Due Diligence in Veitnam

An Expert's View about Business Culture in Vietnam

Last updated: 4 Mar 2011

Any firm establishing a new business venture in Vietnam should develop business relationships in a positive, but cautious manner. It is imperative that relationship building include adequate due diligence prior to entering into contracts or other commercial arrangements. Too often, the local business sector is oriented toward making money quickly. Thus care must be taken to check the bona fides of every business, be it agent or customer, before entering into a business arrangement.

 

One obvious way to check the quality of a business and its management is to request a list of customers and suppliers that are currently transacting business with that entity. One should make the effort to contact a number of references in order to verify the validity and integrity of the business. This may be especially true for consultants, whether local or foreign. These firms should be able to supply a list of satisfied customers. There have been cases of consulting firms that have failed to perform in this market. Confirming that the firm has actually completed successful transactions on behalf of foreign clients can decrease risk of problems later.

 

One of the most challenging aspects of developing partnerships in Vietnam is verifying the bona fides of prospective partners. As noted elsewhere, relatively few firms in Vietnam are audited to international standards. This situation is improving as joint-stock companies submit to more rigorous audits with a view to listing on Vietnam's young, but growing, stock exchange, and as the business sector becomes more sophisticated. Private firms may prefer not to disclose assets and funding sources (let alone liabilities), while information on SOE’s may be considered sensitive by the authorities.

 

Commercial credit information services in Vietnam are very limited. Until recently, the Credit Information Center , operating under the State Bank of Vietnam (SBV) had been the only credit information resource in Vietnam. Vietnam’s existing public credit registry collects information on large loans from banks, but does not have the resources to cover smaller SMEs, consumer loans, and other credit providers. Faced with such challenges, many foreign parties request international law firms with a presence in country to investigate prospective local partners.

 

In 2008, the government issued a license to Vietnam WorldVest Base (WVB) Financial Intelligence Services Co. Ltd. allowing it to provide credit rating services on Vietnamese companies.

Other limited resources may include local municipal governments (people’s committees) with information on companies registered in their jurisdictions. While such information may not be generally available to the public, authorities do recognize that certain professionals such as attorneys may have a legitimate need for such information and may share it with them.

 

 

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Posted: 08 July 2010, last updated 4 March 2011