Businesses must have faith

Vietnam currently has more than 675,000 registered businesses, but only two thirds, or 472,000, are still operating. In the past nine months, as many as 40,000 businesses have filed for bankruptcy or suspended operations, a year-on-year increase of 6.5 percent.

Most businesses have cut down on production costs to lower the price of their products, which is a reasonable way to reduce large inventories that can impede their production.

Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), reveals that some businesses, mostly small and medium-sized ones, have still maintained 30-50 percent annual growth.

The negative impact of the global economic recession seems to have had little effect on these businesses, as they have met the necessary conditions for sustainable development, says Loc.

According to the business executive, these enterprises have developed a good administration system to respond to risks, built a strong competitive edge, and operated in high value added areas. They have also been actively integrating into the global supply chain.

Success stories

It is well known that recession poses risks but it also presents opportunities for executives to redefine business strategies and restructure organisations to survive an economic downturn.

The Phu Nhuan Jewellery JSC in Ho Chi Minh City is one such success story. To reach out to demanding markets in Europe and the US, the company has restructured itself and its efforts have paid off. It is now the leading jewellery company in Vietnam and one of the top 50 companies with shares listed on the bourse. It has also achieved an annual growth rate of 20 percent.

A representative of Thanh Hoa JSC which specialises in high-quality agricultural by-products says the company has adopted a new business strategy to adapt to changes in the market. It has cut unnecessary production costs, designed convenient and affordable products, and launched sales promotions.

Instead of distributing goods to agents, the company brings them directly to consumers, which enables it to consult with them to get to know their tastes, says the representative.

Tran Le Nguyen, General Director of the Kinh Do Bakery JSC, shares the view that businesses should take advantage of the recession to seek new opportunities and overcome difficulties. He says the crux of the matter is that businesses need to adapt quickly to market fluctuations and produce products that specifically cater to customer tastes.    

Kinh Do has divested its capital from non-core business areas to focus on food processing. It has reduced production costs, diversified its products, and promoted sales at home and abroad to build up consumer trust.

The Vietnam Dairy Products JSC (Vinamilk) expanded its operation to food processing for two years but found it inefficient. It has now divested capital to increase investment in its primary dairy products and retain its well-known brand on the domestic market.

Suggestions

Large businesses suggest that the government promptly implement national trade promotion programmes to deal with unsold inventories of goods and support mergers and acquisitions (M&A) of inefficient banks to settle their bad debts.   

Deputy Minister of Industry and Trade Tran Quang Khanh recommends that banks reschedule bad debts and continue to lower interest rates to ease difficulties for businesses. He also calls on businesses to join hands with the government to iron out snags, stabilise the macroeconomy and restructure the national economy.

One of the solutions introduced by experts is more flexible management of the monetary policy to contain inflation, support the business community, and create a healthier business environment for all economic sectors.   

VCCI President Vu Tien Loc warns that given the slow recovery of the global economy, 2013 will be another tough year for businesses, and their primary task right now is to stand firm. To this end, he says, businesses need to have strong faith, redefine their strategies, and restructure their management to fit in with local and global economic trends toward sustainable development. 

To support the restructuring process, Loc suggests that Vietnam should continue finalising its market economy institutions to create a transparent and equal business environment. Competitive capacity can be enhanced when the existing “give – and – take” mechanism is abolished.

Loc vows that the VCCI will help businesses keep abreast of up-to-date information on markets and risk warnings, while also boosting trade and investment promotions.