15 January 1996
Source: The Wall Street Journal by Federico Peña, US Secretary of Transportation
Some American trade promoters have said America waited too long before normalizing relations in July with Vietnam—that while America pushed for the highest degree of cooperation from the Vietnam government in securing the fullest accounting of POWs and MIAs, the nation missed a major business opportunity. But when I arrived in Hanoi late last year on our country’s first trade mission since normalization, I found that this conventional wisdom was very far from the truth. Vietnamese officials from the prime minister on down clearly told me, and a dozen American business executives along on the trip, how eager they were for American products, know-how and investment.
One reason, of course, why Vietnam wants to buy American is that it doesn’t want to become dependent on just one or two source countries. But another reason is the superior reputation of many U.S. companies.Take Ellicott® Machine Corporation International, a small Baltimore-based manufacturer of harbor dredging equipment. When it came time to buy additional equipment as part of an extensive port development program, Vietnam decided to buy more gear from Ellicott® because five of a dozen dredges it bought from the company some 30 years earlier were still in use, despite the 20-year embargo that cut off spare parts.
Vietnam’s economy is expanding at a blistering 9% a year. It has 77 million consumers with steadily rising incomes and a market we haven’t been, and shouldn’t be, missing out on. Still, after visiting eight East Asian economies—some of the fastest rising stars in the region—I worry that American companies might not be doing enough to prepare for what many are now calling the Pacific Century, which begins in just a few short years.
More U.S. companies, especially small- and medium-sized firms, should be selling to Asia, especially in such newly emerging markets as Vietnam, Indonesia, Thailand, Malaysia and the Philippines. Most large companies have a presence in Asia, but they need to broaden their scope to include the new markets of the 21st century. Commerce Secretary Ron Brown has developed and led an effective strategy for these markets, but more U.S. firms must wake up to the opportunities.
American companies must have patience and persistence, but the rewards are there, as Ellicott® Machine learned after searching 12 months for financing for its Vietnam deal and finding it in Australia and Vietnam; the company now has a foothold in a market probably worth tens of millions of dollars over the next few years. In fact, the infrastructure market in East Asia likely will be one of the hottest in the world over the next decade as economies there plan to invest some $1.2 trillion, nearly $530 billion in transportation alone, according to the World Bank.
This vast amount of investment offers huge opportunities for American industrial and technical service companies. But many nations in the region plan to finance their investments privately, offering American investors opportunities in projects as diverse as five planned international airports scattered across Indonesia’s 17,000 islands.
Indonesian officials want more than 40% of their infrastructure projects to be privately financed, a pattern to be repeated across Asia as fiscally constrained governments seek new, innovative ways of financing needed projects.
We in government must lead negotiations to open Asian markets. By building these relationships, we provide American companies the opportunities to promote products in new economic markets.
In aviation, for example, we now have a policy guiding our air agreements in Asia. The Pacific region has now surpassed Europe in terms of operating revenues for U.S. carriers. Last year they earned about $8.5 billion in the Pacific region and $7.9 billion in the Atlantic. While in Asia, I signed new aviation accords with Hong Kong, Macau and the Philippines, and discussed future prospects with other nations. And we are negotiating a new air cargo agreement with Japan. Our goal is to liberalize these key markets, expanding opportunities for U.S. carriers and facilitating foreign trade by making it easier and cheaper to fly and to transport goods.
Another area where government can be more effective is in using technical assistance programs to promote American exports. The U.S. offers technical assistance, and the demand is great. Vietnam, for example, is asking my agency for help in many areas, ranging from management and engineering technical exchanges to trade promotion tours. When our experts work with foreign counterparts they often showcase American technology and services. Hands-on experience with a product by the foreign experts often clinches a sale later on.
But competitive financing is a key challenge for U.S. firms in many countries throughout the region. Many of our foreign competitors are backed by very aggressive government loan programs that can effectively knock U.S. bidders out of the running for contract offerings, especially when concessionary financing is offered at the beginning of the bidding process. We must do more to make U.S. financing programs competitive. Whatever the philosophical debates about government financing programs, the hard reality is that our major competitors world-wide benefit from government backing.
There are those who question the ability of government to sell and market American products in this new age of global competitiveness. After my latest trade mission, I can see how wrong the conventional wisdom is, too.
Federico Peña was the U.S. Secretary of Transportation at the time this was published.