Int'l Cooperation

Last updated: Wednesday, January 23, 2019


APEC Vietnam 2017 and New Start-up Journey

Posted: Monday, October 02, 2017

The world is constantly changing due to the development momentum of the market economy, and perhaps initial steps into the 4th Industrial Revolution. Together with this, strong scientific and technological progress, particularly applications in transportation, logistics, finance - banking, healthcare and chemical industries, is resulting in reduced costs to trade and opening both opportunities and challenges at the same time. Economic integration and market connection programmes take place extensively throughout the world to form large markets with new business opportunities. Competitive advantages of each economy are also shifted. The nature of traditional business, production and supply chain of the world is increasingly changing, shifting toward specialisation and standardisation of products. Traditional barriers to trade are gradually eliminated. Competition is not only seen at the product level, but also at the supply chain level, even at the employment level where traditional industries are replaced by new ones. A new government model is being shaped to support and develop enterprises adaptable to the integrating economy.

In recent years, Vietnam has actively participated in negotiating and signing many agreements on economy, trade and investment with other countries in the world. Notable pacts include the Trans-Pacific Partnership (TPP) Agreement, Vietnam - EU Free Trade Agreement (EVFTA), Agreement with European Free Trade Association (EFTA), and the Regional Comprehensive Economic Partnership Agreement (RCEP). In particular, at the end of 2015, Vietnam and other ASEAN countries announced the formation of the ASEAN Economic Community (AEC) and ASEAN Vision to 2025. Vietnam now has 15 strategic partners and 10 comprehensive partners.

The World Bank's Doing Business 2016 Report showed that Vietnam has climbed 9 spots to 82 out of 189 countries. The data from the Ministry of Planning and Investment of Vietnam revealed that Vietnam had 39,580 new enterprises in the first four months of 2017. The number of small and medium-sized enterprises (SMEs) now accounts for 98 per cent of all enterprises, and contributes nearly 50 per cent to the nation’s gross domestic product (GDP) and 41 per cent to the State Budget. The Law on SME, adopted by the National Assembly, is a positive way to help SMEs - a force that plays a decisive role in economic sustainability and social stability. The law is designed to focus support for three business entities: SMEs established from the transformation of business households, innovative business start-ups and SMEs engaged in sector and value chains. SME-classifying criteria are defined in the Law on SME. SMEs are business entities with no more than 200 employees with social insurance in the preceding year and one of the two following criteria: Total capital of the preceding year being no more than VND100 billion or revenue of the preceding year being no more than VND300 billion.

However, some statistics showed that nine out of every 10 enterprises leave the market, despite the Government's efforts to actively integrate into the economy and commitments to improving business environment policies. April 2017 saw the most business start-ups in history, but corporate dissolutions and suspensions are also plentiful. In fact, although the size of Vietnam's SMEs grew, the rate of loss-making entities increased from 25 per cent in 2010 to 66 per cent in 2015. Profit margin ratio dropped by 16 per cent in just two years, 2010-2012.

So, the question is how the Vietnamese business community, most of which are SMEs, can develop effectively and sustainably in an integrated economy and global competitive landscape? The answer is surely that, in addition to spreading policies, there is a need for more in-depth, professional approach and more sustainable strategy to build a competitive business community and economy. Wherein, the pace, scale and sustainable development will be three most important competitive criteria of the economy. There are many in-depth solutions for developing an effective and sustainable business community. In-depth solutions must depend on the government model. There are three government models in the world: Government regulates the nation according to the free market economy model; government centrally plans the economy that negates the role of market economy; and government that facilitates the environment for doing business. The cornerstone of an enabling government is that it attaches great importance to market roles, but still actively makes rational interventions to direct the market. Many countries in the world have gradually shifted to the facilitating government model and attained certain economic achievements. However, in order to effectively implement the enabling government model, a nation must strongly reform and develop five core directions:

One, building a leader force of integrity to hold executive powers, radically change from “manage to cope with” to “facilitate development”; being determined to build up a government of integrity that facilitates development, action and service to citizens and businesses as stated by the Prime Minister in Resolution 19-2016/NQ-CP dated April 28, 2016 on major tasks and solutions to improve the business environment and enhance national competitiveness and Resolution 35/NQ-CP dated May 16, 2016 on business support and development to 2020.

Two, in the context of vibrant economic integration and industrial revolution in Internet, automation, biotech and energy industries, there is a need for appropriate scientific development and training strategies to guide strategic investment.

Three, building specific plans to carry out that strategy. Wherein, building strategic partnerships in technology and training play a decisive role in building and developing the core competitiveness of national technology.

Four, the country’s human resources and strategic location should be leveraged to hold advantage in negotiation of and participation in regional and international economic cooperation programmes. Such programmes as APEC and ASEAN, once tapped and implemented effectively, will be the driving force for strong domestic economic development through domestic and international business cooperation, especially stimulating SMEs to join global value chains.

Five, having macro-economic and micro-economic measures to generate positive responses of enterprises and people. A right strategy and direction of a government of integrity must be embraced by the business community, including SMEs, and embedded into their business strategies.

APEC Vietnam 2017 will be the best opportunity and the best moment for an enabling government and a business community to start up a new itinerary in a changing and developing Asia-Pacific region with new, vigorous technological revolutions.

Dr Doan Duy Khuong
VCCI Vice President, ASEAN BAC Vietnam Chairman

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