Vietnam struggles with slowing telecoms growth
By Andy Soloman
HO CHI MINH CITY, Vietnam, Nov 16 (Reuters) - A major international telecommunications show will open in Vietnam's Ho Chi Minh City on Tuesday but foreign executives said the country was struggling to maintain recent solid growth.
Strict regulation in a sector viewed as sensitive by the communist leadership for national security reasons, combined with red tape and an economic slowdown have contributed to the downturn, the executives said.
''There are so many opportunities here but the problem is how to access this market,'' one executive said on Monday. ''Our investment options are limited.''
The International Telecommunications Union says Vietnam has the second fastest growing telecoms sector in the world.
In 1986 Vietnam had just nine international telephone lines, a figure that has soared to more than 60,000, official figures show. Telephone penetration among the country's 78 million people in the period has gone from almost zero to 2.3 per 100 residents.
But slower growth has caused telephone penetration targets for 2000 to be cut to four per 100 people from between five and six, said Mai Liem Truc, head of state regulator Directorate General of Posts and Telecommunications.
''The reason for the failure is that we set a target higher than our capability, the economic crisis has affected us and there are still many weaknesses in implementing...contracts signed with foreign partners,'' Truc said in an interview published last week.
In recent years foreign telecom giants have scrambled for a slice of Vietnam's potentially lucrative communications cake.
While manufacturing joint ventures are allowed, foreign telecom firms wishing to invest in fixed or mobile communications networks are limited to business cooperation contracts (BCCs).
These contracts offer limited management rights in return for shared revenues but no equity.
To date Korea Telecom, France Telecom , Japan's Nippon Telegragh & Telephone Corp and Britain's Cable & Wireless (quote from Yahoo! UK & Ireland: CW.L) have won major BCCs to develop fixed networks in Hanoi, Ho Chi Minh City and around the northern port city of Haiphong.
Australia's Telstra , which has contracts dating back to the mid-1980s to develop international telecom links, has been involved in protracted negotiations for a further major BCC to install lines in southern Ho Chi Minh City.
Comvik International Vietnam AB, which has Swedish interests, has invested in developing Vietnam's first national GSM mobile network while Singapore Telecom has a project for an analogue mobile system in the former Saigon.
''BCCs are not totally satisfactory vehicles, but they are the only way into the market,'' a director at a major international telecom company said.
He said deregulation to allow joint ventures or 100 percent foreign-owned investments was unlikely in the short term.
''Clearly the Vietnam government will be influenced by what happens in trade negotiations with the U.S. and eventual entry into the World Trade Organisation,'' the director said.
''I would envisage that in the next 5-6 years as Vietnam integrates into the international economy...the country will gradually keep step with the rest of Asia and the world.''
Roger Barlow, representative director for C&W in Vietnam, said the BCC was not ideal but could be workable.
''Vietnam is an attractive market. Even working through a BCC we can make a successful business. We haven't made any assumptions on the regulatory environment changing,'' he said. |
