“The secret of building financial strategy in the economic recession cycle is to focus on the local market, on consumption goods, and improve domestic distribution channels. This can be an efficient solution to help enterprises survive in the crisis”. This is the advice from Bui Kien Thanh – senior economist in the interview with Vietnam Business Forum.
When the world economy was in the spiral of crisis, it made direct impacts on Vietnam’s economy. How did this problem affect Vietnamese businesses and what are their opportunities at this point in time, sir?
Signs of crisis in the global economy have been shown since early 2008, and become severe from end of 2008 and early 2009. This issue has made negative impact on our economy. Vietnam’s exporting markets start to be narrowed as consumption quantity from other countries fall sharply, internal power of Vietnamese enterprises has deteriorated in 2008, and policies of inflation curb and credit contraction came into effect. The world economic shrink has shown more impacts on Vietnam than other direct competitor of Vietnam such as China and Taiwan. A big part of export turnover of key articles like garment, leather and shoes, seafood, or furniture, is processed or made by foreign intermediating organisations. Our direct FOB export remains modest. When placing outwork orders, intermediaries must select to cut down quantity of some exporters and Vietnam is able to face that risk before other countries in the same region.
Enterprises also have to analyse their short-term and long-term strategies to avoid falling into passive positions or over-dependence on order providers or export intermediaries. This matter requires a long-term investment policy in human resource and training to develop the markets. Such countries as Japan and Korea have JETRO and KOTRA to help the governments and businesses to cooperate and develop direct export relations. However, Vietnam has not established an appropriate supporting organisation so enterprises have to find their own ways.
What do you think is the key area that should be given development priority in Vietnam at the current situation?
We should pay attention to businesses producing consumption goods as the demand for these goods is abundant and real. Virtual demand can create a little but unsustainable profit. Furthermore, banking finance should be strongly developed as it is the life-line of the economy. A company owning good products and markets without capital is fragile.
Is it too much for the local market?I have just mentioned about the exporting market, yet the real chance during the recession is local market. Vietnam possesses relatively big population, ranked 13 among densely-populated countries. Over half of the population is in the age of below 30. Vietnamese people are hard working and can create businesses with small investment. For example, a team of nearly 1 million vendors with investment of VND300,000 can make profit of VND50,000 a day to realise VND20-30 billion a day, or VND50,000 billion a year.
The opportunity for enterprises during the global economic recession is to develop the local market that is in need of investing in capacity, production, and consumption. If Vietnamese businesses do not pay early attentions to types of products suitable to the local market, and a wide and deep distribution network, they will be kicked out of the playground or taken over and merged. An economy unable to stand firm on its local market, will obviously face the risk of depending on foreign financial institutions, which has happened in many African or Latin-American countries. The corollary still burdens on billions of people without the exit.
What can the Government do to stimulate the economy apart from social welfare policies?
In the interim, the Government should organise a specialised agency system to support enterprise development. We have already had the Chamber of Commerce and Industry, policy banks, etc., but they are not a complete system that can assist enterprises since their setting-up initiative.
Besides, priorities should be given to small and medium-sized enterprises by leaving these companies with a part of Government's supply contracts. The reason is these enterprises create the most jobs not the big groups. Only by this way can we achieve the target of generating 2 million jobs a year.
Apart from the 4%-interest-rate subsidy implemented by the Government, there is another solution of capital assistance. Instead of financing to reduce 4 per cent of interest rate for enterprises, the Government can assign the State Bank to provide loans to commercial banks at the rate of 1-2 per cent. These banks will then lend enterprises at the rate of 4-5 per cent while maintaining their profit.
What changes should enterprises make to get over this difficult time?
They should unite. Enterprises, vocational associations, and governmental agencies should sit together to talk over the thoughts, share difficulties, see through risks against the finance and banking sector in order to reach common determination. At present, enterprises still operate incoherently and unable to deal with big problems. Only by joining into a solid team can we survive this hard time.
It is said that the present economic crisis is an opportunity for Vietnam's economy. What do you think about this statement?Yes, it is right. It is a chance for us - both enterprises and state management - to get new thinking of economic development, and union in action. Today, an individual enterprise or a business community is unable to thrive without a proper environment. The crisis is an opportunity for us to think and change.
Luong Tuan
Vietnamese
