Raising Competitiveness and Growth Quality

At the launching ceremony of the Vietnamese Business Annual Report 2013 in Hanoi by the Vietnam Chamber of Commerce and Industry (VCCI) in collaboration with the National Assembly’s Economic Committee and the World Bank, Ms Pham Thi Thu Hang, VCCI General Secretary, said, that Vietnam is carrying out its economic restructuring and this is a long road with a lot of obstacles. Meanwhile, the restructuring of domestic enterprises is actually the re-planning and execution of business strategies, or in other words, positioning businesses in the sector's development strategy. Each enterprise will implement its strategies and corporate restructuring results will create a shift in industry structure.

 

According to the report, although Vietnam's economy restored growth from 2011 to 2013 after a period of decline, the growth rate was still lower than that in other countries in the region as well as than the growth potential of the country, which rooted from slow-growing labour productivity and declining investment efficiency.

 

The report said investment restructuring process in Vietnam is also in trouble when the private sector only increased its investment contribution to total social investment capital from 22.88 percent (2000) to 37.6 percent (2013) and the public investment still played a dominant role. In addition, financial system restructuring improved capital adequacy ratio in the credit system but bad debt problems remained unresolved. The value of bad debts was still high and on the rising trend.

 

The report added that Vietnam had nearly 77,000 new business start-ups in 2013, compared with nearly 61,000 closures, and about 14,000 companies resumed operations after a period of suspension. This partially reflected difficulties against enterprises.

 

Dr Vu Tien Loc, VCCI President, said private sector development in Vietnam is considered an important driving force to propel economic growth in recent years. However, the private sector, especially small and medium enterprises (SMEs), is facing difficulties in accessing development resources such as capital markets and seeking effective supports from the State.

 

He said improving the quality of growth must be based on a sustainable growth model. This model requires the active participation of enterprises, especially the private. Only the resonance of macroeconomic policies with development strategies of enterprises can help Vietnam succeed in changing growth model and enhancing economic competitiveness.

 

Given economic situations in Vietnam, the report put forth some policy recommendations. Accordingly, the Government needs to give priority to setting up sectoral, regional economic structure appropriate to business effective objectives and promote local and national competitive advantages. To do this, restructuring emphasises (investment restructuring, enterprise restructuring and credit institution restructuring) that the Government is pursuing must be made uniform and consistent.

 

"The Government must be consistent with investment restructuring targets, especially public investment, in the direction that the proportion of investment in GDP does not rise and the proportion of public investment in total investment does not increase. In public investment, it needs to focus on technical infrastructure and human resource investment, reduce production investment, especially in the fields that the private sector can do," the report analysed.

 

With respect to the restructuring of State-owned enterprises (SOEs), SOE reform must promote flexibility and endurance of small and medium enterprises which are inherent characteristic of the private sector and reduce the "transgression” of SOEs into the private sector.

 

To restructure credit institutions, according to the report, Vietnam needs to widen concessional fund sources from the Vietnam Development Bank, the Enterprise Development Fund, and commercial banks to support enterprises to invest for modernisation and competitiveness improvement in key business fields. It also needs to support SMEs to access loans with reasonable interest rates.

 

Besides, according to Ms Hang, Vietnam needs to build institutions to encourage and direct market-driven investment by diversifying export markets and penetrating into value chains rather than export to separate nations. It also needs to expand the domestic market, set up domestic supply chains and pay attention to rural markets.

 

To formulate a competitive market, she said that the Government needs to control natural monopolies, place trade policies in the overall integration strategy, combine trade facilitation requirements with investment policies, intellectual property rights protection and competition policies, regulate the market in accordance integration institutions, build consumer protection institutions, and develop consumer protection centres.

In particular, there is a need to raise the scientific and technological content and the proportion of domestic value in products by investing for technological innovation and knowledge transfer, attracting FDI capital, and improving labour productivity; select some sectors with good competitive advantages to develop, focusing on good-performing midsize companies.