Firms Weathering the Storm for Bright Future

Vietnam is entering a new stage of development with its increasingly enhanced potential, position and international reputation. Despite the negative impacts of the COVID-19 pandemic and the complicated and unpredictable changes in global settings, Vietnam still ensured macroeconomic stability and maintained economic growth in the past year. These successes come from the great efforts of the Vietnamese business community.

Mr. Hoang Quang Phong, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI), speaks with Vietnam Business Forum in an interview on this matter.

What do you think about difficulties and challenges faced by enterprises in the current period, especially importers and exporters?

Vietnam presently has nearly 900,000 companies, 14,400 cooperatives and more than 5 million business households. Vietnamese companies largely have small scale, weak capacity, and limited resilience and competitiveness. According to statistics, on average, 18,100 companies were established and resumed to normal operations a month while 12,500 companies went bankrupt in the given period. In other words, seven out of 10 new companies went bankrupt. This reflects that the business sector is still seriously vulnerable to global economic difficulties that are prone to our country.

Against the current backdrop where the world economy is facing risks and uncertainties, the business community is surrounded by numerous challenges, particularly equitable access to resources development (capital, land and business opportunities among others).

Shortly after they resumed normal from COVID-19 epidemic, companies are facing difficulties in market and regional and international development in addition to structural adjustment, partner restructuring and order disruption. Therefore, market volatility, changes in partners and even a likely decline in contractual agreements in the coming time will exert a strong impact on existence and development of enterprises. According to statistics, the decrease in new orders (including export orders) towards the end of this year and the beginning of the next year resulted in an increase in finished goods inventories. As a result, manufacturing will be contracted. Many businesses are finding it very hard to search for input supplies because domestic and international markets are constantly falling short of raw inputs, fuels and materials.

Entering 2023, many international organizations forecast that the world economy would fall into recession. Meanwhile, strategic geopolitical competition among major powers, energy crisis in Europe, China-US and Western economic conflicts, Russia-Ukraine conflict are likely to develop complicatedly and unpredictably. Policy changes in major countries has risked the stability of goods and services, financial and currency markets, food security, and global energy security, including Vietnam.

During this period, the business community desperately needs the participation of authorities. Therefore, the business community and economic sectors have equal access to all development resources of the society, from capital, land, development opportunities and domestic and international market expansion.

Despite being affected by the COVID-19 pandemic, conflicts in the world and global inflation, investor confidence in Vietnam's economy and business investment environment continue to grow in the past year. What do you think about this issue?

In the first 11 months of 2022, foreign investors registered to invest over US$25.1 billion in their projects and share purchases, down 5% year on year. Although newly registered capital has not fully recovered after the disruption of epidemic prevention measures in 2021 and global geopolitical fluctuations, the fund is also gradually looking up. In particular, the total amount of FDI fund realized in Vietnam increased by more than 15%. This has confirmed foreign investors' confidence in Vietnam's economy and investment environment.

In the investment capital structure, the electronics processing and manufacturing sector is increasing, accounting for nearly 60%, especially in the past year when there were many electronic and semiconductor investment projects, making foreign investment flows into Vietnam grow in quality. Large-scale projects are gradually replacing smaller ones.

Vietnam's economy is forecast to face numerous difficulties in the context of unpredictable global setting but Vietnam is still regarded by foreign organizations as an attractive destination for foreign investment capital flows in the long term because countries aim this market to locate their processing and manufacturing for ASEAN and for the world market.

Hence, further improving the investment environment, removing difficulties in human resources, logistics, technology absorption and added value in global supply chains will be important issues that Vietnam needs to solve more effectively to attract FDI inflows.

What shortcomings need to be solved for enterprises to overcome current difficult challenges?

First of all, it is necessary to increase accessibility and make good use of government-backed support packages like reducing value-added tax and special consumption tax on gasoline, reducing electricity bills, and important input costs of many manufacturing industries.

In addition, it is necessary to take measures to remove obstacles to access to preferential loans for enterprises, enabling business recovery support policies to work really effectively. And, there is a need for timely support solutions for strongly recovering industries like tourism and services, which are currently facing a shortage of human resources.

At the same time, it is necessary to improve the legal framework to facilitate the formation and development of innovation-driven business models. It is necessary to develop a separate law on circular economy.

Moreover, it is necessary to speed up programs for enterprise development, business environment improvement and national competitiveness enhancement. There are specific and practical action plans to take advantage of FTA tariff preferences to boost exports and imports and handle policy matters in connection with rules of origin in FTAs.

In particular, it is necessary to further enhance the performance of the government apparatus at all levels; have solutions to check the implementation process and pay attention to improving the performance of central and local agencies.

Besides the above solutions, what support solutions did VCCI adopt to improve competitiveness for enterprises toward sustainable development?

The Government is finalizing a draft resolution on key policies and solutions to support enterprises to adapt proactively, recover quickly and develop sustainably by 2025 in order to build strong Vietnamese enterprises into an important force to ensure economic autonomy.

Over the past time, VCCI has carried out many support activities for the Vietnamese business community; conducted research and development of Vietnamese business ethics rules, attended by senior consultants, scientific researchers and entrepreneurs; and referred to many international and domestic documents and models.

VCCI officially approved the "Code of Business Ethics in Vietnam" with six articles on business ethics in Vietnam: Economic value creation for society; Regulatory compliance; Transparency, fairness, integrity; Creativity, cooperation, mutual development; Respect for nature and environmental protection; and Patriotism and responsibility to society and family. Perhaps, entrepreneurial ethics will help lead enterprises to improve competitiveness and sustainable development. If companies have a good business culture and have good care of employees, they will certainly have strong resources and resilience to external pressures.

VCCI hopes that private companies - which officially registered for establishment under the Law on Enterprises - will account for 15% of the nation’s GDP by 2025 and 20% by 2030 from the current 9%. Besides, Vietnam will have at least 10 giant domestic private industrial corporations and 10 giant domestic private service corporations. The percentage of skilled workers will increase by 10 steps from the current standing. 35% of workers will be professionally certified. These big goals are not easy to accomplish, but VCCI is willing to go with the Vietnamese business community to deal with challenges to move towards a brighter future for business development and national economic development.

Thank you very much!

By Lan Anh, Vietnam Business Forum