Businesses Proactive in Integration and Economic Restructuring

Source: Pano feed

1. Integration and economic restructuring

1. Integration and economic restructuring

Vietnam had formal diplomatic relations with 175 countries and trade relations with 200 countries and territories in the world as of 2014. The country has established strategic partnerships with 13 countries, field-based strategic partnerships with two countries, and comprehensive strategic partnerships with 11 countries. Currently, Vietnam has signed over 90 bilateral trade agreements, nearly 60 agreements on investment encouragement and protection and 54 double-tax avoidance agreements with partners worldwide.

A series of other agreements are expected to take effect or to be concluded in 2015, including the formation of the ASEAN Economic Community (AEC), the Regional Comprehensive Economic Partnership (RCEP) between 10-member ASEAN with six partners, FTA with the European Union (EU) and the Trans-Pacific Partnership (TPP) Agreement. Besides, tariffs are being further slashed as committed to the World Trade Organisation (WTO). With the enforcement and completion of 15 FTAs from now to 2020, Vietnam will become an important link in the vast network constituted by 56 economies, including 18 APEC members and most of the world’s economic centres, thus improving the country’s image and international position of our country.

Vietnam’s export markets have covered more than 220 countries and territories. Many countries have been developed while businesses and products are competitive and good enough to serve economic development and raise Vietnam’s position on the economic maps of the region and the world. Our country ranks among the 30 largest exporters in the world. Commodity exports contribute significantly to GDP growth and have become the main driver for economic growth.

Domestically, together with macroeconomic stability, the development of modern market economic institutions, based on the three pillars of market, state and society, will be a decisive precondition for economic restructuring. That process will be driven by market forces through the interaction of three economic actors of the State, consumers and businesses. Businesses, especially pioneering ones in the process of integration and economic restructuring, will play a decisive role in the success or failure of State economic policies of state and people’s living quality.

2. Proactive businesses

According to the General Statistics Office (GSO), Vietnam had nearly 75,000 business start-ups with a total registered capital of VND432.2 trillion in 2014, down 2.7 percent in business start-ups from a year earlier. The country also saw 15,419 companies return to operation in the year, up 7.1 percent over 2013. However, GSO data also showed that corporate bankruptcies continued to grow. In the year, approximately 68,000 companies filed for dissolution, suspension or bankruptcy. In the coming time, affected by international integration and economic restructuring, the economy will be still difficult and challenging. To survive and maintain sustainable development, businesses must pioneer in using market analysis tools and planning production and business strategies.

2.1 Analysis tools

According to the corporate governance theory, to enhance competitiveness and cooperation, companies must first of all lead the way in building three analysis tools on their own to dissect their capabilities, or in other words, analyse their capabilities to create added values in their operations: (1) Pros and cons analysis, (2) competitor analysis, and (3) competitiveness analysis.

(1) Analysing pros and cons (knowing the reality): Helping businesses identify strengths and weaknesses as well as challenges and opportunities of integration and economic restructuring. For example, being an ASEAN member since 1995 and starting to enact the Agreement on the Common Effective Preferential Tariff (CEPT) to establish the ASEAN Free Trade Area (AFTA) in 1996, Vietnam actually reduced tariffs since 1999 when the first group of items from the temporary exclusion list (TEL) was added to tariff reductions under the CEPT. However, towards the formation of AEC in 2015, challenges and opportunities not only line in commodities but also extend to such sectors as services, capital mobility, labour, fair competition and corporate social responsibility.

(2) Analysing competitors (knowing others): Analysing operations in value chains of competitors (or partners) to identify comparative advantages in capacity over rivals to have competition or cooperation plans. Rivals will be on the rise and varied as a result of regional and international integration.

(3) Analysing competitiveness (knowing itself): To analyse its competitiveness, a business must first of all identify its market and market share of products, thus enabling it to make long-term reasonable investments to ensure the logical structure of inputs and outputs. Or in other words, it must answer questions about the position, stability, development, prediction and other factors of the market and customers it targets. This analysis plays a decisive role in selecting, building and developing its core values. A business must be regarded as a chain of added values generated by direct production activities and supporting activities. Direct production and business activities include product creation, marketing, distribution and after-sales service. Support activities comprise resources, input infrastructure, leadership, culture and IT (helping create added values and reduce costs). The capacity of a business is constituted by value-added chain of such activities. Its core values are such capacities, comparative advantages over competitors and generate profits for it.

2.2 Planning production and business strategies

The use of market analysis tools enables businesses to know realities, others and themselves. But, it is important that they must act to overcome challenges identified after being analysed because if challenges are recognized but no actions are taken to address them, the problems will be worsened, particularly in the context of economic crisis and rapid change. Therefore, every business must take action to assess itself in a practical and objective manner to plan production and business strategies. They must proactively have strategic plans for the five following areas.

(1) Stabilising and developing businesses

Currently, banks and even governing bodies (of SOEs) hope that businesses must take action to address internal issues within their capacity before having support policies.

– Rationalising production and business stages

– Relocating fixed costs into variable costs by signing subcontracts with strategic partners

– Strengthen variable payment factors

– Reducing costs by reducing intermediaries

– Optimising capital source, cash flows, debt collection, debt moratoriums, capital turnover cycle increase and supply chain standardisation

(2) Restructuring apparatus and corporate finance

– Renovating and streamlining the business model towards increased productivity and improved working conditions; focusing on building the model at the decision-making level, because the speed of making decisions plays a major part in enhancing competitiveness in the current rapidly-changing economic environment.

– Focusing on goods and service quality improvement strategies, particularly well-branded and highly profitable goods

– Optimising sales and marketing stages

– Keeping creative to go beyond traditional limits, keeping study and exchange work to build up working experience

– Keeping good relations and working with creditors in a timely manner

– Rationalising costs and increasing market forecast (probably on a weekly basis)

(3) Divesting from non-core businesses

In the context of economic recession, smart businesses will quickly rearrange their production business operations and divest from non-core fields, including selling important assets

(4) Never miss any chance to buy good assets

Empirically, the biggest return for a company may come from its asset purchases in the time of past economic recession. Therefore, pioneering businesses must look at current difficulties and challenges to purchase good assets and earn big in the future.

(5) Strategic visions

Business owner and CEO must be practical, optimistic, confident and innovative with business development visions. Such spirits must be spread throughout his/her company. A pioneering company must define its sustainable development directions in an integrating and business environment full of risks by seeking to control challenges, rather than being affected by such challenges.

In the process of integration and economic restructuring, pioneering businesses must see realities, rivals, partners and their capabilities to work out suitable strategies to be successful with their business and contribute more to national development.

Dr Doan Duy KhuongVice President of VCCI and Chairman of ASEAN BAC Vietnam

Đăng ký: VietNam News