Does integration threaten Vietnam’s economic autonomy?

However, many prominent business leaders are saying the influx appears to be a death sentence for domestic companies— many of whom have had a dominant position in the marketplace for decades.

Pham Nhu Bach, CEO of the Mai Lan Joint Stock Company, specializing in producing Kissme paper products, says competition with the large foreign invested businesses is proving to be the greatest challenge his company has faced since it was founded.

After a steady ascent in the rankings over the past 30 years of operations for which it has been recognized as a top Vietnam brand for 14 consecutive years, today the company is facing insurmountable problems.

Bach says transnational companies have substantially more financial resources along with a wide array of other advantages such as state-of-the-art technology, superior products, and well seasoned marketing and management skills.

He says over the past three to four years we have cut back production because we can’t compete in the major supermarkets and retail establishments with the global brands. Today the Kissme brand can only be found in Vietnam’s traditional markets and stores.

We simply don’t have sufficient resources to invest in the requisite updated equipment and technologies required to compete on a level playing field with the large transnational companies.

Echoing these sentiments, Nguyen Dac Son, director of Hai Son Mechanical Engineering Co Ltd underscores the point that it’s not easy to obtain the long term financing the company needs to modernize.

Some short-term limited working capital type loans are available with preferential short term interest rates for up to two years but longer term financing packages are either not available or much too costly, Son stresses.

The fact is Son added that most transnational companies also pay higher salaries and wages leaving domestic companies struggling to pay competing remuneration in a fruitless effort to retain key employees.

Domestic enterprises are not only losing out on the home front, says Vietnam Association of Seafood Exporters and Producers (VASEP) General Secretary Truong Dinh Hoe.

The quality of many Made-in-Vietnam products lack competitiveness because they are not on conformance with international standards and therefore are not permitted entry into foreign markets.

Domestic companies are simply at a complete disadvantage entering foreign markets when compared to the foreign invested companies that can draw on a rich body of knowledge and experience on how to approach them.

The management of domestic export businesses most often lack even a rudimentary understanding of the foreign market on attributes of consumer demand, market trends and distribution channels or even who their rivals in the foreign markets are says Hoe.

As a specific example, Hoe cites the case of the European Union (EU) for which out of a total of 400 domestic businesses just over 30 are up to par and accredited to export to the vast market.

Notably, the Republic of Korea (RoK) recently imposed higher quality requirements on import products, especially singling out Vietnamese shrimp after a shipment tested positive for excess ethoxyquin residue.

The situation was embarrassing for Vietnam because it highlighted the simple fact that Vietnamese businesses collectively have yet to devise simple business plans and marketing strategies to successfully enter a foreign market.

In the face of the high competitiveness businesses are facing in the domestic market the government should re-evaluate its policies with respect to transnational businesses says leading economist Dr Nguyen Tri Hieu.

In far too many instances the government has implemented policies and procedures that unfairly benefit the large transnational businesses at the expense of domestic businesses, Hieu suggests.

Last but not least, Vietnam Chamber of Commerce and Industry (VCCI) Chairman Vu Tien Loc,
also stresses the government should pay more attention to the plight of domestic businesses to ensure economic autonomy.