In the new context, it is necessary to restructure the national business gathering model and trade promotion method to proactively shape and develop manufacturing and industry.

A new context needs a new approach

Vietnam is facing an unprecedented extensive economic integration, driven by new-generation free trade agreements (FTAs). Domestically, Vietnam's economic potential has been strengthened. However, according to rankings announced by the World Economic Forum (WEF) for the first three months of 2015, Vietnam bottomed in competitiveness among 12 TPP-signing countries.

Some sectors (e.g. garment-textile and leather-footwear) of Vietnam have gradually joined global value chains, but not many companies are qualified for being chain links. Some production stages such as designing and input material production have not made much progress over time.

Statistics show that most Vietnamese companies have small and medium scales, with a vast majority being small. Big companies only account for 2 per cent. For this reason, Vietnam does not have enough strong enterprises to enhance overall productivity and competitiveness.

A majority of Vietnamese companies lack understanding of challenges and stand unprepared to catch opportunities when Vietnam enters into international organisations and FTAs with various regions and major economies. They have not prepared well enough to compete with rivals from the region, especially in the labour market and domestic goods and services supply.

Limited knowledge will inhibit companies, particularly small and medium ones, which are now the vast majority in Vietnam, from taking preferences and opportunities from international integration, thus resulting in gradually rising opportunity costs on the path of international integration.

According to the Asian Development Outlook 2015 released by the Asian Development Bank (ADB) on March 24, 2015, 36 per cent of Vietnamese firms are integrated into export-oriented production networks, compared with nearly 60 per cent in Malaysia and Thailand. And just 21 per cent of Vietnamese SMEs participate in global supply chains.

The world is changing constantly, caused by development drives of the market economy. Together with that, the strong progress in science and technology, particularly in transportation and information technology fields, give rise to a reduction in commercial expenses. There are three consequences of that changing progress.

Firstly, economic integration and market connection programmes are being carried out across the world. Competitive advantages of each economy also shift.

Secondly, the nature of traditional trade and global supply chains is changing and going more deeply into specialisation and standardisation of products. Traditional trade barriers are gradually being lifted. The pace, scale and sustainability will be the most important competition criteria of an economy.

Thirdly, competition exists not only at the product level but also in supply chains, even at the employment level.

In that process, the economy needs to consider three issues: (i) Identify industrial and manufacturing sectors with competitive edges; (ii) identify products, supply chains and works with competitive advantages; (iii) improve the competitiveness of industrial and manufacturing sectors.

Businesses will be at the heart

At its resolution issued at the back of the regular cabinet meeting for March 2015, the Government assigned the Vietnam Chamber of Commerce and Industry (VCCI) to coordinate with the Ministry of Industry and Trade, the Ministry of Planning and Investment, the Ministry of Foreign Affairs and other relevant ministries and agencies, and business associations to work out some schemes to boost bilateral trade and investment ties with countries with strategic partnerships with Vietnam and report them to the Government.

However, it is said that a new approach to promotion work is needed to carry out this task. Representative agencies and investment and trade promotion agencies must build and restructure the national business gathering and promotion model for business forces and take the promotion of manufacturing and industry to function as core forces and stimulate economic demands.

These are essential because Vietnam has entered the stage that decides whether it falls into the "middle income trap" or not. It can only exit this dilemma with manufacturing and industrial development strategies enabling it to create new products and lead knowledge- and creativity-based industries rather than rely on subsidy mechanism, natural resources and low skill labour.

Previously, State agencies were the nerve and businesses were passive. But now, with the new model, businesses will function as the nerve and the State only provides supports with big specific projects that help generate ripple effects on the economy. The State will still build mechanisms and policies and negotiate to open up the market but how to promote investment and trade is decided by businesses.

In the new model, national authorities will gather leading manufacturers and industrialists to perform the following tasks:

- Giving advice to and holding dialogues with the Government on enterprise development, strategies for development of production and industrial clusters, products, and value chains with competitive advantages; on policies on market negotiation and production - business development. For example, Fintech is technology-powered financial services companies.

- Organising annual industry and manufacturing forums.

- Developing and shaping product standards and consumer trends

- Assigning representatives to participate in business advisory councils for international economic integration programmes APEC, ASEAN, TPP and other FTAs.

- Engaging in market development and labour relations.

- Recommending risk prevention measures (e.g. industrial development funds) and dispute settlements.

Hence, compared with current business gathering models, the new one has many new features, including the task of conducting industrial and production promotion - which is now mainly carried out by State agencies. This approach can fundamentally change the way of trade promotion and answer the question "What can businesses do for the country".

Doan Duy Khuong, Ph.D, VCCI Vice President, ABAC Vietnam Chairman