Quartet for Economic Sustainability

Specifically, a sustainable business model essentially congregates the following factors: Efficiently using natural resources to create a foundation for building and deciding business models as well as inputs; having high-quality human resources that can orientate operations and guide enterprises to develop; effectively attracting and using domestic and foreign capital and budgets as a driving force for enterprises to develop; and coordinating the economy with the legal policies of the Government to support the favourable and stable operation of enterprises. These factors are being adopted by most major economies in the world today. At the CEO World Forum 2012 recently held in Hanoi, most attendants shared the common standpoint that 2011 was a changing year for the world economy in general and that of Vietnam in particular. Vietnam’s inflation grew over 18 percent in 2011, much higher than the target of 7 percent set by the lawmaking National Assembly in 2010. According to the Ministry of Planning and Investment, as of September 2011, nearly 49,000 companies closed down operations, an increase of 11,000 from a year earlier. Hence, Vietnamese enterprises now have to actively seize and take advantage of opportunities to survive and develop.

 

In fact, Vietnam witnessed two decades of strong economic growth and became a near middle income country in 2009. But, it is noted that this economic growth was driven by extraction of natural resources. Currently, land and water are increasingly overused; natural forests are felled for timber; fish resources are being exhausted, and mineral resources are harder to extract. Mr Nguyen Dang Vang, former deputy director of the National Assembly’s Committee on Science, Technology and Environment, said: For developing countries, natural resources are a very important element to create competitive advantage and sustainable development for their economies. Efficient utilisation and development of resources is an urgent matter that business leaders, investors and government agencies need to pay careful attention to. Vietnam is endowed with great natural resources for social and economic development, like a more than 3,000 km coastline, land resources and mineral resources. Nonetheless, excessive use of those resources is in an alarming situation. Presently, the Government has invested a large amount of money for resource exploitation, but the extraction is not actually effective.

 

Speaking at the CEO World Forum 2012, Mr Tran Tuan Anh, Deputy Minister of Industry and Trade, said: With heavy duties assigned for 2012, State-owned corporations like the Vietnam National Oil and Gas Group (PetroVietnam) and the Vietnam National Coal, Mineral Industries Holding Corporation Limited (Vinacomin) have to accelerate renovation to reduce energy demand, to be specific electric power and natural resources, to lay the groundwork for building business models and inputs for enterprises.

 

As a decisive factor for the sustainable development of enterprises, most delegates and experts agreed that high-quality human resources can provide sound strategies for enterprises in this time of crisis, turn difficulties into opportunities and take advantage of them to further develop. Socially, high-quality human resources are the fundamental element for sustainable development, because the brake on the growth and development of enterprises is a result not only of poor infrastructure and capital shortage, but also unfulfilled potential in human thinking and creativity.

 

At the moment, investors are hesitating to pour capital into new projects or business plans as a result of tightened credit policy that has left many projects stagnating. Mr Dang Thanh Tam, President of Saigon Invest Group, said: Effective investment requires a long-term capital utilisation strategy. He noted that Vietnamese businesses rely too heavily on bank loans. Reportedly, some have to borrow even 80 percent of investment capital from banks. This is not the case in developed countries where investors borrow no more than 50 percent from commercial lenders and the rest is raised from other sources, like stock and bond offering or loans from international institutions. This issue alone has hindered the growth of Vietnamese enterprises.

 

The final element is coordinating the economy with legal policies and corridors of the Government to support the favourable and stable operation of enterprises. According to Ms Do Thi Thu Ha, Deputy General Director of KPMG, Vietnam’s tax policies have huge impact on foreign direct investment and business operations in Vietnam. They can be a favourable and driving element, but they can also be a barrier against investment. Consistent and synchronous policies will encourage enterprises to more proactively and quickly invest and do business. Therefore, legal policies and corridors of the Government must support enterprises to develop. This will help Vietnam attract more foreign investment capital for social and economic development, Ms Ha recommended.