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Philip Bowring

A DISPUTE between a foreign investor and its minority Vietnamese state partner has landed in the lap of Vietnamese Prime Minister Vo Van Kiet.

   He has been petitioned by the foreign group to investigate the case and, by implication, the management of a Vietnamese company, which is an offshoot of the Ministry of Tourism.

   The case has again highlighted the problems that investors can face in Vietnam, where actual foreign investment has tended to happen much more slowly than the headlines suggest and be much less than foreigners are willing to commit.

    This dispute involves the Seabreeze Hotel in Vung Tau, the port, resort and oil exploration base at the mouth of the Saigon River.

   It is a small enough project, involving investment of only some US$1 million in the restoration and refurbishment of a hotel which now has only 42 rooms but with plans for 38 more.

   The foreign partner, which has a 75 per cent stake, is Iseya Hotels, a small company owned mainly by Australians.

  It is registered in the British Virgin Islands and operates out of Hongkong and Manila.

   The local partner is OSC Tourist Co, an offshoot of the Tourism Ministry and engaged in various enterprises related to Vung Tau's tourism and oil business.

    Iseya claims it has been effectively deprived of control of the venture despite having 75 per cent.

   Its problem dates from last May when it tried to replace its local representative, an Australian, Mr Peter Grantham, who owned a small stake in Iseya.

   Iseya said the move was made because Mr Grantham was a builder and not competent to run the hotel when it reopened in August.

   But the OSC refused to accept Mr Grantham's removal and for months refused to accept any Iseya nominees to the joint venture company.

   As a result, the OSC appointees plus Mr Grantham have kept control of the hotel.

   Iseya claims that the management has refused to supply it with operating reports or financial statements or allow an independent auditors' examination.

  It also claims that although it has brought its problem to the State Committee for Co-operation and Investment, which oversees joint ventures, the body has been almost totally ineffective.

    The Seabreeze issue is perhaps bigger than either the numbers or the specifics of the dispute may suggest.

   Most important is Vietnamese insistence that unanimity of the parties is necessary to change the general director of a joint venture.

   Iseya claims Mr Grantham never formally held that position.

   But regardless of the specifics, the rule creates endless scope for dispute, and an opportunity for minority partners who capture management control effectively to exploit it regardless of the majority party.

   The Seabreeze is primarily patronised by foreign oilmen.

     Thus the affair could influence foreign attitudes to contracts in Vietnam, and persuade them to drive harder bargains.



Hotel row shows woes for investors