Doan Duy Khuong Ph.D, Vice Chairman of Vietnam Chamber of Commerce and Industry (VCCI), made this statement after Vietnam officially joined the WTO as the 150th member. However, according to Mr. Khuong, apart from benefits for the economy by the WTO entry, Vietnamese enterprises, especially SMEs, need to do many things to tap opportunities in the integration period. The trade deficit remains a prevailing problem.
How do you assess the integration of Vietnamese enterprises one year after Vietnam joined the WTO? Do Vietnamese businesses follow the track of WTO integration?
Vietnam actually already integrated into the world before its accession to the WTO, by joining ASEAN, ASEM and APEC. Moreover, Vietnam also signed bilateral deals with many countries and organisations, especially the Vietnam-US bilateral trade agreement (BTA). However, Vietnam fully integrated into the world economy when officially joining the WTO. Vietnamese enterprises are unique in the world because most of them are small and medium sized, even giant Vietnamese firms are still small in comparison with the world. Vietnamese enterprises are mainly base production on natural resources, not making products with high technological content. As a result, most Vietnamese companies are still very small on the world scale.
Enterprises in each country have their own advantages, but they know to share the market in production. For example, an iPhone of the US is manufactured in China. Multinational companies know how to share production market to enhance productivity and profit margins. Meanwhile, Vietnamese enterprises usually think they must execute their business from A to Z.
Does it mean Vietnamese enterprises have not employed all opportunities the WTO brings in?
Personally, this is partially attributed to the tradition as well as the intention of Vietnamese enterprises. At the same time, business management agencies and policymakers fail to track the development of the business environment in the integration process. Meanwhile, business associations fail to promote their roles.
Apart from the gap in business size and development level of Vietnamese enterprises, giant business entities have increasingly cooperated with each other recently. Small business entities only have small partners. Do you think this gap will decrease development opportunities for small and medium enterprises?
I don’t think so. The integration process in the initial phase is a playing ground for giant companies, not SMEs, because only they have sufficient conditions and capacity to extend business to other nations. In the so-called flat world, geography and information are not obstacles. The goals of leading firms in the world are to maximise profits and minimize costs. They see the world as a common market. As a result, giant firms will partner with giant ones. This is why SMEs do not enjoy as many opportunities as giant ones. However, integration in the second phase is the playing field of SMEs.
Integration always generates both opportunity and challenge, and SMEs should change their business thought. SMEs do not mean the production of small things or low productivity. I visited many SMEs in Japan and their products are only nails or bolts, but they are very proud of manufacturing products that are used not only for motorbikes but also for spaceships. In short, SMEs should generate attractiveness to create opportunities for themselves.
After joining the WTO, the Vietnamese economy has outstanding development. However, Vietnam still has to encounter and deal with numerous difficulties such as weak infrastructure. Meanwhile, foreign exchange, trade balance, trade deficit and international payment balance are issues of concern that need resolving. What are the origins of these issues?
Yes. In my opinion, the world is a common market but each country has its own peculiarities and barriers. Regarding non-traditional and technical barriers in major markets, Vietnamese enterprises should study them carefully. For example, they should look into commodity quality, social responsibility and intellectual property among others. Regarding trade balance and international payment balance, these are actually problems for Vietnam. In the ASEAN market alone, Vietnam incurred some US$3 billion trade deficit in the first six months this year. It earned US$3.8 billion from exports but spent some US$6 billion on imports. The same situation is seen in trade with China. These problems should be resolved immediately to avoid further complications at a later time.
Another issue of concern is urbanisation. This is considered the hardware of the business environment, and legal procedures are the software. Hurried and badly-designed development and traffic congestions seriously affect production capacity and the investment environment. Many countries have experienced this step in development.
The increasing promotion of the private economy is a common trend in the world, and can be seen even in Vietnam joining associations such as APEC and ASEAN. Meanwhile, the private sector seems weak in Vietnam. Does VCCI propose any supports for the development of this economic sector?
The Vietnamese private economic sector is not actually weak, because FDI enterprises also belong to this group. This economic block contributes over 60 per cent of GDP. The number of private enterprises will certainly increase and the number of state-owned ones will fall. To develop, this economic block needs a good legal environment and fair business playing field between private enterprises and state-owned enterprises. VCCI will act as a bridge between enterprises and the government. VCCI will also support enterprises promoting export and international integration via corporate social responsibility, corporate sustainability and entering new markets.
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