Corporate Restructuring: Way of Thinking Is Most Important

The Government initiated the corporate restructuring project since October 2001 and has continued it until now. Many conferences, activities and amendments vis-à-vis corporate restructuring at both macro and company levels have been held. The Ministry of Planning and Investment has also coordinated with other ministries and agencies to draft a project on economic restructuring in the midst of the global economic slowdown. According to the ministry, Vietnam will focus on investments, especially public investment and infrastructure, and corporate restructuring, with priority given to accelerating privatisation. In the coming time, the development model will be fine-tuned to maximise internal forces, draw on external forces effectively, and enhance the competitiveness of the Vietnamese economy, enterprises and products. This demands an inclusive reform which requires enterprises to power up by their own abilities. Former Deputy Prime Minister Vu Khoan has said that economic restructuring is essential and the Vietnamese economy is facing three linked tasks. In the short term, Vietnam continues to deal with adverse impacts of the global financial crisis and economic downturn. In the medium term, it will take new opportunities and respond to the challenges of the post-crisis period. In the long term, it will prepare the 10-year socioeconomic development strategy from 2011 to 2020.

 

Vietnam currently has about 350,000 companies, more than 90 percent being small and medium enterprises (an SME has less than VND10 billion or less than 300 employees). SMEs have a combined capital of about US$85 billion, contribute about 40 percent to GDP and create 50 percent of all new jobs. However, according to the Vietnam Small and Medium Enterprises Association, as many as 60 percent of SMEs are struggling to survive and develop. Moreover, the economic slowdown has forced SMEs to face weaknesses in capital capacity, technical facilities, governance and expertise. Thus, at a cabinet meeting in May 2009, the Government demanded a focus on production expansion and required all enterprises to grasp every opportunity to renovate technology, and enhance governance to improve competitiveness.

 

In fact, the corporate restructuring project has been kicked off since 2001. Many forms of holding companies have been set up following corporate restructuring. With the support of the World Bank (WB) and the United Kingdom Department for International Development (DFID) for pilot corporate restructuring project, the Vietnam Textile and Garment Corporation (Vinatex), Seaprodex Da Nang and Vinacafe were picked for the pilot program in three phases, 2003-2005 and 2005-2008. To date, these entities have obtained very positive results. Taking Vinatex as an example, the change in leadership thinking enabled it to transform from a corporation into a world-renowned group with multiple revenues streams.

 

According to economists, the global economic crisis is indeed a chance for Vietnamese enterprises to earn more from exports, thanks to weakening US dollars, or purchase cheaper modern equipment from foreign suppliers. Moreover, many enterprises receive support from the Government, including tax breaks, reductions, deferments and interest subsidy. Additionally, mergers and acquisitions, and dividing has helped many companies strengthen their capabilities.

 

According to many experts, restructuring is necessary in the process of international integration. Business leaders should have new ways of thinking and follow what has been outlined. Second, employees should be trained on corporate restructuring to have information, thinking and knowledge to cope with any difficulties. Third, they need to determine a suitable form for their company at a proper time.