Bloomberg

Wednesday, April 29, 2015 12:25

TTN – Chuck Palazzo was 18 when he took his first trip outside New York City. He went to Da Nang, Vietnam, courtesy of the U.S. Marines.

“You had mortar rounds going off in the mountains and you were surfing off China Beach,” he said. “It was ‘Apocalypse Now!’”

Forty-five years later, Palazzo is back, this time as a tech entrepreneur contributing to the planned construction of one of Southeast Asia’s most modern cities. The roar of F-4 Phantom jets has become the rumble of bulldozers, the rattle of Huey helicopter rotors has been replaced with spinning casino slot machines; instead of bullets, golf balls whizz down world-class fairways.

“It is ambitious,” said Palazzo, who lives 10 blocks from China Beach, now called East Sea Beach. “They are welcoming of foreigners. In terms of process and getting things done, Da Nang is by far much more friendly to businesses than Ho Chi Minh City,” the country’s commercial center, formerly known as Saigon.

In Da Nang, you might be forgiven for wondering how the war ended. Tourists sun themselves on the white sand in front of the Hyatt Regency resort, a few blocks up the coast from the Greg Norman-designed Da Nang Golf Club. Downtown, outside the Big C supermarket, which sells French baguettes and bottles of Bordeaux, traffic directed by International Business Machines Corp. software flows on toward the airport and the Coca-Cola Co. factory.

Vietnam’s Singapore

Decades after the city revolved around the U.S. military air bases, Da Nang is recasting itself as the Singapore of Vietnam, touting a transparent and efficient government. A building boom has transformed the landscape into a budding metropolis, ranked at or near the top of the Vietnam Provincial Competitiveness Index for good governance and business-friendly policies since 2007.

The city government spent $4.5 billion in infrastructure projects in the past five years, a surge from $1.7 billion in the previous five years, according to Da Nang’s statistics office.

About $60 million went into a new airport terminal, $88 million on the striking, sail-shaped city hall and $93 million on a three-level overpass. IBM’s system provides real-time updates on bus routes and monitors water quality, while 300 kilometers (186 miles) of fiber-optic cable installed by Cisco Systems Inc. connects all the government offices.

Unlike the larger Hanoi and Ho Chi Minh City, which have much older infrastructure, Da Nang has the advantage of starting afresh, said Tan Jee Toon, IBM’s Hanoi-based Vietnam general director.

“The government is very forward-looking,” Tan said in an interview. “They value feedback from not just citizens, but the business community as well.”

Fire-breathing bridge

The Han River, which separates Da Nang’s downtown area from the main beach resorts, had two bridges when U.S. forces departed. Now it has 10, including the six-lane Dragon Bridge, which breathes fire on weekends for tourists.

Wide streets and a new airport terminal make for hassle-free commuting across the city, said Hung Nguyen, co-founder of LogiGear Corp., a Silicon Valley software testing company that chose Da Nang over Ho Chi Minh City to expand its Vietnam operations.

The city’s master plan calls for its population to double to 2 million by 2020, said Huynh Lien Phuong, vice director of the Da Nang Investment Promotion Center. But the government isn’t interested in the growth-at-any-price model that China adopted in past decades.

“Da Nang doesn’t blindly compete to attract everything,” said Edmund Malesky, an associate professor of political economy at Duke University in Durham, North Carolina, and the lead researcher for the competitiveness index. “So dirty manufacturing plants don’t end up next to agricultural land.”

Chicken run

The city has turned away projects, such as a textile dye plant and a shipbuilding operation, said Huynh Van Thanh, vice director of Da Nang’s Department of Planning and Investment.

“We are a little picky,” Thanh said in an interview.

Instead, Da Nang’s future can be seen below the twisting Hai Van pass, north of the city. Chickens dart across a dirt road lined with banana trees leading to the 1,130-hectare Da Nang High Tech Park, now under construction.

The plans include housing for 10,000 tech workers, a shopping center and international schools, said Bui Van Doanh, head of the park’s investment promotion division. Tokyo Keiki Inc., Niwa Foundry Co. and a Vietnamese company will be the first tenants, he said.

The challenge is to find enough skilled workers to fill the new plants, said Lam Nguyen, Ho Chi Minh City-based country director at International Data Corp.

One thing that will help attract foreign staff is the beach, Lam said by phone.

Basket boats

Perched on some 100 kilometers of white sand washed by the South China Sea and against a backdrop of marble and limestone hills, Da Nang’s tourism industry is thriving. In the north, in Da Nang Bay, fishermen in red-and-blue wooden fishing trawlers and bamboo-basket boats bob in the turquoise waters. Along the beach east of the city is a line of high-end resorts where tourists sip beers and sodas under giant thatched umbrellas.

The risk the government faces is that the rapid growth of the city could strain its new infrastructure, said Malesky at Duke University.

“The question is, can they handle that inflow of people?” he said. “Can they handle that massive economic growth and complexity in their economic structure?”

Broken pipes

To help find that balance between expanding tourism and the economy and making sure the roads and power and sewage treatment plants can keep up, the government six months ago opened its new city hall, a 34-floor building whose sail design symbolizes the Communist leaders’ desire to connect with the global economy, said Phuong, at the Investment Promotion Center located in the new building.

The headquarters includes offices from all government agencies for easier access for citizens and investors alike. People can e-mail officials directly, and there’s a call-center to field complaints, from broken water pipes to being overcharged by hotels, said Nguyen Quang Thanh, vice director of Da Nang’s information and communications department.

“The high-tech government center is something you don’t find in Hanoi or Ho Chi Minh City,” LogiGear’s Hung Nguyen said. “They have some leeway to do things differently.”

Good solutions

The man credited with building Da Nang’s reputation for transparency was Nguyen Ba Thanh. The controversial former chairman of the Da Nang People’s Committee, who died in February, was often likened to Lee Kuan Yew, the Singapore leader who passed away a month later, said Alexander Vuving, a security analyst at the Asia-Pacific Center for Security Studies in Hawaii.

“He was committed to turning Da Nang into a modern city with an effective bureaucracy,” Vuving said. “He always had very good solutions. At the same time, his leadership style was like a dictator.” There’s a risk that the culture of good governance will be harder to sustain now that the strongman is gone, he said.

Thanh’s efforts helped lure foreign hotels and companies such as Furama Ltd., with its resorts and four-bedroom beachside villas, Coca-Cola and Mabuchi Motor Co., one of the world’s biggest manufacturers of small electric motors.

Since 1987, the city has granted licenses for 324 foreign direct investment projects from 37 countries with a total of $3.38 billion in registered capital, Phuong said. Recent inquiries have included Apple Inc. and Airbus Group NV.

Helicopter hangars

“Da Nang is miles ahead of everyone else as a leader in being proactive in encouraging foreign investment,” said Ho Chi Minh City-based David Blackhall, managing director of VinaCapital Real Estate Co. “If you need to modify or change a plan, it could take years in most places in Vietnam. In Da Nang, it happens in weeks.”

All the change and development haven’t erased the reminders of the days when Palazzo first arrived. Across from a row of luxury resorts are cement helicopter hangars, remnants of a U.S. Marines base. Parts of the Da Nang International Airport still have traces of dioxin, a chemical derived from Agent Orange used by the U.S. as a defoliant.

But the political enmity of the past has ended. Vietnamese naval and coastguard officers greeted the guided-missile destroyer USS Fitzgerald and littoral combat ship USS Fort Worth in Da Nang on April 6 for five days of activities. Reporters for local newspapers and local officials took selfies on the warships and posed with U.S. Navy officers in dress whites.

“The war was so hard,” said Suel Jones, a former Marine injured twice in nearby Quang Tri province who has split his time between the U.S. and Da Nang for years. “There is a happiness here now. They have money for a change, and they don’t want that to end.”