HANOI - After five years of a great leap forward, foreign investment in Vietnam is faltering because of ambivalence within the Politburo, capricious official decisions, and widespread corruption in the government bureaucracy and the business world.
In the first nine months of this year, the Communist government approved applications worth $3.57 billion in foreign investment, a 35 percent drop from the $5.43 billion approved during the same period of 1995.
John R. Pike, the chief investment officer of the Vietnam Frontier Fund in Ho Chi Minh City, said 75 percent of proposals for joint ventures never get started, and 50 percent of those that do eventually fail.
Richmond Mayo-Smith, the president of investment firm Indochina Co. in Ho Chi Minh City, formerly Saigon, said: "This place is still too risky for most foreign investors."
Two consulting firms agree. Business Environment Risk Intelligence of the United States rated Vietnam 40th of 50 nations around the world. The Political and Economic Risk Consultancy of Hong Kong ranked Vietnam as the highest risk among 12 Asian nations.
Several American ventures have fallen by the wayside in the past year.
The BBI Investment Group plan for a $243 million resort near Da Nang, along what was called China Beach during the Vietnam War, has been delayed and may be dropped. Chrysler Corp. has postponed and may never start a $192 million auto-assembly plant. Occidental Chemical Corp. has suspended plans for a $109 million resin plant.
Vietnamese leaders appear to have recognized the foreign disenchantment.
Prime Minister Vo Van Kiet devoted half his address to the National Assembly in October to calling for better conditions for foreign investment.
A leading economist, Le Dang Doanh, in a remarkably candid speech to a business group that could have been given only with top approval in this authoritarian regime, recited a litany of obstacles, from inconsistent regulations to poor banking.
But because of Politburo infighting, it is not clear whether any real changes will be made.
After the long war against the United States and the South Vietnamese ended with the country unified under Hanoi in 1975, the Communist rulers struggled for 10 years to establish a Marxist, centrally planned economy.
They failed. In 1986, a program of renovation called "doi moi" was initiated. Two years later, Vietnam was opened to foreign investors, largely in joint ventures with Vietnamese state or private partners.
That investment started slowly, picked up in 1991 and reached $20 billion by mid-1996, not counting investments in gas and oil production.
Taiwan has been the biggest source, at $4 billion. Next have been Japan, Singapore, Hong Kong and South Korea, at $2.1 billion to $2.4 billion each.
The United States is sixth, sending $1.8 billion since President Clinton lifted an embargo in 1994. Less than a third of that has been disbursed, however, because joint ventures progress so slowly.
In recent months, enthusiasm for investing in Vietnam has worn off for several reasons, said Asian and Western diplomats and business executives in Hanoi.
Vietnam's political leaders are split, some saying they are eager …