Restructuring: Where Is the Position of Vietnam Businesses?

At the seminar, experts and businesses exchanged and discussed lessons corporate restructuring learned from international practices to specific cases in Vietnam, and shared assumptions about macroeconomic outlook and business environment in 2012-2013. Restructuring contents are discussed in all aspects of governance, from strategy to finance and personnel.

 

According to experts, Vietnam's economy reaped some remarkably successes like high economic growth in recent years, rated amongst highest in the world. The growth engine is industrial production and service, powered by the shift to manufacturing processes with higher added value and participation in regional production chains. However, the local business environment is considered to be less attractive than in other countries in the region like China and Thailand. Large budget deficit, limited management capacity of the State apparatus, high risk of corruption, incomprehensive infrastructure and technology, and environmental issues are all big barriers to economic development and risks to enterprises.

 

In addition, Vietnamese businesses are confronting with challenges in corporate governance and administration, such as lack of strategies, cash flow imbalances, and human resource shortfalls and improper operating system. They are facing the need for restructuring in two different positions: passive and active. But, no matter what position they choose, the biggest restructuring pressure is economic recession and financial crisis where they face with a sharp decline in consumer demand. They must have solutions to survive and overcome the crisis. They must solve weaknesses and loss of competitiveness. In that context, business leaders need to actively approach updated knowledge as well as case studies so as to make the best restructuring strategy with high practicability and foresee potential risks in the future.

 

Remarking on business environment and economic outlook, Raymond Mallon, economic consultant and senior advisor of Beyond WTO Programme in Vietnam, said, in a number of likely scenarios, the most likely is global economies will gradually recover and business environment in Vietnam will be significantly improved thanks to the government’s positive reform measures.

 

HSBC's Deputy General Director Pham Hong Hai believed that the difficulties would create momentum for restructuring and expected that restructuring of the financial market would have positive results and become a source of GDP growth, like the way it did with the economic reform in 1986 focused on the agricultural sector that helped Vietnam become the second largest rice exporter in the world and the reform in 1999 aimed at private sector and industrial production.

 

Corporate restructuring must be an overall reform from business, process, technology, and personnel. When they embark on the plan, fears of change will become the biggest obstacle to success because operating strategy making is not only a starting point but also a crucial point of the restructuring process. It is indeed not easy for companies to choose either expansive model with many business fields or concentrative one with core businesses. But, first of all, they need to accurately define their core competencies which are intangible value that is difficultly quantified. This is the key to successful restructuring, experts said.

 

As regards personnel, in reality, any company in trouble and with declining revenues will take cost cut into account first. And, according to subjective standpoint of business leaders, a majority of expenses are for personnel. But, will staff cut be an effective solution to cut costs or a troublemaker in running their companies?

 

Douglas Coulter, director of Open Minds Foundation, US, said eliminating workers might even make costs higher because businesses often retain employees with low salary and therefore low efficiency. He said the key is sustainable production and development.

 

Mr Le Kinh Luan, a senior consultant at Tower Watson Vietnam, emphasised personnel changes in corporate restructuring. This change can bring new styles of leadership and support changes in business operations and business strategies. Businesses should make changes in corporate culture and management mechanisms - such as the way bonuses are awarded - to encourage employees' potential. He added that spiritual encouragement, understanding and sympathy with employees are the key to unlock potentials of employees.