Vietnamese enterprises too fragmented for global, regional economic integration: forum
Vietnamese enterprises too fragmented for global, regional economic integration: forum
Vietnamese and foreign experts have been concerned that local enterprises may face numerous challenges when further integrating into the regional and international economy, with many trade deals with foreign partners already signed or about to be clinched, local media reported.
The realization of those trade pacts can be considered a key moment for Vietnamese firms to join the global value chain, experts said Tuesday at the mid-term Vietnam Business Forum 2015, with the theme of "Improving the Competitiveness of Enterprises for Global Integration."
Many business associations also shared their concerns about the competitiveness of local enterprises when integrating into that chain.
Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI), said the private sector in the country is still very fragmented as individual and household businesses are contributing over 33 percent of GDP, news website VnExpress reported.
The entire private sector makes up about 50 percent of the country’s gross domestic product, Loc added.
Two percent of the sector are large-scale businesses while medium-d enterprises account for two percent and the remaining 96 percent are small and micro enterprises, Loc said.
"Vietnam's economy is severely lacking in mid-d businesses which can serve as linkages between local firms and the global value chain and directly participate in international markets," he asserted.
Tran Anh Vuong, vice president of the Hanoi Young Business Association, said there are only six months left for Vietnam to be fully integrated into the ASEAN Economic Community (AEC), but the majority of the country’s small and medium-d enterprises (SMEs) are not well-prepared for the big game ahead.
ASEAN is a ten-member bloc which includes such Southeast Asian countries as Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar, and Vietnam.
As shown on the ASEAN’s website, the AEC is the goal of regional economic integration by 2015 and envisages the following key characteristics: a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.
Vuong remarked that Vietnamese SMEs are still adjusting passively to changes rather than proactively integrating into the regional economy, whereas the local market lacks necessary technical and non-technical measures to protect the domestic market against imported goods when the AEC is realized.
"Vietnamese SMEs are feeling greater challenges than ever as the year 2015 is defined as an integration milestone with many bilateral and multilateral agreements to be signed or take effect," the vice president added.
Vietnam is now in the second wave of investment to attract more competition, as the AEC will be established by the end of this year with a series of important trade pacts in which the country is getting involved, said Kyle Kelhofer, regional director of the International Finance Corporation.
If they make good use of those opportunities, the Southeast Asian country’s businesses can open a new chapter of growth with better income for the people, he added.
Similar view shared
Foreign investors also fear that the weakness of the economic sector in Vietnam will affect the business environment.
Tomaso Andreatta, vice president of the European Chamber of Commerce in Vietnam (EuroCham), said only 36 percent of Vietnamese enterprises engage in production networks for export, compared with nearly 60 percent in Malaysia and Thailand.
Meanwhile, only 21 percent of Vietnam’s SMEs are involved in the global supply chain, and the contribution of this sector in its export turnover is lower than in other regional countries, he added.
"Socio-economic development in the future will depend on the ability to integrate into the global supply chain and access to the global markets so that we can benefit from the resources and technology in the world,” the EuroCham vice president said.
In order to create the conditions so that local businesses can become sustainable foundations for the economic development of the country, the leaders of many business associations suggested that the government create more opportunities for the private sector to grow, for example further reducing interest rates for medium- and long-term loans and building a favorable business environment.
Besides, Vietnam also needs to enact the Law on SMEs, in parallel with the final choice of five industry sectors, including electronics, garment-textile, food processing, agricultural machinery and tourism for the development of industrial clusters to raise their value chain, VCCI chairman Loc said, adding that such moves will enable local firms to join the global value chain in the future.
Minister of Planning and Investment Bui Quang Vinh said that Vietnam has achieved positive results with growth recovery momentum already regained.
However, the Vietnamese economy is still facing many difficulties, so the government is keen to focus on carrying out restructuring, especially public investment restructuring, bank restructuring and boosting equitization in state-owned enterprises in an effort to create a level playing field in the market.
Virginia B. Foote, chairperson of the U.S.-Vietnam Trade Council and co-chairman of the Vietnam Business Forum 2015, said the development of the private sector must be associated with the progress and quality of corporate restructuring, government website chinhphu.vn reported.
However, the restructuring of SOEs, along with the equitization of the SOEs, has yet to meet the expectations of the foreign sector as only a small number of shares have been sold to strategic international investors and to the public, Foote said.
In addition, it is difficult to attract foreign investors given the ceiling rate set aside for them in many business sectors, she added.
