Kiwis find Vietnam easier than China

Ohau Gravels sees a lot of potential in the Vietnamese market - where 60 per cent of the population in under 35 - as the nation becomes wealthier. Photo / Supplied

The Maori word Ohau, the brand name under which Peter Healy markets his wine throughout Asia, sounds like "everything is excellent" when heard by Mandarin speakers.

But while Healy and Ohau Gravels are making inroads into the enormous Chinese market, he is finding things are generally much better south of the border in Vietnam.

Healy, who was New Zealand trade commissioner to Vietnam until last year, and his successor Graham Sims are among those who believe the country is an easier place than China for Kiwis to do business while remaining handily close to Asia's major markets.

New Zealand aviation, dairy and education businesses have been doing well in Vietnam as the socialist state follows in the footsteps of its larger neighbour in developing an increasingly market-based economy. Kiwi businesses are expected to do even better under the newly inked AANZFTA free trade agreement linking South-east Asia economies with Australia and New Zealand.

Prime Minister John Key will be meeting a few of them in Ho Chi Minh City ahead of this weekend's East Asia Summit in the capital city, Hanoi.

Though Healy won't be there, he will have helped many of them succeed in Vietnam.

These days as part owner in Ohau Gravels - situated between Otaki and Levin - Healy spends up to five months a year marketing the company's wine all over Asia from his base in Vietnam.

"By sheer fluke" he discovered the brand name had another meaning in Mandarin. He is happy to be based in Vietnam, where Ohau is one of about 20 to 25 New Zealand wine labels selling "useful" volumes.

"Sure, in China they'll buy 10 times as much, but the complications are just huge compared with doing business here."

He puts that down partly to culture, and partly size.

"For New Zealand companies it's a lot more manageable here. You're dealing with a smaller country, but it's easily big enough for us."

"In China, we're the pimple on the elephant whereas in Vietnam the economy is of comparable scale to our own. We can get to the government officials more easily, the English is better here."

Apart from the location, no more than a couple of hours low-cost flight from other major Asian cities, Healy says Vietnam, with its cheap wi-fi and telecommunications, is well set up for businesses.

He also says the Vietnamese, 60 per cent of whom are under 35, possess a youthful optimism he sees as a result of the country now putting 150 years of invasion and occupation by the French, Japanese, Americans and Chinese behind it.

"I just really like these people, I like the way they work and I can see lots of potential here."

However, he believes that while there are New Zealand success stories in Vietnam, most companies that have taken a look haven't quite grasped the opportunities.

"We sell the Vietnamese a lot of pine lumber but we could have come up here and turned it into furniture and sold it into the world. Instead we just sold them low-cost wood and the Vietnamese make the profit margin. Good on them, but that's just New Zealand every time."

Nevertheless, as other business people have remarked, Vietnam resembles South China 20 years ago when it was beginning to take off and there were plenty of opportunities for smart investors and business people.

For New Zealand, Healy thinks much of the potential lies in food and beverages.

"As the Vietnamese get wealthier they are like any Asian economy shifting into proteins and cheeses, fine foods and fine wines."

And while there are already some New Zealand IT companies doing well in Vietnam, he believes there is potential for more to explore the delivery of services that are taken for granted in New Zealand.

Healey's successor as New Zealand's Ho Chi Minh City-based trade commissioner, Graham Sims, former managing director of baking goods company Bakels, also tips the IT and food and beverage sectors as offering opportunities for New Zealand businesses in Vietnam, but his future focus will also be on education and clean technologies.

Sims says the country is now embarking on an ambitious aviation sector expansion.

Previously dominated by the state airlines, the country is now opening up to low-cost private sector carriers and annual passenger movements are expected to double to 32 million by 2015 and double that by 2020.

That will require airport upgrades and expansions driving demand for baggage handling equipment through to pilot training and navigational aids.

This weekend Prime Minister John Key is in Vietnam, where his programme includes a breakfast marking growth in New Zealand's aviation exports by companies like Airways Corporation, CTC Aviation and Pacific Aerospace.

Sims says system reforms mean doing business in Vietnam is getting easier but the usual rules about getting started in a foreign market still apply, principally around partnering up with the right locals.

That is something Sims says NZ Trade and Enterprise is happy to do.

Many of the businesses that come to his office for help have had issues trying to do business in China.

"Vietnam offers a good alternative to China and a possibly closer-to- market option than India."

And, like Healy, he believes Vietnam is a better size fit for New Zealand's small- and medium-size businesses.

Along with the pluses Healy mentions, Sims believes many Vietnamese have "a real affinity with New Zealanders and Australians", partly based on the respectful relationship between Australasians and the locals following the Vietnam war, which saw quite a few Kiwis and Aussies return to the country shortly afterward to work on aid and restoration projects.

While in Ho Chi Minh City, Key will also visit Auckland company Academic Colleges Group's (ACG) campus there.

ACG recognised relatively early on the country's rapid economic growth would drive demand for high quality international education and, having taught hundreds of Vietnamese students at its Auckland schools over recent years, decided to establish its own school in the country three years ago.

It is now Vietnam's second largest overseas-owned education provider and chief executive Ian King has been based in Ho Chi Minh City for the past five years

ACG marketing director Kim Harase says compared with Vietnam, doing business in China is "highly complex" and "we do know of institutions from New Zealand who have tried to become successful in China with varying results".

"Vietnam is less problematic than China."

What is AANZFTA?

The ASEAN, Australia and New Zealand Free Trade Agreement which came into force this year, driving fresh interest in Vietnamese business opportunities among New Zealand businesses

GOOD TERMS

$375m - Value of NZ exports to Vietnam in the year to June of which ...
52pc was dairy products
$163m - Vietnam's exports to NZ over the same period
6.5pc - Vietnam's forecast economic growth this year