Rising input costs and administrative costs are the biggest external and internal barriers to the growth of the business community. This is the first factor that affects the development of enterprises, according to the Report on Vietnam Economic Growth and Prospect 2016, titled “Impacts on growth of major industries”. The report was recently announced, together with the list of the 500 fastest and most prospective companies of Vietnam in 2016, in Hanoi by Vietnam Report.
The survey by Vietnam Report showed that up to 60 per cent of respondents consider input costs as the biggest external barrier to growth. The next barrier, with over 52 respondents agreeing, is market demand changes for products, services and the rise of competitors.
Meanwhile, the intrinsic barrier to business growth in the past three years is attributed to administration. This difficulty is faced by nearly a half of businesses surveyed, followed by barriers from recruitment and employment and lack of information about market trends and competitors, with respective choices of 42.1 per cent and 40.4 per cent.
According to the report, breakthrough spearheads in socioeconomic development strategy are infrastructure development, high-quality human resource development, and institutional reform, which have not made remarkable breakthroughs if they are taken into consideration with other countries in the region. Indeed, Vietnam has made significant improvements, particularly in infrastructure development and institutional reform. However, in the integration process, especially with the advent of the newly established ASEAN Economic Community (AEC), if Vietnam is behind other countries in the region, it means that it will have a worse economic competitiveness and its resources for growth will be constricted.
From the perspective of the business community in Vietnam, the biggest challenge to over 48 per cent of respondents relates to trade promotion and market expansion. The next two challenges, with an equal choice of 43.1 per cent, are governmental regulations and policies, taxes, customs fees and the rise of industry competitors.
The report showed that businesses opt for risky growth strategy in 2016 against the backdrop of TPP integration. Better business results achieved in a long way from 2011 to 2015 combined with positive economic forecasts for 2016 and particularly prospects of deploying TPP and AEC International integration commitments are reliable platforms for increasing business confidence and growth prospects of Vietnamese enterprises. More than 76 per cent of businesses surveyed plan to expand their business operations with the hope of grasping new growth opportunities; 22.1 per cent intend to maintain current business operations, and only 1.6 per cent want to scale down their business. This is a certain development trend when the economy is beginning to enter a new growth phase.
A majority of companies, including FDI and domestic, have witnessed improvements in technical efficiency. In general, technical efficiency of FDI companies is higher than that of domestic enterprises in the same industry. Assuming that companies in the same sector use similar technologies, the combination of inputs to create outputs by FDI companies is better than that of domestic companies.
Despite the criteria used for classifying companies by workforce or capital base, bigger companies have better technical efficiency than smaller ones. Export and investment operations of companies also have a positive interrelation with their technical efficiency. Companies with a longer operating time and companies located in better-built infrastructure will have higher technical efficiency.
Analyses in the report convey some policy recommendations for policymakers in a bid to support the business community in the context of quicker integration where competition pressure is growing. Major recommendations include infrastructure improvement, sufficient policy information provision and a better investment climate for companies to operate effectively.
Quynh Chi
Vietnamese
