“There’s no need to be the first, but the second, who is creative and stands out from the former, can make success,” Dr Le Dang Doanh, Head of Central Institute for Economic Management, said about how enterprises can overcome current difficulty.
According to Dr Doanh, many of Vietnam’s enterprises are now facing global challenges.
Tougher difficulty
The difficulties pointed out by Mr Doanh are: inflation, exchange rate fluctuation, and capital scarcity. The current challenges are considered tougher than those in 2008. Mr Doanh estimated that inflation moves strongly in the shadow of decisions to increase exchange rate, petroleum and electricity price.
Consequently, according to Mr Doanh, material price and input costs sharply increase. For example, transport enterprises, given the strong price increase in three first months and with fuel accounting for 40-50 percent of input costs, cannot calculate the impact of increased input costs on demand. Among those, the most severe consequence is soaring interest rate, since at the moment corporate interest rate is between 22-26 percent, continuously rising from initial rate of 18 percent. This rate is over enterprises’ heads. Moreover, the policy to restrain credit at 20 percent in 2011, while for the first five months the rate has only come up 6 percent, makes it impossible for most enterprises to access bank capital. Lack of capital results in no rollover channel, which forces enterprises to use black market exchange.
Due to investment cuts, plus suddenly increasing price, market movement and demand is unpredictable. According to a General Statistics Office report, in the first five months, among 136 industrial goods and commodity groups, two-thirds have inventory rates increasing year on year. Mr Pham Thai Binh, Market Analysis Manager, PetrolVietnam Securities Incorporated added, besides the big difficulties as Mr Doanh stated, Vietnam commodities face severe competition from Chinese and Indian goods, in both domestic and international markets.
Difficulty may be opportunity
Dr Le Dang Doanh said, confronted with such challenges, Vietnam’s enterprises have to make changes in investment into R&D, willingly spend money on deeper study of inflation, competitive exchange rate and interest rate to work out strategies to deal with fluctuations in the domestic and world economy.
On the other hand, according to Mr Doanh, difficulty will be an opportunity to restructure enterprise organization, cut costs, improve efficiency and adopt new technical-technological advances. At the same time, it is a chance for enterprises to adjust their products and marketing to adapt to new environments. Enterprises need to foster cooperation to reduce production cost.
To take advantage of opportunities in such difficulty, Mr Doanh also advises enterprises to take SWOT analysis on the current and future status. Think globally, act locally and decisively. Progress and efficiency are the most important in current fluctuating status. Based on that, enterprises can propose action plans in order of priority and focus on finishing step by step. They also need to continue to pursue long-term strategy and patiently conduct strategies cultivating human resources.
Luu Hiep
Vietnamese
