Integration a concern for Vietnam firms
Only a fourth of Vietnamese enterprises believe they have strong products and services, good management and prices and adequate capital, a survey by the General Department of Statistics has found.
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The department polled 3,500 companies for its “Vietnamese automation and manufacturing sector’s readiness to internationally integrate” report, done in the context of Vietnam’s many free trade agreements like the Eurasian Economic Union, ASEAN Economic Community and Trans-Pacific Partnership and FTAs with Europe, Japan and the Republic of Korea.
The survey found 32% had confidence in their products and services, 26% in their management ability, 25% in their prices, and 17.5% in their resources.
Most of the respondents know about FTAs through the media, with 84% being interested in the EAC, 82% in the TPP, 67% in the Vietnam – Japan FTA, 64% in the Vietnam – European FTA, and 63% in the Vietnam – the Republic of Korea FTA.
Importantly, 84% supported Vietnam’s signing of FTAs, with over 53% saying they “strongly supported” and nearly 31% saying supported though with concern.
Only 0.6% strongly objected to FTAs.
“Vietnam is one of several countries in South East Asia to strongly integrate,” Thời báo Kinh tế Vietnam (Vietnam Economic Times) newspaper quoted economist Vo Tri Thanh as saying.
Though a high proportion of Vietnamese firms know about FTAs, only a small number understand them enough to take advantage.
Thus, only around 35% of Vietnamese products and services benefit from the lower tariffs offered by FTAs with the rest attracting up to 5% higher taxes.
“Vietnamese firms have missed an opportunity since they don’t pay enough attention to FTAs,” To Hoai Nam, deputy chairman and general secretary of the Vietnam Small- and Medium-sized Enterprise Association, admitted.
The report found nearly 70% of the polled companies saying they would like to get support with respect to FTAs and learn about guidelines and 55% wishing to have international market information from the Government and 49%, local market information.
How to take advantage
“To take advantage of international integration, Vietnamese enterprises should focus on three major fields: improving quality of products, expanding production and business, and exploring new markets,” Thanh said.
He also warned that while technology plays a central role in improving competitiveness during integration, only 44% of domestic companies plan to invest in new and modern technologies.
Local companies should change as soon as possible to avoid a situation where foreign investors come to Vietnam and monopolise the advantages offered by FTAs, he said.
Nguyen Anh Dương of the Central Institute for Economic Management’s macro economic policy department said: “Authorities should create conditions and provide support to improve enterprises’ capacity to enter the international market.
“Enterprises must be proactive and study about FTAs.”
While FTAs provide the opportunity to promote exports, enable Vietnam to complete its task of creating a market-oriented economy and motivate Vietnamese businesses to become more competitive, the country’s low competitiveness prevents it from grabbing the opportunities thrown up by international integration, he said.
The competitive pressure on local businesses would increase as would the threat of failure in the home market, he said.
He listed five factors that would increase their competitiveness, saying authorities should connect local and FDI companies, educate the business community about value chains, help businesses hedge their risks using methods like insurance, apprise them about international standards and help them focus on other competitive aspects instead of just price.
