Promoting Resources for Economic Development and Innovation

The main objectives of economic management are to enhance labor productivity and to improve the quality of life of the people by managing the five resources of social and economic development (financial, natural, manufactured, human and social) in a sustainable manner. However, human and social resources are the only ones that can actively foster socioeconomic development and innovation. The effective management of these two resources is the key factor that distinguishes a developed country from a developing one.

Businesses need to conduct research and participate in networks and alliances with national business associations such as VCCI and local and sectoral associations to leverage social resources

Human capital is the most valuable asset of any country in building its capacity. This resource refers to the labor productivity of an individual, which is inherited and developed through education and training as well as a conducive social environment. Moreover, history has shown that humans are social beings. We have evolved to be social with various structures and institutions that form social resources. Social resources are defined as the competitive advantages derived from the way an individual interacts with others, including structures, institutions, networks and relationships (family, neighborhood, community, business, trade union, voluntary socio-political organization, legal/political system and others) that enable individuals to maintain and enhance their human capital in collaboration with others and to be more productive when working collectively than individually.

To promote the key resources effectively, it is essential to build and develop human and social capital to manage other resources efficiently. This was the reason why nearly 80 years ago, on October 13, 1945, more than a month after the National Day of Vietnam, President Ho Chi Minh wrote a letter to the Vietnamese industrialist and commercialist community: “…A prosperous national economy means the business of entrepreneurs is prosperous. Therefore, I hope that the industrialist and commercialist circle will try to advise industrialists and commercialists to quickly join the nation-saving industrialist and commercialist union and make investments that benefit the nation and the people.” And this day, officially chosen as the Vietnam Entrepreneurs Day, aimed to highlight the important significance and role of entrepreneurs, enterprises, associations and federations of industry and trade as both a resource and a driving force in the country’s socioeconomic development.

Global slump hits Vietnam’s economy

The global economy is facing a bleak outlook, which affects Vietnam’s economy in three aspects:

Macroeconomy: The economy remains stable, inflation is under control, national credit ratings and international position continue to improve. However, due to the global economic crisis caused by the Russia-Ukraine conflict, the superpower competition and the policy responses to inflation in other countries, especially the Fed rate hikes, Vietnam’s economic growth in the first six months of 2023 was only 3.72%, close to the lowest in 12 years, putting immense pressure on the GDP growth prospect of this year. Achieving the growth target in 2023, the 5-year period from 2021 to 2025 and the 10-year strategic period from 2021 to 2030 becomes extremely challenging.

Business community: Corporate bankruptcies reached 15,600 cases in the first eight months of 2023. Moreover, the registered capital of newly established enterprises and resumed enterprises also decreased by nearly 20% from a year earlier. Meanwhile, total liabilities of State-owned enterprises (SOEs) increased 6% from 2021 to more than VND1,980 trillion (US$85 billion), equivalent to over half of their total assets. Their average debt-to-equity ratio is 1.09 times. These data indicate that the Vietnamese business community, including SOEs, is encountering many difficulties. Furthermore, in reality, the scale of newly established enterprises has tended to shrink.

Productivity: According to statistics, Vietnam’s labor productivity lags behind the region. In 2022, it was only a quarter of South Korea, nearly two-thirds of China and about two-thirds of Thailand. The situation was attributed not only to labor training, but also to slow changes in institutions and structures of Vietnamese social capital sources.

Today’s rapidly changing world with new regional and global strategic connection initiatives, along with the fact that Vietnam is now an active member of multilateral economic cooperation organizations such as ASEAN, RCEP and IPEF and has bilateral comprehensive strategic partnerships with the three largest members of the United Nations Security Council (China, Russia and the United States), requires us to employ the most capable people to take advantage of new development opportunities because human resources are the greatest asset of every organization and country. However, simply having the best talent is not enough; it is necessary to ensure that individuals are positioned for optimal success. In other words, hiring the best people is only part of the solution. It is more important to promote the best values of people. Doing so requires unleashing human and social potential by actively building and innovating institutions and organizational structures, including three main elements: people, apparatus and mechanism - to effectively implement the organization’s purposes in all three core criteria: cost, standards (technical, environmental and social) and progress.

Competition experts believe that, for developing countries, in addition to immediate socioeconomic development solutions and plans, it is equally important to focus research on construction and innovation strategy, combined with human and social resources development, because these are not only fundamental resources but also capital sources to foster and sustainably manage three remaining resources - environmental, financial and produced - towards a competitive society with increasingly improved labor productivity and quality of life of people.

Fostering enterprise participation and contribution to socioeconomic development

In that process, authorities proposed three notable contents and solutions to effectively utilize enterprises and their capital to actively promote socioeconomic development resources:

Entrepreneurs: The innovative and creative qualities of human capital demonstrated through four industrial revolutions, along with the invention of the market mechanism and the emergence of entrepreneurs have brought about a much more prosperous life and society than our ancestors. Therefore, the “settle-down” policy is a top priority for every country and a core foundation for developing human capital and entrepreneurs. Laws protect the basic needs of entrepreneurs such as production, business, study and personal security from threats like war, conflict, violence and unfair competition. In particular, ensuring trust in justice and law must be one of the core issues in business. Entrepreneurs whose goals are profit and sustainable growth also need to have a strong belief in the connection of social resources in building a foundation for business ethics and rule of law to maximize personal productivity and achieve the highest business goals over time.

Enterprises: Private enterprises and SOEs need to be aware of new popular business models of the market economy such as joint stock enterprises and social enterprises, as seen in developed market economies. These models, despite being managerially complicated, will increase the financial resource as well as the social resource of enterprises in the long term. Therefore, it is necessary to consider the equitization policy as a basic strategy for development when the business scale will be one of its competitive advantages amid increasing consumer income and more expansive international economic integration.

Businesses need to research and join links and alliances in national business associations such as VCCI and local, sectoral associations to increase social resources. Nevertheless, to meet the actual needs of enterprises amid rapidly changing national and global economies, local and sector-specific business associations need to make changes and, especially in the near term, need to clearly define institutions and organizational structures by public law or private law model to position legal status and representative status to ensure transparent and effective operation and membership before the law.

Social capital development strategy: The 13th National Party Congress clearly defined reform directions and enhanced institutional quality, including institutions and structures of the business community, to perfect market economic institutions of our country.

Domestically, it is necessary to reform the public-private partnership (PPP) mechanism to improve the business environment for three core groups: Commerce, industrial production and banking. In government-business policy dialogues, it is necessary to build a cooperation mechanism with leaders in these three groups, led rotationally on an annual basis, to avoid interest groups, focusing investment on key economic sectors (limiting excessive investment in real estate) consistent with the development cycle of the market economy. In addition, it is important to research and improve the quality of the PPP model in infrastructure development (especially in transportation) as a joint-stock mechanism to enhance the effect of State-owned land use, and reduce State-funded capital and ODA funds to avoid the risk of increasing public debt for the economy and the risk of falling into middle-income trap.

Internationally, with favorable competitive advantages in regional supply chains and comprehensive strategic partnerships with the two largest economies (also high-tech centers and production bases of the world), Vietnamese businesses need to seize opportunities to foster innovations and creativity to develop prestigious product brands that go global to ensure sustainable economic development, thus creating a solid foundation to connect the Vietnamese business community with the international business community by establishing Vietchams in key markets to create new resources for the country in the digital age and high-tech age.

By actively unlocking resources for socioeconomic development through human and social resources development strategies, especially entrepreneurial resources and enterprise resources, in an effective and sustainable way, we will certainly make a practical contribution to commemorating the 80th anniversary of Vietnamese entrepreneurs and move toward a developed and thriving nation as we approach the golden centenary celebration of the first democratic state in ASEAN.

Dr. Doan Duy Khuong,

Source: Vietnam Business Forum