Communist Party and
State, including detention, expropriation of assets, surveillance, and extortion or blackmail against Viet
Kieu and local Vietnamese business professionals. Conversely, Viet Kieu fear of too little government
stems from stories of many entrepreneurs (OV or local Vietnamese) “losing their shirts” to corrupt local
officials or the predations of con-artists and thieves as contract enforcement and legal recourse appear
non-existent or unenforced.82 Though foreign businesses share these concerns, Viet Kieu appear to face
exaggerated risks since their businesses relationships are much more intertwined with local Vietnamese
and they do not enjoy the benefits of collective bargaining power or dedicated legal support as large,
multi-national corporations do.

In response to these concerns, Minister of Planning and Investment Vo Hong Phuc replied in a
2008 investment promotion tour that Viet Kieu investors should be accorded the same legal rights and
protections as local Vietnamese.83 However, this is precisely what many OV business owners and
investors fear. As unfair as it may seem to local Vietnamese or foreign businesses, Viet Kieu business
owners would like to have the legal status and diplomatic protections of their adopted (Western)
nations, yet have the economic rights and privileges of Vietnamese citizens. Even for Viet Kieu business-
owners not inclined to cross the ill-defined and shifting line of what Hanoi defines as sedition or
incitement of “hostile forces”, the lack of clear and transparent legal standards, consistent enforcement,
and due process rights serve to directly inhibit the growth of OV investment.

Modern capitalism, as practiced in Vietnam and many other newly-industrialized countries is
more raw and untamed than in the developed world, exactly because legal reform has yet to catch up to
market liberalization. Systemic legal reform in Vietnam requires a shift in paradigm from enforcing
compliance with government mandates and regulations towards protection of the fundamental rights of

82
Don Danh of VSVN notes that exploitation is a two way street---local Vietnamese have been taken advantage of
by Viet Kieu scams as well.
83
Question by author during Q&A, following remarks by Vo Hong Phuc, Vietnam Minister of Planning and
Investment. Vietnam Investment Forum hosted by Asia Society, Washington DC. April 11, 2008.

30 | P a g e

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