Mekong Delta Businesses Restructuring for Sustainable Development

The Mekong Delta is now home to 43,000 enterprises, including 264 state-owned enterprises (SOEs) and 516 foreign-invested enterprises (FIEs). In the first six months of this year, up to 13.6 per cent of businesses went bankrupt - the highest rate in the country. Particularly, the non-State sector made up more than 9 per cent, followed by the State-owned business sector with 2.7 per cent and the foreign-invested sector with 2.4 per cent. In the Mekong Delta, hardships appear in many industries like fisheries, construction and real estate. Major difficulties facing businesses are tight access to bank loans, exorbitant interest rates, poor infrastructure, cumbersome administrative procedures, and labour shortage.

 

Mr Dau Anh Tuan, Deputy Director of the Legal Department, VCCI, said that except for Can Tho City and Long An province, other provinces in the Mekong Delta suffered imbalances in budgetary revenue and expenditure estimations in 2012. Notably, except for Long An, Can Tho and Kien Giang, foreign investors made no inroads in other provinces. Although foreign investment is not the major component of Mekong Delta investment structure, it brings new job creation, governance methods, and industry structure change.

 

Nonetheless, the total amount of foreign direct investment in the Mekong Delta is not even equal to a locality like Da Nang or Hai Phong, although Can Tho is also a centrally governed city. Vo Hung Dung, Director of VCCI - Can Tho, said the previous strength of the Mekong Delta was abundant, low-cost labour, but this advantage seems to be ignored by enterprises, especially foreigners, because they do not need manual labourers, but high-quality and well-disciplined ones. He stressed, "In the current context, full-fledged businesses which are believed to have enough resources and competencies to overcome hardships have to take up defensive positions. This causes economic stagnancy. The Mekong Delta situation is worse because of its agriculture-based economy and lack of development conditions."

 

As of May 2012, despite two deposit rate cuts, lending rates remain too high for businesses. Before this situation, local businesses proposed the Government focus on controlling inflation, and maintaining growth at a reasonable level to avoid collapse and huge losses to State-owned enterprises. The central bank necessarily loosens lending regulations to open access to bank loans for the vast majority of businesses and lower lending rates to 10 per cent per annum in the first six months of 2013 and below 10 per cent in the last half of next year.

The forum also witnessed the announcement on the formation of the Mekong Delta Business Association Council. The council was established in accordance with VCCI’s Decision signed on November 7, 2012. Mr Vo Hung Dung was elected the chairman. Over the past time, connectivity for regional development was weak in the Mekong Delta. Thus, the council was expected to open up investment connectivity with other regions and foreign investors. This will then facilitate socioeconomic development of the entire region.

In addition, the Government should have policies to encourage infrastructure investment, and increase public investment for regional infrastructure, especially traffic systems. Importantly, it should introduce attractive policies to draw foreign investment capital into the Mekong Delta. This is also a driving force for training human resources, promoting enterprise development, and restructuring enterprises in the region.

 

Dr Nguyen Dinh Cung of the Central Institute for Economic Management (CIEM) said that to overcome current difficulties, Mekong Delta provinces need to improve the business environment and legal framework; and promote cooperation in and planning for priority sectors dependant on local agriculture, forestry and fishery resources to edge up competitiveness and market shares. Besides, they must resolve difficulties against businesses, promote connectivity to build and apply investment attraction and promotion mechanisms and policies for regionally advantageous fields in order to mobilise maximum internal and external resources for development investment, stimulating sustainable and effective economic growth in the region.

 

He also recommended that in addition to the efforts of the Government and local governments, businesses themselves must actively restructure and seek opportunities, even in the tough time, to gradually stabilise and develop business activities before the passing of the current crisis.