When Singapore's KhattarWong announced in late September that it had signed an agreement with Vietnamese law firm PBC & Partners with a view to establishing a joint venture in two years (subject to approval by the authorities), it came as no surprise. Asia's legal community has watched over the past year as firm after firm, from a diverse array of backgrounds, have taken the nation's entry into the World Trade Organisation (WTO), a recent overhaul of investment laws and a subsequent booming investment climate as a sign to establish an office or otherwise get a foothold in the market.

Now a hive of activity where demand for legal services well exceeds supply, the boisterous optimism from new entrants for what some see as a new China in terms of opportunity should be tempered with caution. Vietnam will not be easy on start-ups, and firms have to adopt flexible approaches and be committed if they want to succeed.

And the question is being posed - are these firms already too late?

A new China in IndoChina
In the words of US law firm Duanne Morris' Asia managing partner Eduardo Ramos-G¢mez, Vietnam has "captured the imagination of the outside world". And if the firm's aggressive entry into the Vietnamese market is anything to go by, it has definitely seduced Duanne Morris. The firm has made Vietnam a key plank in its Asia strategy, having entered Singapore with a splash of lateral hires, and soon after recruited three former Baker & McKenzie partners, Chris Muessel, Oliver Massmann and Giles Cooper, to open offices in both Ho Chi Minh and Hanoi, bringing its Asian office tally to three.

The firm is not alone. Aside from KhattarWong's latest initiative, Australia's Allens Arthur Robinson took the two Vietnamese offices (Ho Chi Minh and Hanoi) of competitor Phillips Fox in January, after they opted out of a merger with DLA Piper last year. Allens has since grown its headcount rapidly to over 30 lawyers in total. The first of Korea's major legal players, Horizon Law Office, got a footing in the market two months ago when it opened an office in Ho Chi Minh, led by partner Do Yo Kim and assisted by two local lawyers. The other Korean firms have also been increasingly active in the market, though they have preferred to fly partners in as required to date. And although some lawyers argue the international firm lost ground by retreating from the market some five years ago to run its Vietnam operations out of Hong Kong, Lovells has also recently been rebuilding its team on the ground, though it is yet to base partners there.

It is the lure of the opportunity presented by this fast-developing Asian nation that is attracting firms from both Asia and further afield. For those that may have missed out on the growth of China, Indochina's Vietnam presents another chance to enter Asia. "We have already been into China, as we have a fully fledged office in Shanghai, and we see parallels in Vietnam as to what China was 10 years ago," KhattarWong's deputy managing partner K. Anparasan told ALB. Vietnam offers a new chance for firms to differentiate their practices. "We've also noticed there are one or two Singapore firms active in Vietnam, so it's good for us to go in now and establish our name," he said.

And for some of these firms, such as Allens Arthur Robinson, the lighting speed of growth in investment and legal work has been a surprise. "In October last year the investment boom had not really started and we expected a long slow period of building the practice and allocated investment funds for the start up phase - they are still sitting there," said AAR partner Jim Dunstan. "Three months later on the day we took over in January the investment upswing was under way - and it has not faltered since."

Tough times ahead?
Though there is no doubt business opportunities abound in Vietnam, some of these new law firms are likely to find their start-up in the market to be an extremely tough task. "If they are starting up now it might be a little bit too late," said Chris Vale, who manages Rouse & Co International's two Vietnamese offices out of Hong Kong.

Indeed, Vietnam poses a number of immediate challenges for new firms.

Established foreign firms
"There are a number of foreign firms who have been here for 10 years plus, and they have a established practices, good connections and good lawyers," Vale says, with Rouse & Co itself having practiced for 10 years through Doan Hong Son Law Office. It may be that wresting clients away from the grip of the likes of Freshfields, Baker & McKenzie, Gide Loyrette Nouel and Johnson Stokes & Master may be challenging for new firms.

The importance of this competition should not be underestimated, with even AAR thinking twice. "AAR had been looking at Vietnam for a number of years, but had decided against entry on our own because of the fact that there were a number of good firms in the market and one of our Australian competitors had a very good team on the ground servicing the Australian client base which was our natural starting point," Dunstan said. Picking up the local offices of Phillips Fox solved the problem.

However, Ramos-G¢mez from Duanne Morris does not think competition need act as a barrier. "Notwithstanding there have been firms in the market here for quite some time, changes in Vietnam laws and the new work being done has really leveled the field." He said private equity, fund and financial markets work is new and evolving, allowing newer firms a chance to compete with established players. "It is not that firms established there don't have their merits, as they have made a name there and have experience of living and working in Vietnam, but in terms of the work and expertise on the deals we are doing and are interested in, they are as new as we are on these kind of deals," he said. And as ALB has reported, some firms such as Frasers are consciously choosing to work on the best deals and with the best clients due to a rapid rise in demand and a lack of resources, effectively "firing" some clients, who are forced to look elsewhere for advice.

Culture, legal framework, language
"Vietnam is a market which makes sense for some firms," said AAR's Jim Dunstan, "But it is not necessarily for everyone. It is developing fast, but it is still developing." Vietnam presents inherent challenges in language, its civil law legal system (making it more difficult for law firms from common law backgrounds, and giving the likes of Gide an advantage), and a still often vague and developing legal framework. "A lot of firms have put a sign out here in the past and have had people based in Singapore, but it isn't easy to start up a practice here nowadays - the law has become complicated," said Fred Burke, partner with Baker & McKenzie in Vietnam. Dunstan says Vietnam is a country where you need genuine commitment and deep local knowledge to do well.

Recruitment
Recruiting Vietnamese lawyers is the single most challenging issue firms are facing when building their practice. "We've started hiring Vietnamese lawyers and its challenging to say the least," said Ramos-G¢mez. "The standard of lawyers, in terms of English language and skills is just not there." Firms are having particular difficulty in sourcing lawyers with a number of years PQE, in the most demand. Ramos-G¢mez says after a long period of interviewing, the firm has decided to invest in training up lawyers fresh out of law school to international standard, rather than hiring lawyers with experience.

Office space
While it might not be the first thing occurring to firms, the lack of office space will soon become an issue when they hit the ground. With the boom in investment and interest, office buildings in both Hanoi and Ho Chi Minh are completely full, and new developments coming online in the next year are already fully subscribed. "We can't find suitable space at the moment. In Hanoi, people are facing a wait of quite some time for new space to come on to the market," Vale said. Though Duanne Morris has been in the market for quite some time, the firm only moved into a permanent space in Ho Chi Minh at the end of October, having worked from temporary space until then.

Vietnamese firms
Vietnamese local firms are fast developing their practices and skills in competition to foreign firms, making it even harder for start-ups to get an edge in the market. The likes of YKVN, Vision & Associates and Vilaf are tipped as fast-improving firms. There are also an increasing number of boutique spin-offs from these firms, such as Indochine Counsel (focused on M&A), that are also highly capable and growing firms.

Economic cycles
Firms will also have to be realistic about the possibility of a slowdown in activity in Vietnam - there is no doubt that the euphoria will die down at some point.. "Like any Asian developing market there will be ups and downs," Dunstan said. "We have seen a bewildering variety of events which impact on business over the 26 years we have been operating in Asia. New firms will have to ensure they are prepared to weather such downturns if they are to participate in Vietnam over the long term.

A balanced approach
Over the past 15 years, according to Burke, foreign firms have come in well funded, lost money for two or three years and then decided it was not for them. So how can new start-ups in Vietnam avoid a similar demise? Firms will have to take a realistic and flexible approach to the market to succeed. Allens Arthur Robinson is one firm that has thought its strategy through carefully. Having taken offices on the ground it has gained instant expertise and a base from which to build its client base, and the firm is also being highly flexible with its staffing, supplying lawyers from Singapore as required. "We have deliberately built a large team in our Singapore office of partners and senior associates who we use to fly in to supplement our teams in Hanoi and Ho Chi Minh," Dunstan says. "This ability to quickly expand the team on the ground for specific jobs using a team out of Singapore gives us great flexibility in staffing the bigger jobs while not loading the Vietnam offices with long term employment costs as jobs complete." Such approaches may be necessary to ensure success in the challenging, but ripening, Vietnam market.