When the bar is not set for doing business, not only consumers but the society and economy at large suffers. Thus, it is necessary to establish a standard for business dealing in an ethical manner. The current situation is the result of a lack of a common standard.
Banks and the story of selfishness
In 2011, many businesses were facing difficulties because there was neither new contract and nor capital. There are even businesses with new contracts but no capital to perform the contracts' obligation. While the economy was lackluster, banks posted astronomical profits. During the first eight months of 2012, though they always complained about the difficulty of capital disbursement, and while the credit growth rate was a mere 1.4 percent given the annual target of 15-17 percent per year, banks still posted healthy profit. There are banks such as Eximbank, ACB and OCB whose profits surged to the tune of thousands of billions of VND. During the first nine months, DongA Bank posted an income before tax of VND1,042 billion, or 69.48 percent of the annual target; Sacombank, after setting aside VND2,563 billion as reserve, achieved 3/4 the annual target and posted a profit of VND2.107 billion.
Not to mention the reliability of these numbers, the fact that banks are reluctant to lend money to businesses in need of capital or those which cannot even access the capital in this challenging period lends evidence to a possible loophole in business ethic. According to the result of the research titled "Initiatives to establish the standard and transparency in business deals in Vietnam" that is publicised by VCCI in September 2012, 47.6 percent of businesses claimed that they needed to expense a grease payment for bank representatives to secure the loan contracts and 60.6 percent believed that a close relationship with banks or credit loan representatives was a must. This grease payment averages 2.8 percent the total loan capital, and sometimes can be as high as 10 percent according the report.
The National Financial Supervisory Commission has also recently publicised the result of a April 2012 survey on more than 60 businesses based in Ho Chi Minh City and Da Nang. The result revealed that 63 percent of businesses lamented about the difficulty in accessing banks' capital in 2011 as well as the first three months of 2012.
Even with the grease payment, businesses still have difficulty accessing banks' capital due to a stall in banks’ capital flow. This stall is partly due to an unsubstantial decrease in lending rate despite efforts by the State Bank of Vietnam (SBV) to push the deposit rate from 14 percent to 9 percent per year, which does not make a significant impact because of the short timeframe. Moreover, banks’ profit is also threatened by huge real estate debt which is hard to retrieve. Some banks lend to their “backyard” businesses at a low rate while maintain a higher lending rate for normal businesses in order to make a profit. Capital available for the private sector is depleted due to capital flow into public investment projects-the least efficient sector. There is still cross-ownership among banks; the lack of transparency regarding bad debt statistics as well as illegal market manipulation and bank acquisition activities performed by a group of advantaged tycoons.
If we apply the group work principle to help clarify these abovementioned facts, it is hard to believe commercial banks still consider developing the economy as their top priority.
Disregard the customers’ benefit
Monopoly and disregard for the customers’ benefit are not rare occurrences in the business environment in Vietnam. Because of the protection given to the monopolised businesses, this situation has been in existence for a while. The latest example is the tussle between the Ministry of Industry and Trade and the Ministry of Finance regarding the decision to increase the gas price of Petrolimex, who holds a monopoly position in sale of petroleum products; or the story of the electric industry which takes a huge loss in its core business due to loss in during the delivery process and high electric price, but still invests in many other non-core businesses etc.
For businesses which do not possess a monopoly position, customers’ benefit is disregarded in other manners. For example, many big corporations are currently sitting on a mountain of debt. Many economic experts believe that they took advantage of the bubble to speculate on real estate, which drives up the real estate prices to sky-high level. Of course, the customers’ benefit such as that of secondary investors or people with real demand is not secured when the bubble bursts.
In other industries, when businesses manufacture products of inferior quality which uses banned chemical substances; when extravagant advertising campaigns serve to exaggerate the true quality and function of the products; or when businesses’ operation destroy the environment etc., the customers are the ones who suffer the consequences.
The need to establish a standard for business dealing
When the bar is not set for doing business, not only consumers but the society and economy at large suffers. Thus, it is necessary to establish a standard for business dealing in an ethical manner. The current situation is the result of a lack of a common standard. Regarding the standard for doing business, Dr Dang Duc Dung, Managing Director of the Asia Pacific Region of Kangaroo Group said, “The common standard for business dealing is built around the company’s culture. The establishment of a company culture should be based on three conditions: global integration; product quality assurance in manufacturing, distribution and product services and the active involvement in social activities.”
On the other hand, historian Duong Trung Quoc believes that “Getting rich on the basis of patriotism and the continuous endeavour to integrate with the international market is the cornerstone of building a business culture.”
According to Associate Prof and Dr Pham Thanh Tam, Head of the Institute for Business Research and Development, in order to establish a well-rounded business culture, “businesses need to care not only about themselves but about the interest of the society as a whole. Regardless of whether the businesses are the backbone of the economy, monopolies, state-owned or private, they all have to play their parts in building the common standard for business dealing. This standard should be built upon the compromise between the interest of the businesses and the society,” Mr Tam asserted.
Nguyen Thanh
Vietnamese
