“Things Will Look Better by the End of This Year”

It is great to be back in Vietnam after about a year and there are many changes.  I think the economy is going through a very difficult time, especially in regard to State Owned Enterprises, the Banking System and Regulatory Reform.  I hear that there are reforms coming, but, quite frankly, from the outside, it appears that Vietnam is not keeping up with the pace of reform that is occurring in other countries in South East Asia.  So I think that Vietnam needs to be careful, or it will lose its competitive advantage in the region.  Vietnam still has some of the best opportunities in the region, but it needs to improve its public relations as well as get some of its policies in better shape. 

 

The simple answer is NO, but the question is more complicated than that.  This will not be a great year for Vietnam, but I believe it can be a better year than last year, which all economists seem to agree was one of the worst on record.  Inflation seems to be coming down and some of the recent numbers are very encouraging.  The trade picture looks better but there are still too many import restrictions and not enough market based solutions.  In short, some of the needed policy measures are in process, but I encourage the government to do more and to try to speed up the pace. Still, I expect that things will look better by the end of this year and that 2013 and 2014 will see the recovery continue.

 

In times of economic downturn looking at one's strategy and making adjustments in marketing and human resources is usually an important response to hard times.  Cash Management is important, but do not confuse cash management with not spending anything! Sure, this is not the time to buy an additional Mercedes or Bentley.  However, now is the time when concentrated marketing approaches in selected areas of expertise can be critical to the survival of the firm; furthermore, improving human capital, something one never has time for during boom times when everyone is too busy to think about education, is another area that should not be neglected.

 

First of all, how do you know they are competitors?  Many foreigners would love to partner with a Vietnamese firm to make a firm that is stronger together than either firm is separately.  Do not overlook possibilities for forming alliances and having both sides learn from the experience.  Vietnamese also have an advantage in knowing the market because it is your home market.  Competition can make Vietnamese firms improve quality, cost and service.  The fact that most Vietnamese are young means that they can afford to take a little time to study some of the methods of foreign companies and learn best practices while avoiding bad practices.  Don’t take foreign firms coming in as a challenge, take it as an opportunity.

 

I am not sure that any company has successfully overcome the crisis. Some companies have lost less than other companies and have been able to emerge from the 2008 and 2009 difficulties better than other companies. These companies usually have strong reserves which they could call on for a rainy day.  Some companies, like Apple and SAP, simply had new products that were in demand, products that were perfected with R & D money they had continued to use even during rough times.  Other companies spun off their finance subsidiaries into separate companies and concentrated on manufacturing.  Still others, like some real estate companies, switched their target markets to go after less glamorous projects, but ones which provided less elastic demand.  Finally some companies, realizing they could not go on alone, reworked their strategies to form alliances with other better capitalized companies to better develop their capabilities and utilize the combined resources to continue to prosper in difficult times. 

 

Vietnam has struggled against many economic difficulties, and one of the best features of Vietnam is that when it confronts a problem it has never seen before the government and corporations are not afraid to ask the outside world for help and to use some of the experiences of others to resolve its own difficulties.  I think over the short term Vietnam will come through the inflation problem in fairly good shape.  Continued work on  transparency and governance in SOE's will be crucial to improving Vietnam's reputation overseas and to attracting the kind of technological investment Vietnam needs to grow.  Vietnam remains an important player in the Trans Pacific Partnership, which has the potential to bring new trade opportunities for Vietnamese firms. Vietnam continues to play a strong role in ASEAN, especially in developing "Single Window" for imports and exports.  So I am cautiously optimistic. Vietnam has too many dynamic entrepreneurs to stagnate, but it needs continued policy support to truly establish the level playing field, a sound banking system, and an effective education system that will enable Vietnam to prosper going forward.