Entrepreneurs and Enterprises with the Nation’s Aspirations for Advancement

10:49:35 AM | 14/10/2019

The nation's aspirations for robust advancement to realize the goal of becoming a high-income country by actively engaging in Industrial Revolution 4.0 and creating new opportunities for Vietnamese entrepreneurs and businesses to develop more rapidly and more effectively.

I. Accelerating period

According to the “Vietnam White Paper 2019” released by the Ministry of Planning and Investment, as of December 31, 2018, the country had 714,755 operational enterprises, an increase of 9.2% over 2017, let alone nearly 5 million business households. Ho Chi Minh City had 228,267 companies, accounting for 31.93% of the total and Hanoi had 143,119 enterprises, accounting for 20.02%. The two largest cities of the nation accounted for 51.95% of total enterprises nationwide. On average, there are 7.6 enterprises per 1,000 residents. Five localities had more than 10 enterprises per 1,000 people, including Ho Chi Minh City, 26.5; Hanoi, 19; Da Nang, 18.9; Binh Duong, 12.7; and Hai Phong, 10.7. Some provinces had a very low ratio of enterprises to residents, particularly Ha Giang, 1.3; Son La, 1.4; and Tuyen Quang, 1.6.

From January to July 2019, as many as 79,300 companies were registered for establishment with a total fund of VND999.4 trillion, representing a year on year growth of 4.6% in enterprises and 29.6% in value. On average, a new company had VND12.6 billion, up 23.9% from a year ago. If the added fund of VND1,476.9 trillion registered by existing companies was counted, the value would be VND2,476.3 trillion. The 7-month period also welcomed 24,300 companies resuming operations, up 29.9% from a year ago. New corporate entities employed 743,900 people in the period, an increase of 19.3% over the same period of 2018.

Nevertheless, the business community witnessed 57,206 companies leaving the market from January to July, up 16.2% year on year. Of the sum, 23,118 companies registered for temporary operational suspension for a definite period, 15.6% more than a year ago; 24,828 companies were pending for bankruptcy, up 15.3%; and 9,260 companies completed bankruptcy procedures, up 20%.

In recent years, many businesses have focused on investing in technological innovation, research and development, labor productivity improvement and socioeconomic efficiency. The rate of investment in science and technology between the government and enterprises was from 7 to 3 in 2011 to 5.2 to 4.8 at present.

Vietnam's telecommunications market ranked high in both scale and growth in three sectors: Landline, mobile and internet. Vietnam has approached the level of advanced countries in the region in nanotechnology, stem cells, crop and livestock gene mapping and human genome mapping.

On July 24, 2019, in New Delhi, India, the World Intellectual Property Organization (WIPO) announced the “Global Innovation Index (GII) Report 2019”. Vietnam advanced three places over 2018 and 17 places over 2016 to rank No. 42 out of 129 countries, No. 1 among 26 low-middle income countries and No. 3 in ASEAN after Singapore and Malaysia. Notably, market development climbed three places, credit rose by 4 places; labor productivity incremented 3 places, total R&D spending looked up 5 places and knowledge and technology-based product index went up 8 places over 2018.

WIPO senior expert Sacha Wunsch-Wincent said that in this year's rankings, Vietnam emerged as a special country for two reasons: (1) Vietnam has continuously increased its rankings in the Global Innovation Index and (2) Vietnam has been continuously assessed as a prominent innovator in economic development. Vietnam is also the only country that receives direction from the Prime Ministerial level with a resolution on establishing a special group of experts to work together with ministries to promote innovation policies.

However, Vietnam's science and technology (S&T) spending currently accounts for about 0.44% of the gross domestic product (GDP), relatively low compared to Thailand with 0.78%, Singapore with 2.2%, Malaysia with 1.3%, and China with 2.1%. Its S&T capacity remains quite limited, unable to effectively address immediate and long-term socioeconomic issues. Research institutes and universities have not really become high-quality science and technology centers and lacked necessary cooperation with enterprises, resulting in slow application of many research projects in practice. Big companies have invested little in R&D and they have not yet been able to build ecosystems to stimulate S&T development, especially for startups.

Recently, the National Agency for Science and Technology Information conducted a business survey on innovation. Among 7,641 responses, 4,709 companies had innovations (accounting for 61.63%), 2,841 respondents did not have innovations (37.18%) and 91 companies were not specified (1.19%), demonstrating the fact that Vietnamese enterprises lacked innovations.

Technological innovation funds operated inefficiently and technological innovation encouragement policies still faced a lot of shortcomings.

The above figures show that the overall picture of Vietnamese businesses is quite bright and they play an important role in the annual economic growth of 7%, macroeconomic stability, budget revenue growth, delivery of sufficient goods and services for people, and rapid export growth. However, to adapt to the transition to a digital economy, the country's businesses need to take innovations as a guideline for action, invest more in science and technology, and train high-quality human resources.

II. Businesses in digital era

Socioeconomic achievements and private sector growth are prerequisites for achieving the goal of having two million enterprises, including thousands of corporate groups, by 2030.

Most CEOs/Presidents of conglomerates in Vietnam have ambition, confidence and aspiration to build strong brands, not only in the domestic market but also in the international market.

Thaco President Tran Ba Duong set the goal that “THACO becomes a multi-industry group, focusing mainly on automobiles for Vietnam and ASEAN.”

Bkav Chairman and CEO Nguyen Tu Quang believed that “Domestic manufacturers can bite into market shares held by global corporations, reach global markets, and become the likes of Samsung and LG of South Korea.”

Vingroup President defined his group's mission as "For a better life for Vietnamese”.

Businesses are directly affected by Industry 4.0. In the near future, some industries will have to scale down their scope and many jobs will be done by robots instead of humans. In the meantime, new industries will be created and employ workers of high skill and expertise. Coal-fired thermoelectricity, hydroelectricity, electronics, manufacturing, garment - textile and footwear must be adjusted in the short and medium term to keep pace with world trends. Tourism, commerce, information technology, education, healthcare and construction will benefit from digital data and big data connectivity.

Businesses that seize opportunities, quickly renovate technologies and product designs and meet market demands will grow rapidly and effectively. Conversely, if they fail to pace in tune, they will suffer losses or even go bankrupt.

Minister of Information and Communications Nguyen Manh Hung, former General Director of Viettel Group, said, “The best word to describe Industry 4.0 is doing things in ‘reverse’. 4.0 tools primarily support doing things differently. And if you keep acting like the people who precede you, there will be no chance to make a breakthrough. For human resources training, you need to set higher and harder goals that many people think they are impossible to reach to be on the difference-making side.”

Can small and medium-sized enterprises (SMEs) surmount challenges caused by limited resources to take advantage of new opportunities from the Industry 4.0?

According to many international studies, to change for Industry 4.0, it is important to innovate thinking and engage enough investment. This should not, however, be beyond the capabilities of most businesses, because artificial intelligence (AI), internet of things (IoT), robotic, augmented reality (AR), VRR, blockchain and big data technologies do not require much cost.

Mr. Trinh Thanh Nhon, General Director of ICC International Cosmetics Company, said that the ICC factory used to hire more than 150 workers but, after changing the technology, it needed just 50 workers for a treble output. Not only focusing on manufacturing technologies, enterprises should also adopt new governance technology. Powered by new corporate administration system, business leaders can grasp daily production activities, from input stage to marketing, to have timely solutions if issues emerge.

Mr. Huynh Dung Sang, Deputy General Director of Duhal Industry and Trading Joint Stock Company, said that the company has applied high technology since 2010. Duhal, which is currently a strategic partner of Samsung Group, will continue to invest in technology and R&D to optimize production processes. Hence, the company’s revenue has kept rising, reaching over VND1 trillion in 2017, of which 30% came from exports. Duhal targets to increase its production capacity by five times from now by 2020 and bring its revenue to US$250 million.

Mr. Pham Hoang Thai Duong, founder of Color Life Joint Stock Company, said he spent three years researching applied technology in the flower industry after having built basic infrastructure and opened flower shops and planning to open branches in Hanoi and in Cambodia in 2019. The company applies information technology from order-placing, delivery, production management, financial accounting, human resources and after-sales care service. Therefore, investors can easily observe and evaluate the company’s business situations which will help them make more accurate investment decisions.

The above examples illustrate innovative capabilities of Vietnamese businesses, from CEO of giant Viettel Group to leaders of medium enterprises such as Duhal and ICC to small florists like Color Life. The most important is new innovative ideas and different ways of doing business.

III. E-government

To develop the private economy, building e-government is a must of innovation for authorities in the digital age. On October 14, 2015, the Government issued Resolution 36a on e-Government, which specifies publicity and transparency of internet-based activities of governmental agencies in order to improve their quality and efficiency of activities in service of people and businesses.

The Office of Government said that, by the end of 2017, many central and local agencies had launched online public service portals to link online public services with the National Single Window. Many Level 3 and Level 4 online public services have been delivered to people and businesses. The Ministry of Public Security settled more than 8.8 million records (passports and declarations for temporary residence); the Ministry of Industry and Trade handled nearly 772,000 records; the Ministry of Education and Training, 270,000 records; and the Ministry of Transport, 144,118 records. Locally, Hanoi settled 225,173 records; Lam Dong province, 110,625 records, Ca Mau province, over 95,000 records, Thai Nguyen province, 91,201 records, and Ha Nam province, nearly 82,000 records.

Among 71 tasks assigned to ministries and branches by the Government, 44 were basically completed, accounting for 61.9%. Some important tasks and solutions like arranging suitable financial mechanism for investment, applying information technology, establishing foundation information systems such as land, construction and electronic licensing, have been recently launched.

Prime Minister Nguyen Xuan Phuc noted that belated e-government construction is not caused by insufficient resources, but that central and local authorities and agencies must get around it. He required cabinet members, provinces and cities to change their perceptions and actions, agree on the viewpoint of “acting quickly for enormous and certain results”, build e-government in association with administrative reform and information technology application, and use information technology as a tool to implement reform objectives.

Businesses highly appreciated e-government implementation at all levels of government from commune/ward and district to province and central agency to reduce costs and time of carrying out public services. At the same time, it is hoped that information technology application, open-source and cooperation principles will help make breakthroughs in e-government. Transparent public information is accessible, re-usable, republished, repurposed and added value to public information.

There is no one-size-fits-all for people of different sizes. To best fit for specific size of enterprises, the Law on Investment 2014 and the Law on Enterprises 2014 needs separate provisions for small and medium-sized enterprises (SMEs) and corporate groups.

For SMEs, the Law on SME Support is already in force. However, nearly two years since the effective date of early 2017, a majority of SMEs have not yet received regulatory incentives and support. Not many have access to bank credit, while State support funds are operating ineffectively. Hence, it is necessary to amend and supplement this law from existing practices.

The Government should assign importance to building an ecosystem that encourages the establishment of startups and new businesses, including SMEs, to quickly and effectively address bottlenecks such as funding regimes from SME support funds and technological innovation funds; use incentives to stimulate the establishment of venture capital funds with engaged by foreign investors and domestic corporate groups; increase bank credit ratios for SMEs (currently less than 30%) by fundamentally changing loan and mortgage conditions.

In order to support SMEs, transform business households into corporate entities and introduce preference policies and mechanisms, the Government should strongly foster the formation of law, business registration and tax accounting consulting firms, staffed by highly qualified staff and delivering affordable services, to support SMEs, from starting and running a business to working with accounting figures and fulfilling regulatory obligations to the State.

For corporate groups or economic groups, they need their own ecosystems secured by a favorable legal corridor to have more corporate groups each year. Existing groups, directed towards prioritized industries and sectors, are inspired to reach out to world markets to help Vietnam have a firm foothold on the map of leading corporate groups in the region and the world. Experience from Viettel, FPT and True Milk in foreign investment is a lesson for other economic groups to study. Success stories of Vingroup and Sungroup in multi-business investment, strong enough to compete with foreign rivals in the domestic market, confirmed the capacity of Vietnamese businesses. The shift of Vingroup to high-tech industry is in need of the Government’s support to quickly achieve desirable results.

Conclusion

The private economy keeps expanding. The number of new corporations increases year after year. Millions of trillions of Vietnamese dong are brought into the economy each year.

Entrepreneurship is a vibrant movement that engages thousands of young people who have the willpower, ambition, creativity and entrepreneurship. Although the failure rate is high, more people are successful, signaling a new trend of the country's private economy.

SMEs are getting bigger and bigger and their business is increasingly diversified. Most of them attach importance to innovations and they are acting as the most important and populous force in the business community.

Large enterprises, including hundreds of corporate groups, have affirmed their position in the market, some of which have been ranked high in the region and in the world. They are leading the business community in the Industrial Revolution 4.0 era.

The potential of the private economy needs to be effectively tapped with an enabling ecosystem and an open regulatory corridor. New opportunities will be utilized by businesses operating innovatively and differently from others and precedents.

Prof., Dr. Nguyen Mai