Enterprises with good strategies and effective business plans will continue to grow in 2012, Vu Tien Loc, chairman of Chamber of Commerce and Industry Vietnam (VCCI), told Tuoi Tre in an exclusive interview.

Vu Tien Loc, chairman of Chamber of Commerce and Industry Vietnam (VCCI), Photo: Tuoi Tre

“Both the recent Party Politburo resolutions on entrepreneurs and economic restructuring have emphasized the need to create a competitive and transparent business environment in 2012.”

“This is an opportunity, because when all firms are treated equally, the ones with greater competitiveness will win,” he said.

“We have experienced a period of economic boom with rapid growth when a majority of enterprises have developed rapidly in width to take advantage of the opportunities.”

Although more than 20 years have passed since the Enterprise Law took effect in 1990, a recent VCCI’s survey has found that up to 70 percent of the registered businesses are still operational.

“It [the survey] demonstrated strong vitality of Vietnamese businesses and that the local business environment still has many opportunities to offer.”

However, as the global economy has changed, businesses that want to develop cannot keep their old operational models but need to strengthen their competitiveness and map out specific long-term business strategies.

“In my opinion, it is high time that local firms switched completely to a more professional working style and model. For example, the family-owned business model should soon be transformed. Many famous family businesses that cannot evolve in time have been overtaken by their rivals.”

Regarding what the government should do to help local firms this year, Loc said the government should devise a series of policies to help them survive difficult times and then to thrive since it took Vietnam no less than a decade to develop these capable medium-sized enterprises.

The Prime Minister and many ministers have recently established dialogues with the public and business community on television or online forums via the Government website, signaling a more open atmosphere for supporting businesses.

Although many industries and their representative associations have intensified dialogues with the government, there are still problems in the coordination between them and state agencies, leading to ineffective cooperation and supports for businesses.

So VCCI has recently proposed to the Prime Minister to increase contact and dialogue with National Assembly members who are businessmen, VCCI and other business associations.

“Of course, I think, it is better if the leaders of the Party and the Government have enhanced the form of dialogue with businesses.”

“But if dialogue is held annually or periodically with the participation of a large number of enterprises, the effect will be very high, both practically and symbolically.”

“We need to stay alert to a current threat that there are more foreign companies from Europe, Korea, Japan and China seeking to take over Vietnamese medium-sized businesses at very low prices,” Loc said.

“In fact, many medium-sized enterprises in Vietnam are effective, very effective, but given the economic downturn, high interest rates and low liquidity, they are temporarily in difficulties.”

“If the government can provide support to tide them over the economic crisis, they will work very well.”

“So it is better that the government adopts policies to support them to overcome difficulties or encourage the merger and acquisition (M&A) between Vietnamese firms.”

Besides 600,000 registered businesses, about one million household businesses have registered and about 3 million more are operating without registering in the informal sector.

“So, there is a need to examine why one million of them don’t want to set up official businesses and 3 million still want to operate informally. What do they really need?”

“If we have good policies to transform 4 million households into official businesses so that they can operate under the business model to increase transparency and professionalism, the country will have enormous, additional resources to thrive on.”

Responding to concern about many ineffective business assistance programs, Loc said among three institutions supporting businesses, including state agencies, associations and the business private sector itself, the last two have yet to fully develop.

“In my opinion, there are many things the state does not need to do, and it should leave room for the other two.”

As to supporting businesses by providing information, training, and promotion programs, Loc believes it should be the task of associations.

But many agencies don’t think the associations are up to the task.

In that case the state can identify strong and effective associations through a bidding process. These associations then can mobilize resources from other sectors to increase scale and the efficiency in supporting businesses.

Asked what he thinks about the Ministry of Finance’s announcement on the reduction of corporate income tax from 25 percent to 20 percent, Loc said the process needs to be accelerated.

“We should not think that support should be given to struggling businesses only. It should also be used as a tool to increase the competitiveness of successful and thriving businesses.”

“Vietnam’s corporate income tax is generally high compared with that of other countries in the region, so a tax relief will help increase these businesses’ competitiveness, not to mention the high interest rates they have to cope with – higher than those in the region.”

If businesses have to pay more tax, it is hard for them to accumulate capital to invest in research and development (R&D) to increase competitiveness.

"A strong economy is not necessarily having many large enterprises. It needs more medium-sized enterprises operating effectively so that they can gradually move on to a larger scale."

Source: Tuoi tre