Keys for Success of FDI Enterprises in Vietnam

At the forum “Success of FDI enterprises in Vietnam” Dr. Le Dang Doanh, senior economist, former Dean of the Centre Institute for Economic Management shared his opinions and suggestions.

 

First of all, successful investors have to define their target market, its demands, keep track of its new demands and improve their competitive capacity. They have to conduct good studies of the domestic market, target countries for their exports and studies to analyse their competitors.

 

Take Honda motorcycle manufacturer as an example. Honda had made a full study of the demands of Vietnamese in completing the design of motorbikes with seats for two people; this is a travel routine of the Vietnamese, not one rider as in other countries others.

 

Also in this improvement, Honda had change the centre of gravity pushing to maintain its market share in the competition with much cheaper Chinese motorbikes. Honda’s customer strategy is to deal with any post-sale complaints. This is what we have to learn from.

 

Another example is commercial banks. They not only meet customers’ demands regarding capital but also and more importantly fulfil demands of information on the market and other customers and partners.

 

The Citigroup service has helped Vietnamese and foreign investors and enterprises to find partners for investment, purchase and other services suppliers besides capital. These are of urgent demands for Vietnamese investors and enterprises. 

 

The Vietnamese service market is opening up with new high quality demands for healthcare, education and training, cosmetics, and mobile phones among others.

 

Many enterprises suggested demands, which had not existed before in Vietnam. Coca-Cola did a good job. The Vietnamese enjoyed other drinks before Coca-Cola came to Vietnam. Coca-Cola has quickly developed a network of services, and expanded dealers. Now Coca-Cola has become the most popular drink in Vietnam in a very short time.

 

However, there are still enterprises facing many difficulties because they underestimated challenges in competition during market assessment

 

The second experience is that successful investors have set up reliable and fruitful cooperation relations with related state agencies.

 

I want to focus on relations with local authorities at provincial and even district and commune levels, besides their relations with ministries and central agencies such as the General Department of Taxation and the General Department of Vietnam Customs.

 

Take the Tate & Lyle Producer of Sugar as an example. Other sugar factories, even those not far from its location in Nghe An, were facing difficulties in purchasing farmers’ sugar according to contracts. Tate & Lyle could easily collect full material for production thanks to good relations with communes producing sugar.

 

Recently, many Southern FDI enterprises have faced strikes but not so the Puchen Co. It would be a big problem if a strike were carried out in an enterprise of 48,000 labours. Puchen was very willing to negotiate with representatives of trade unions and labourers to find a common solution.

 

I think investors should be involved in dialogue and not refuse to talk with any partners. In the past strikes, representatives of labourers asked management boards to negotiate but they refused which led to, I think, avoidable strikes.

 

The provincial capacity of competitiveness index showed that Binh Duong province has the best relations with investors. Provincial officials are willing to cooperate with both domestic and foreign investors. They set a working schedule to deal with all the problems of enterprises but they did not hold talks which were not urgent and effective.

 

The third experience I want to share is developing human resource and making close relations with local service suppliers. One of the best assets in Vietnam is our human resource with intelligent and skilful labourers who are quick to catch up with new things. This fact pleases all enterprises of this field proved by the investigation of Jetro – (Japan), Kotra (South Korea) and US enterprises.

 

However, Vietnamese labourers’ qualifications need improving. Investors should care about the problem of intelligence drain. I applaud FDI enterprises that selected Vietnamese in such key positions as Managing Director, Regional Manager, and HR Manager. This not only reduced management costs for investors but also created better relations with labourers and others agencies.

 

Honda Vietnam has developed its relations with many local suppliers of spare parts for motorcycle production. Honda had implemented technology exchange and assistance for Vietnamese partners. Metro has collected and bought farm products from farmers and helped them to increase the quality of products, packing, preserving and food hygiene and safety. So their products are of sufficient quality to be sold in supermarkets, to export and even to supply to big hotels.

 

Hotels in Hanoi and Ho Chi Minh City have to import 70 per cent of their food. This is understandable but domestic suppliers should have plans to increase their share.

 

The fourth experience I want to emphasize is that successful enterprises have close and regular connections with research institutes to renew technology, and design and launch new products.

Vietnam has become a part of the world market so it is no use to apply old technologies.

 

From the experiences of automakers, the demand for new technology in Vietnam is urgent. Honda Vietnam produces new products even when the previous ones are not used up.

 

Lastly, I appreciate investors and ask you to take more participation in the process of policy dialogue and management reform in Vietnam. Please believe that Vietnamese policy makers always listen to your ideas and requests. Because all of us take benefit: you earn profits and pay taxes, create jobs and contribute to the growth and development of our country.