In the context of international economic integration, competitiveness is the key factor that determines the development not only of businesses, but of the country, because enhanced competitiveness of the former entails improved competitiveness of the latter. To learn more about this issue, the Vietnam Business Forum interviewed Deputy Prime Minister Nguyen Thien Nhan, Chairman of National Council for Sustainable Development and Competitiveness Building. Thu Ha reports.
2012 was a tough year for Vietnam's economy and business community. Achievements in economic restructuring were not as good as expected, caused by macroeconomic instability, as well as internal reasons inside enterprises like weak competitiveness and 'paper only' integration. What do you think about this issue?
In 2012, Vietnam continued to be affected by global economic instability caused by unsolved financial crisis and the debt crisis in Europe. Manufacturing and commercial activities were affected worldwide, inventories increased while purchasing power weakened, and non-performing loans at banks remained at worrying levels. These disadvantages combined to cause adverse impacts on the operations and growth of businesses.
One of priority tasks in 2012, economic restructuring, aimed at public investment, and corporate restructuring, with the purpose of enhancing economic efficiency and competitiveness to boost sustainable social development, but results in this area were below expectation. The emerging challenge for economic restructuring plans is the weakening health of the business community.
According to the General Statistics Office (GSO), nearly 100,000 companies filed for bankruptcy in 2011 and 2012, equal to 50 per cent of all bankruptcy cases in the past 20 years. In the first 11 months of 2012, as many as 62,794 companies were established with a total registered capital of VND403 trillion (US$20 billion). Up to 39,936 enterprises suspended operations and 8,807 companies were dissolved.
Foreign-invested companies experienced an even worse time than domestic ones. According to surveys, 27.92 per cent of FDI enterprises reported losses in 2012, as much as in 2011, and 12 percent broke even. Only about 33 percent had marginal profits, ranging from zero to 5 per cent.
In addition, the competitiveness of Vietnamese enterprises was generally low and unstable. Exports were mainly offshore goods and reliant on foreign inputs, thus lacking a solid foothold in the market.
Would you please tell us what led to this situation?
A lot of reasons have been cited for this reality, from the macroeconomic impact to problems within enterprises.
As for the macroeconomic factor, the current business environment in Vietnam contains a lot of shortcomings causing plenty of problems for manufacturing and business processes. In its annual report on business climate, Vietnam ranked 99th out of 185 countries worldwide. Other East Asia - Pacific countries (rated 86 on average) had faster improvement than Vietnam. Vietnam still stood in the last half of business environment rankings.
There are also many other causes like lack of market information; very limited financial resources, especially among private enterprises; high business costs; and ineffective governance. In fact, a majority of Vietnamese enterprises have small scale and limited capital, while owners lack the systematic training in business knowledge, management, culture, law and management skills, especially in the context of international integration, to respond to the uncertainties of the global business environment.
Especially, the distribution, communication and trade promotion strategies of Vietnamese enterprises are limited. Trade promotion activities do not bring about the good results expected. In addition, the connectivity of Vietnamese businesses is lax. This has undermined the strength of the business community.
To remedy this reality and improve competitiveness, Vietnamese enterprises need to forge linkage and cooperation while focusing on product quality improvement to boost competitiveness.
Moreover, to enhance prestige, apart from boosting production and business efficiency, they also need to focus on fulfilling corporate social responsibility (CSR), contributing to the community and improving the livelihood of employees. This cannot be overlooked on the path of integration, because it not only benefits enterprises and the society, but also improves the competitiveness of enterprises and the country and supports the better enforcement of Vietnamese labour laws.
You have just mentioned enterprises exercising CSR for sustainable development. How would you rate business performance in this area in Vietnam?
In fact, Vietnamese enterprises have learnt about sustainable development and corporate social responsibility for more than 10 years. In recent years, more and more businesses have realised the importance of these issues and inserted corporate social responsibility into their long-term development strategies. They have organised many positive social activities such as contributions and support for charity funds, poverty alleviation and protection of labour rights.
Since 2005, Vietnam has had the "CSR Awards Towards Sustainable Development" presented by the Vietnam Chamber of Commerce and Industry (VCCI), the Ministry of Labour, Invalids and Social Affairs, and the Ministry of Industry and Trade, together with the Vietnam Leather & Footwear Association (Lefaso) and the Vietnam Textile and Garment Association (Vitas), honouring businesses with good CSR practices in the context of integration.
In the current trend of global economic integration, CSR will be receive even more attention and will contribute more to the development of the whole society.
Is this a new strategy to help improve corporate competitiveness?
It is not absolutely right to say this is a new strategy, but this is the right element to boost the competitiveness of enterprises. In reality, in the process of global economic integration, CSR has become an indispensable requirement for enterprises because if they do not comply with CSR, they will not have sustainable development.
There are a lot of examples in Vietnam to illustrate this. Their good deeds have boosted their brand names and strengthened their holds on the market, like Sanofi-aventis Vietnam, FPT and TRAPHACO. This is the main driving force for them to strive for better business, improved efficiency, and good responsibility to community and environmental protection. Responsible investment and business activities will help them overcome difficulties, enhance competitiveness and develop truly sustainably in the context of global economic integration.
As the Chairman of the National Council for Sustainable Development and Competitiveness Building, could you please tell us what the Council will do in the coming time to help Vietnamese enhance competitiveness?
The National Council for Sustainable Development and Competitiveness Building was established in accordance with Decision 641/QD-TTg of the Prime Minister dated May 31, 2012. The 41-member council consists of four professional committees, namely the Committee for Sustainable Economic Development and Competitiveness Improvement; the Committee for Sustainable Social Development; the Committee for Sustainable Natural Resources and Environment Development; and the Committee for the Education Decade for Sustainable Development in Vietnam.
The Council is responsible for advising and counselling the Government and the Prime Minister to direct the construction and enforcement of sustainable development and competitiveness building strategies, policies, programmes, tasks and activities; solutions for implementing sustainable development and competitiveness enhancement; monitoring and evaluating sustainable development objectives and indicators in Vietnam in accordance with the Sustainable Development Strategic Orientation in Vietnam approved by the Prime Minister. The Council also monitors and assesses the implementation of competitiveness building programmes, tasks and activities and reviews the implementation of sustainable development and competitiveness enhancement in Vietnam.
At its first meeting on July 19, the Council reported Vietnam’s results on sustainable development objectives in the past 20 years and continued the green growth and sustainable development strategy.
In the future, the Council will focus on the successful implementation of the Vietnam Sustainable Development Strategy in the 2011 - 2020 period ratified by the Prime Minister. It aims to ensure macroeconomic stability, especially macro balances; maintain food security, energy security and financial security; convert from the growth model to harmonious development in width and depth; gradually implement green growth and low-carbon economic development; and use all resources economically and efficiently.
In addition, the Council will actively exchange with and propose to the World Bank (WB) and the World Economic Forum (WEF) technical and capacity assistance programmes for creating reports and sets of competitiveness indicators for Vietnam. This is a very urgent issue in the current period. However, in the near term, it is essential to identify competitiveness assessment criteria, and create national reports on sustainable development and on competitiveness building. By 2015, the Council will complete and announce the set of national competitiveness indices. Besides, there will be a draft guide for localities to implement competitiveness building strategies.
Source Vietnam Business Forum
