Continuing to Successfully Achieve Dual Goals

9:32:33 PM | 11/2/2021

In the face of unprecedented developments in history, Vietnam has achieved many important "dual goals", highly appreciated by the international community. It is certain that “The country's position is rising, the confidence is back", the macro-economy has become more stable; institutional reform has been accelerated, the business community does hope that the achievements will be a solid foundation for Vietnam to successfully enter a new stage of development. On the occasion of the Year of the Buffalo, Vietnam Business Forum has an exclusive interview with Dr. Vu Tien Loc, Chairman & President of the Vietnam Chamber of Commerce and Industry (VCCI). Duy Anh reports.

How have the good pandemic containment and reforms of Vietnam in the past year contributed to the development of enterprises and entrepreneurs?

Exactly as General Secretary, President Nguyen Phu Trong repeatedly affirmed: "Never has our country had the opportunity and international reputation and position as it has today.” Vietnam has achieved many "dual goals" in the past years: Socioeconomic development and Party construction; macroeconomic stability and continued growth; internal relations and external relations; integration and self-reliance; disease control and livelihoods for the people.

During the pandemic, the world became fragile; the might of major economies was threatened; the world economy was sent deeply into crisis but Vietnam still managed to contain the pandemic and achieve positive growth, gaining a steady posture, emerging as one of the bright spots on the world economic map.

Vietnam's GDP growth reached 2.91% in 2020. Although this was the lowest in decades, it was a great success in the context of the complicated Covid-19 pandemic development. This was one of the highest growth rates in the world. In 2020, Vietnam's economy expanded to US$343 billion, ranking in the Top 40 largest economies in the world and ranking 4th in ASEAN. Vietnam’s GDP per capita was US$3,521, ranking 6th in ASEAN.

The total trade value was US$543.9 billion in 2020. In the year, 112 countries and territories invested US$28.5 billion in Vietnam, down 25% from 2019. Top investors included Singapore, South Korea, China and Japan. While global investment declined dramatically due to Covid-19 impacts, this result was much better than that of other countries and showed the appeal of Vietnam to international investors.

The above economic successes come from the Government’s tireless efforts since the beginning of the year to restore production and business activities and facilitate the development of the business community. Remarkably, the Government has successfully established a much steadier macro-economic foundation than in previous terms, reflected in inflation control, low public debt, and stable balance of current payment, record export, increased foreign exchange reserves. Besides, economic institutional reforms with a focus on administrative procedure reform have continued to be promoted. E-government has been accelerated with more online public services in place. Indicators of business environment and competitiveness, based on global rankings, have been upgraded. The gap with leading ASEAN countries has been narrowed.

Many new opportunities have been opened up to the Vietnamese business community, including the EU - Vietnam Free Trade Agreement (EVFTA) and Investment Protection Agreement (EVIPA) (ratified in June 2020), Regional Comprehensive Economic Partnership (RCEP) (signed on November 15, 2020), Vietnam - UK Free Trade Agreement (UKVFTA) (signed on December 11, 2020) and Vietnam-Korea Origin Agreement (signed on December 13, 2020). The National Assembly has also passed a number of important laws, such as the revised Enterprise Law, the revised Investment Law, the revised Construction Law, and the Public-Private Partnership Investment Law.

It can be affirmed that resilience is becoming a core competitiveness of the Vietnamese people as well as the Vietnamese economy in an uncertain and unpredictable world. Vietnam has gained high appreciation from international friends and is becoming a safe destination for international investors on their global journey forming a wave of responsible and sustainable investments.

Despite the many achievements, it had to be admitted that 2020 is the year the business community had to face enormous difficulties and challenges. The global Covid-19 pandemic, the complicated U.S.-China trade war, and natural disasters, especially the historic flooding in the Central region, exerted adverse impacts on business performance of local enterprises.

In that context, the Vietnamese business community has carried out many solutions to maintain production and business activities such as promoting e-commerce and digital economy; changing key products and services; actively looking for new input markets and output markets. As a result, in 2020, Vietnam had 134,900 new companies, which invested more than VND2,235.6 trillion and employed 1.043 million workers. In addition, 44,100 enterprises resumed operations, up 11.9% over 2019.

These economic successes also result from outstanding efforts of Vietnamese enterprises in this unprecedented difficult context. Many businesses have actively planned to deal with difficulties and made great efforts to maintain production.

2021 is forecast to be another tough year. The business community expects the Government to take concrete and quick measures to immediately resolve the bottlenecks that prevent businesses from taking advantage of integration opportunities from FTAs. What recommendations do you have to deal with those bottlenecks?

Entering 2021, the first year of executing the 10-year socio-economic development strategy in 2021-2030, the Government will continue to effectively fulfill the goals of preventing the pandemic and recovering socio-economic development; strongly accelerating economic restructuring with a changing growth model, improving productivity, quality, performance, independence and competitiveness of the economy; accelerating digital transformation and developing the digital economy, building a digital society; developing high-quality human resources and fostering science, technology and innovation; reforming administrative procedures, creating an open and favorable investment and business environment to unlock resources for development.

It will be very helpful for the business community if many problems are solved quickly. Since the Covid-19 pandemic broke out at the beginning of 2020, VCCI has conducted an assessment survey on pandemic impacts on enterprises, reported the result and proposed many recommendations to the Government. Many recommendations have been considered and applied by the Government in its support measures for businesses.

For the time being, the business community expects many bottlenecks to be cleared by the Government. In human resources, VCCI has proposed developing and implementing training programs for specialized technical workers in supporting engineering industries. We must have specific skills training programs for specific industries that belong to key value chains to attract FDI relocating from other countries. It is necessary to improve the quality of human resources based on scientific assessments and forecasts of labor market changes in the next 5-10 years.

In infrastructure, VCCI and the business community have proposed that the Government effectively enact the Public-Private Partnership (PPP) Law and the Public Investment Law with priority given to the transport infrastructure sector and incomplete ongoing projects; and ensure the connectivity of key production areas (agriculture and industry) to the international border gates.

With respect to enhancing product competitiveness, although this belongs to the responsibility of each enterprise, the business community expects that the Government can support enterprises to strengthen the capacity and quality of trade and investment promotion through diplomatic missions or spare appropriate resources for trade promotion agencies such as VCCI. Necessary actions may be setting up a market portal and business connection for businesses, especially with the EU market and markets where Vietnam already has FTA (with information on commercial commitments with Vietnam; import and export procedures; relevant legal regulations; information on market characteristics, distribution channels and partners.)

Domestically, as for agricultural products that partner countries have specific requirements on technical standards, food hygiene and safety (e.g. irradiation and pre-loading inspection), the Government should support establishing technical centers to guide producers and exporters to fulfill requirements; conducting free or preferential inspection of goods according to standards imposed by importing countries; and working with designated technical units to meet technical requirements.

Besides, to facilitate business recovery and development in the coming time, the business community hoped that the Government will further improve the business environment and national competitiveness, with a focus placed on reforming administrative procedures, business conditions and cost savings for businesses, building e-Government where it is necessary to widely apply information technology to administrative procedures, increase online public services of Category 3 and Category 4. The Government will proactively research and provide information on market access, capital access, and labor market for businesses.

In recent years, the digital economy has grown rapidly and been given priority and attention for development by the Government. Resolution 52-NQ/TW of the Politburo on guidelines and policies on an active approach to the Fourth Industrial Revolution sets the target that the digital economy accounts for 20% of GDP by 2025. So, where are Vietnamese businesses standing and what should be done to achieve this goal?

Digital economy will be an opportunity for Vietnam to reposition itself and change itself in the world economy. In the post-Covid-19 recovery period, digital transformation will help Vietnamese businesses, especially small and medium-sized enterprises (SMEs), find a more flexible business model that requires less cost and boosts optimization to overcome difficulties.

At present, many businesses still lack interest in the digital economy and they simply think that digital transformation is just a means to show off rather than a very worthwhile investment to enhance competitiveness in the domestic and international market. The fear of loss and the hesitance to change are the biggest barriers to the digital transformation of businesses and the economy.

Given the importance of the digital economy and e-commerce, some new generation FTAs have a separate chapter on e-commerce facilitation and protection, consumer interest protection, personal information protection, respect to e-commerce freedom. Therefore, in a narrow field such as import and export, integrating digital technology into the entire import-export process for enterprises is imperative. As for ministries and sectors, the coordination of digital platform operations among agencies in the whole digital service network to ensure smooth import and export such as customs, taxation, logistics and banking is of vital importance.

The Prime Minister has approved the National Digital Transformation Program to 2025, with a vision to 2030. This is an opportunity for Vietnam to become a digital country and to be at the forefront of testing new models and technologies.

Although this is part of technology, the success or failure of digital transformation does not depend on technology but on political determination and national institutions. Therefore, the Government needs to create a modern institutional system with appropriate legal regulations, synchronous infrastructure, abundant skilled human resources to create an ecosystem for e-commerce and the digital economy. For enterprises, it is necessary to renew their business model, establish a digitally enabled governance model towards innovative, sustainable and inclusive development goals.

I want to use the order of General Vo Nguyen Giap for the digital transformation journey in Vietnam today: “Be quick, even quicker. Daring, even more daring”. Digital transformation is an arduous journey that requires high resolve and courage. Only by doing so will Vietnam rise.

Vietnam Is Well-Positioned to Attract FDI

Vietnam’s strong international economic integration agenda and efforts to restructure the economy to encourage efficiency, sustainability and the production of value-added products and services, will help to contribute to its attractiveness as an FDI destination and its trade performance. Vietnam’s efforts to create a business-friendly environment and bring Vietnam in line with international standards, particularly in the areas of labor, environment and procurement, are welcome and crucial to the effective implementation of new generation trade agreements. Vietnam Business Forum would like to introduce recommendations by ambassadors, officials and representatives of international organizations on how to further improve Vietnam’s business and investment environments. 

 

Canadian companies are increasingly interested in exploring Vietnam’s market and in developing new business relations in Vietnam
H.E. Deborah Paul, Ambassador of Canada to Vietnam

Vietnam is a growing trade partner for Canada with more Canadian companies looking to Vietnam as a potential market for investment. We welcome the Vietnamese government’s efforts to create a business-friendly legal environment, and to make administrative procedures simpler for businesses. For example, the recent launch of the National Reporting System and the Government Operations Center in August 2020 marked a significant step toward government digitalization to connect ministries and ministerial-level agencies, streamline administrative procedures and report on socio-economic performance indicators in a timely manner to support the government’s operations.

Vietnam’s strong international economic integration agenda and efforts to restructure the economy to encourage efficiency, sustainability and the production of value-added products and services, will help to contribute to its attractiveness as an FDI destination and its trade performance. Vietnam’s efforts to create a business-friendly environment and bring Vietnam in line with international standards, particularly in the areas of labor, environment and procurement, are welcome and crucial to the effective implementation of new generation trade agreements, such as the CPTPP.

I know that Vietnamese government leaders have also announced their determination to facilitate start-ups and entrepreneurship, which is also highly commendable. We would further encourage efforts to support women entrepreneurs and women-owned businesses, to ensure equal access to both the opportunities and the benefits of economic growth.

Canadian companies have been receptive to the reform signals that Vietnam has been sending in recent years. This is reflected in the increasing interest from Canadian companies in exploring the market and in developing new business relations in Vietnam in a wide range of sectors, including agriculture, education, financial services, ICT, aerospace, and sustainable technologies, to name a few.

 The two-way trade relationship between Canada and Vietnam is strong and an integral component of our bilateral relationship. Vietnam has been Canada’s largest trading partner in ASEAN since 2015.

Vietnam’s exporters enjoy many opportunities under the CPTPP especially in manufacturing and processing industries like electronic machinery, footwear, apparel, furniture, agri-food and seafood products. Conversely, Canadian products such as agricultural commodities, agri-food, fish, seafood, forest and value-added wood products enjoy preferential market access in Vietnam. In addition, the CPTPP improves Vietnamese access to Canadian expertise in areas such as genomics, bio-technology, environmental services, green and sustainable technology. This can support the on-going restructuring of Vietnam’s agricultural sector, leading to increased efficiencies and increased food security.

During the first year of CPTPP implementation (2019), Canada-Vietnam bilateral merchandise trade reached a new record of CAD 7.9 billion, an increase of 23% year-over-year. Vietnam’s overall exports to Canada increased by almost 30% in 2019, with a remarkable increase seen in mobile telephones, footwear, furniture and garments. Despite the impacts of COVID-19, bilateral trade in the first ten months of 2020 recorded a positive growth of 10%. These benefits will continue to grow as the CPTPP expands through ratification and accession of new members.

On the occasion of the 2nd anniversary of the entry into force of the CPTPP, the Embassy of Canada in collaboration with the VCCI is organizing a joint seminar to review the implementation of the agreement and discuss ways to further strengthen trade between the two countries in the post-COVID era.

I am also excited about other ways we can further deepen our trade and investment relationship in 2021, particularly through launching ASEAN-Canada FTA negotiations. Launching ASEAN-Canada FTA negotiations would send an important signal about our shared commitment to rules-based trade, contribute to our COVID-19 recovery efforts, and support the growth of intra-regional supply chains among Canadian suppliers and buyers in Vietnam and Southeast Asia.

 

Lessons from income gap and humanitarian tradition
Mr. MASUDA Chikahiro - Chief Representative of JICA HCM City Branch

I feel very lucky to have the opportunity to work in Vietnam for the second time. My previous term ended about three years ago. During that time, Vietnam's GDP increased by 22.4% and GDP per capita rose to more than US$3,000 according to the new calculation method.

According to a 2019 report by Knight Frank (United Kingdom), a large real estate consulting and service company, super-rich Vietnamese people with net worth of over US$30 million (about 3.1 billion Japanese yen) are expanding at the fastest speed in the world. Five Vietnamese people are on the Forbes billionaire list, instead of only one as of three years ago.

Japan had such a period in the past. During the economic boom (1960-1970) of the Showa era, the annual economic growth was 10% or more and Japan enjoyed this growth success. However, even during the economic boom with hundreds of millions of people entering the middle class, the income gap was insignificant in Japanese society.

In Vietnam, the share of health spending to GDP was 5.9% (2017), much higher than that of neighboring countries and the share has been kept at 5.4% for 18 years.

When the earthquake and tsunami attacked Japan in 2011, Vietnam immediately sent consolations and donations to the Japanese.

In 2020, when central Vietnam suffered many devastating floods, the Vietnamese staff of JICA Vietnam Office actively donated money and clothes to support the victims. In my opinion, that showed Vietnam is a nation and a people that values ​​social welfare.

Some days ago, I heard a Vietnamese proverb about humanity read by my employee at JICA HCM City Branch Office. The proverb tells people in the same community to love and embrace each other in life, as gourd and zucchini are different kinds but grow in the same place, grow in the same way.

I believe that Vietnam will continue to grow its economy and become more and more prosperous. At the same time, I hope that you will take the income gap in the world as a lesson for yourselves. Do help each other to grow society in a perfect and balanced way.

 

The opportunities and challenges
Mr. Takeo Nakajima, Chief Representative, JETRO Hanoi, Vice Chairman, JCCI

VCCI and the Japanese business community has had great years to cooperate. We have the same goals to achieve; to lead the Vietnam economy more robust and make Vietnam a business-friendly country to attract excellent companies. 

The economic relation between Vietnam and Japan keeps growing even amid the COVID-19 crisis. JETRO, as a Japanese government body, has been assisting Japanese enterprises in starting and expanding business in Vietnam through various tools.

The business chances in Vietnam are three folds; the growing domestic market, the competitive exporting base, and the potential digital sector. First, more Japanese enterprises focus on the Vietnamese market, which has grown double-digit over the years. According to the JETRO survey last year, the number one reason for their business expansion in Vietnam is the growing domestic market (BtoB and BtoC). 

The second is the exporting base: many FTAs concluded, competitive costs, and stable manufacturing activities thanks to controlling the pandemic. The global companies in Asia plan to transform the supply chain, and Vietnam is a crucial country. 

The third is the digital and innovation space. JETRO assists in matching Vietnamese startups and Japanese enterprises. Japan side has fine technology, experience, and global network, and Vietnam has ideas, products, and talents. Logistics, transportation, retail, FA, healthcare, education, and environmental protection are potential examples. 

 However, besides the opportunities, the Vietnamese economy will also face challenges. First, due to the pandemic, business transaction has shrunk both domestic and international. The JETRO survey shows that 49% of the respondents in Vietnam suffer from a decrease in orders. The percentage jumped from 24% last year though it varies from sectors. The shrink happens in Thailand, Indonesia, and the other ASEAN countries - the negative impact spreads across the region. 

The second challenge is the low rate in the local procurement; The Japanese companies procure 37% of material and parts in Vietnam while importing the other 63%. The low procurement may cause higher costs, supply chain disruption, and unstable quality control. 

Thirdly, hiring and securing human resources continues to be a headache. The issue has eased a little from the previous year due to the economic slowdown. Still, well above 60% of the companies raise the issue. 

 

Doing business does not purely count on profit but rather about creating partnership
Ms. Morakot Janemathukorn, Chargé d’Affaires a.i., Royal Thai Embassy in Hanoi

Traits of Thai and Vietnamese business culture shared with most East and Southeast Asian countries include collectivism, courtesy, saving ‘face’ and strong hierarchy. We do not feel so bothered talking about personal life to determine who our partner really is and trust-building. We value a person’s social standing, dignity, reputation and honor. Trust is also key to real thoughts and feeling. Confronting unpleasant topics is less welcomed for the Vietnamese and Thais. Leaving someone in the dark is not always by intention but rather goodwill to avoid conflicts. Thai business culture also contains the enjoyment or ‘sanook’ concept: the effort to achieve pleasure in whatever ones do. While Thais are productive and hard-working, initiatives for more fun especially in entertainment and marketing business are very common. Ones should not take the first ‘yes’ or ‘no’ too optimistically or pessimistically when dealing with the Thais or Vietnamese. Once you reach trust, some could help you like as a family member. Doing business in Thailand, hence, does not purely count on profit but rather about creating partnership, a similar notion in Vietnam.

Besides, solid foundation of partnership as a prime driver of mutual interest in Asia, Thailand and Vietnam have also undergone a series of regulatory reforms in pursuit of better business environment during the past few decades, climbing to a higher ranking of the World Bank report. Thailand is now the 3rd in ASEAN while Vietnam is the World’s economic rising star. I believe our countries have far more room to contribute to the global economy regardless of the size of our economy, as ones say: “It takes all sorts to make a world”.

I hope that bridging closer and greater friendship for our common prosperity with sustainability this year will be a prominent marking of our 45th anniversary of Thailand-Vietnam diplomatic relations in 2021. 

 

Vietnam is well-positioned to attract FDI
Mr. Francois Painchaud, Resident Representative, Vietnam/Lao PDR, IMF

Prior to COVID-19 Vietnam experienced a prolonged period of high growth and impressive improvements in living standards. In recent years, Vietnam’s economic growth averaged 7 percent, one of the highest in the world, owing to Viet Nam’s commitment to macroeconomic stability, trade openness, and private-sector-led growth. In addition, Vietnam also took actions to reduce the fiscal deficit, the debt-to-GDP ratio and increase FX reserves. The banking system’s financial health was also improved.

Vietnam has taken decisive steps to contain the health and economic impact of COVID-19. Swift introduction of containment measures, combined with aggressive contact tracing, targeted testing, and isolation of suspected cases helped contain new infections. Fiscal policy provided support to vulnerable households and firms. Measures taken by the State Bank of Vietnam lowered the cost of borrowing and facilitated the continued flow of credit. These helped limit the COVID-19 fallout and economic growth in 2020 reached 2.9 percent, among the highest in the world.

Continued structural reforms are needed to make the most of Vietnam’s considerable potential. These reforms will help support robust and inclusive growth and reduce the economic dualism between the FDI and non-FDI sectors – the Vietnamese economy is characterized by a productive FDI sector and a large but relatively less productive non-FDI sector.

Vietnam is well-positioned to attract FDI once COVID-19 abates. Of course, COVID-19 has negatively affected the global value chains and FDI flows around the world and in Vietnam. A global economic recovery from the pandemic could re-invigorate global value chains and FDI. Vietnam has a lot to offer to foreign investors: Vietnam was very successful at containing COVID-19 while maintaining macroeconomic stability; it has a large population, growing income, positive economic outlook, a good geographical location, an already open economy and continuous efforts by the authorities to expand trade agreements; and Vietnam is committed to improving its institutions and regulations, infrastructure and connectivity; and strengthening skills to meet businesses’ needs.

While FDI has been and will continue to be important for Vietnam’s economic development, the non-FDI sector also has great potential and accounts for the vast majority of jobs in Vietnam. Here, the Government should help unleash the creativity and industriousness of the Vietnamese people by reducing the regulatory burden faced by domestic private firms, improving access to land and financial resources, particularly for SMEs, and reducing corruption. Establishing an expedited SME-specific insolvency regime would help unlock capital and prevent unnecessary liquidations. Reducing labor skill mismatches, increasing human capital and technology access would also boost labor productivity.

 

Italian businesses are satisfied with Vietnam’s business environment
Mr. Antonio Alessandro - Italian Ambassador to Vietnam

There are more than 100 Italian companies with investments and economic interests in Vietnam. They are generally very satisfied with the local business environment and appreciate the political and economic stability that Vietnam has to offer. There are also some weaknesses, for example in the logistic infrastructures or in the administrative and customs procedures and protection of intellectual property rights, but the Vietnamese Government has shown a great commitment in addressing them: many new infrastructure projects were approved and in 2020 and a new e-government portal was launched to speed up and facilitate bureaucratic relations.

The EVFTA provides an additional stimulus in this direction: the recent reform of the Labor Code and the related decrees are seen by us as important developments. The adoption of some regulations (revision of the customs tariffs, rules of origin) has also contributed to the swift implementation of the Agreement. We look forward to the completion of this process, so that all the aspects of the EVFTA could be fully in force. I refer in particular to the elimination of non-tariff barriers and the achievement of a level playing field for companies of both sides. A major goal for Italy is the recognition of the EU as a single entity, without any differentiation among its 27 Member states, in sectors like agri-food and pharmaceuticals. This point was raised by Under-secretary of State Manlio Di Stefano during the last session of the Economic Joint Commission on 14 December last year. 

Italian trade with Vietnam has been affected by the pandemic and we count on the EVFTA to recover from the crisis and reach the target of US$5 billion which was set by the two heads of Government during the visit of Prime Minister Giuseppe Conte to Hanoi in June 2019.

 There is a growing interest in the Vietnamese market among Italian companies. The Embassy has contributed to many promotional events in Vietnam, such as "The True Italian Taste" organized by the Italian Chamber of Commerce ICHAM, and "A taste of Italy every day", managed by the Italian Trade Agency ICE. The Embassy has also contributed to several online country presentations to promote Vietnam as a trade and investment destination to Italian small and medium companies.

We see great potential in the traditional sectors of excellence of Made in Italy, such as industrial machinery, furniture, fashion and food, both for premium brands and more affordable market segments. As for food, after the first import of Italian apples in 2020, we aim at finalizing the authorization for Italian kiwis, pears and beef.

The year 2021 could also see the introduction of new Italian automotive brands: the market in Vietnam is thriving and the Italian industry is looking at it with great interest. Pharmaceuticals, cosmetics and wellness products from Italy are also becoming more and more acknowledged by the Vietnamese costumers for their quality and safety. Finally, we are working on how to bring to Vietnam more cultural and creative products such as TV, cinema, design, music, art and sport.

Source: Vietnam Business Forum