To survive in new free-trade climate, businesses must cooperate: economists
To survive in new free-trade climate, businesses must cooperate: economists
Viet Nam is in the process of reaching various free trade agreements (FTA) with its partners, and for survival and growth, they should seek opportunities and connections while competing in the market.
Speaking on March 27 at a workshop on business leadership and management in HCM City, Vo Tri Thanh, deputy director of the Central Institute for Economic Management (CIEM), said that companies would have to learn how to cooperate and connect while accepting competition.
"Competition does not exclude association in a world where many production networks and value chains exist," Thanh said.
He advised them to associate with leading firms and cooperate with strategic partners to take advantage of their strong points, thanks to their larger scale and value chain for their growth.
He said FTAs would offer opportunities if businesses define their capacity (for connections) in production networks and value chains as well as grab openings in new sectors such as the "green" industry (environmental preservation, waste collection and treatment).
Thanh said ASEAN alone had a population of 600 million that could be tapped.
Businesses should also learn how to mobilise capital by accessing capital in global circulation, which is generally governed by commercial banks, investment funds and other financial institutions, he said.
"In developing countries, the state is a giant investor. In Viet Nam, State investors represent 35 per cent of the total social investment. Forms of capital mobilisation are more diversified, including the issuance of shares and bonds," he said.
He said that businesses should be aware that financial investors were placing more and more importance on the "green" factor in business projects.
They should also learn how to manage instability through risk-prevention tools like insurance and derivatives.
Thanh also recommended that they stay abreast of the Government's information on integration commitments as well as grasp existing and incoming policies of the government.
However, he also warned against "excessive closeness" to ensure transparency.
"Negotiation and implementation of business contracts should be done according to legal procedures to ensure the rights of partners, especially in wide and deep integration that is based on international practices and standards," he said.
Ha Thu Thanh, chairwoman of Deloitte Vietnam, and vice chairwoman of the Vietnamese Association of Women Entrepreneurs, said that integration was not a choice but an inevitable fact and global integration would depend on the three revolutions of technology, finance and leadership thinking.
"Leadership thinking is the key to governing important strategies of a company," she said.
This year marks important milestones in globalisation and economic integration since Viet Nam will be integrating deeply and comprehensively with the regional and global economy when many Free Trade Agreements (FTAs) take effect.
The ASEAN Economic Community (AEC) will also be officially established, and Viet Nam will participate in the upcoming Trans-Pacific Partnership agreement (TPP).
Joining AEC and TPP will mean that the market will be "flat", without any major barriers of national legal protection.
Enterprises will also have the chance to join the global value chain in a "flat market, a joint, equal market with consistent manufacturing space and services".
Products, services and capital flows will shift freely. No borders will exist in trade, and there will be no tariffs as well as non-tariff barriers.
Investors will be allowed to invest in all areas and the labor market will be free to move.
Some of Viet Nam's competitive advantages such as cheap labor will change under these circumstances.
This new situation is expected to have a significant impact on the operation of enterprises in Viet Nam, not only bringing many opportunities for breakthroughs but also containing many new challenges.
Viet Nam joined the ASEAN Free Trade Area (AFTA) in 1995 and World Trade Organisation (WTO) in 2007.
By 2014 it had signed and joined eight FTAs; another seven are under negotiation.
Foreign trade between Viet Nam and countries participating in FTAs represented almost 64 per cent of total import value and 39 per cent of export value in 2014.
