Recently, the Vietnamese economy has seen a new trend as most corporations and economic groups are tending to ask the Government to allow them to develop into economic groups. In this respect, this trend has reflected the development of the national economy. But it is a question of whether or not this trend has originated from their needs to develop further or is it purely a matter of changing time?

The Vietnamese economy has witnessed quite a lot of movements, which initially received a positive response but finally suffered heavy losses as in the cases of raising catfish and growing tobacco and trees.

Regrettably, such a business trend continues to occur in many areas like building golf courses, economic and industrial parks and establishing economic groups.

According to statistics, Vietnam now has eight economic groups, of which those with profitable businesses are in the minority. Along with these eight economic groups, dozens of other economic units are making plans to develop into major groups, including two from the transport sector, three from the construction sector and one from the tobacco producing sector.

Why is it necessary to establish economic groups?

The reason for this growing tendency to establish economic groups can be described by Vietnamese economists. In a foreign country, in order to become President of an economic group, he/she must own the biggest volume of shares in the group. But in a Vietnamese enterprise that has became a group or is preparing to set up an economic group, has capital from the State. Therefore, if approved by the Government, the General Director of that company will probably become the President of a formalistic executive board as he/she is appointed to the post by the State while they are uncertain of having a strong financial and business capability.

Another reason for the ineffective business activities of corporations is that after becoming a group, that economic unit can diversify its kinds of business while still carrying out the main tasks assigned to it by the Government. Recently, for various reasons, many economic units have failed to fulfil their tasks or to become economically efficient. Therefore, the diversification of crafts or business forms is seen as an effective remedy to deal with the issue. Meanwhile, economic units hope that in the name of an economic group, the State will provide them with more capital or allow them to issue bonds to prevent any financial crisis due to their unprofitable business.

Judging from the above reasons, the establishment of an economic group in Vietnam is a movement rather than a need for the further development of an individual economic unit.

In the face of this trend, it is imperative to clearly define which enterprises are financially strong enough to become a group or not to prevent the national economy from suffering great losses with the current fashion of becoming economic groups.