Ad giant JWT caught in government turf war in Vietnam
HANOI - Global advertising giant J Walter Thompson (JWT) has been caught in the middle a turf war in Vietnam between competing government factions, raising concerns about the communist nation's investment climate.
The spat began two years ago when JWT Vietnam, which is part of the London- and New York-listed WPP Group, was given permission by the Ho Chi Minh City People's Committee to carry out its own media buying activities.
Previously, all foreign advertising companies -- of which there are only around 30 in the country -- had to purchase advertising space or airtime through a local agency in a bid to protect the domestic industry.
Vietnam's 1,000 plus agencies accounted for only 15 percent of the 900-million dollar market last year, according to the Vietnam Advertising Association. Not surprisingly, JWT's mandate to bypass them triggered alarm.
The Ministry of Planning and Investment and the Ministry of Culture and Information, which oversees all local and foreign media activities, say that authorities in the southern business capital were not entitled to grant the licence.
They have also taken issue with an October 2000 decision by the People's Committee to allow JWT -- which handles the accounts of nine of the top 10 spending companies in Vietnam, including Ford, Pepsi and Unilever -- to become the country's first 100 percent foreign-owned advertising company.
This, they say, contravened rules limiting investment levels laid out under the July 2000 US-Vietnam bilateral trade agreement (BTA).
The accord, which came into effect in December 2001, resulted in an end to punitive US tariffs on Vietnamese exports in return for Hanoi opening up its tightly controlled markets to foreign investors in a phased process.
Among the minutiae, the BTA laid out the investment framework for American advertising agencies in Vietnam, specifying that they can only be 100 percent foreign invested seven years after ratification.
US trade experts, however, stress that the agreement allows the government to grant more market access at an earlier date than those specificed if it so wishes.
Previous attempts by the two ministries in Hanoi to force a revocation of JWT's licence have failed, but last month Prime Minister Phan Van Khai initiated action on their behalf.
In a July 2 circular signed by Tran Quoc Toan, deputy head of the Government Office, and obtained by AFP, the Ho Chi Minh City People's Committee was ordered "to carry out immediately the adjustment of the target activities of J Walter Thompson Vietnam" in line with the ministries' instructions.
Nguyen Anh Tuan, acting director of the planning and investment department of the Ho Chi Minh City government, said Monday that his department had not received the July 2 circular.
JWT Vietnam failed to respond to repeated requests for comment.
The Vietnam Advertising Association, which initially came out in support of the domestic industry, now believes that any reversal of JWT's licence would send the wrong signal to other American companies.
"This is a delicate issue. We have no problems with JWT Vietnam. The licence adjustment demands are absurb," said Tran Nguyet Dan, vice president and general secretary of the industry body.
Foreign investors have long complained about the ad hoc nature of government policy making and sudden changes to the ground rules.
One local expert, who requested anonymity, said JWT had been unwittingly caught in the middle of a power struggle pitching the two ministries against the Ho Chi Minh City government.
"This has been going on and off for two years and so a lot of people are looking at this as a case of the boy crying wolf again," said another sector specialist, who also asked not to be identified.
"Is anything ever going to happen? Well we don't know, but it is a very serious matter for JWT if it does," he added.
Agence France Presse - August 03, 2004.
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