Vietnam business community weakening: economist

The Vietnamese business community is weakening, with 15,000 companies leaving the market every month and their financial capabilities waning, said Dr. Vu Tien Loc, a member of the National Assembly’s Economic Committee and president of the Vietnam International Arbitration Center (VIAC).

Vietnamese businesses are facing mounting difficulties, and many of them have been forced to fold and while those that are left are struggling. What is the root cause of this situation?

Vietnamese businesses are facing a storm. Although the world economy has shown signs of improvement, it is still facing challenges. Export markets have narrowed. Domestically, production is difficult, employment and incomes are declining, purchasing power is low, and the market is gloomy. Foreign investment is failing to meet expectations while private investment is weak and public investment is sluggish.

The three main growth drivers -- export, consumption, and investment -- are all stagnant. Vietnamese businesses, after a period of struggling due to the Covid-19 pandemic, now continue to face new and even more severe difficulties. Many lack orders and capital, with increasing inventories and poor liquidity.

Businesses are encountering a sea of difficulties. Many of them have been forced to leave the market while others are struggling to maintain operations, leading to narrowed production and unemployment. Some are even clinically dead. Business growth is at its lowest level in decades.

Statistics for nine months through September show that on average, for every eight businesses that folded, 10 more were newly established or resumed operations? What do you think about this?

In the first nine months of this year, over 160,000 businesses were established or resumed operations in Vietnam, higher than the number of companies leaving the market or temporarily suspending operations (nearly 122,000).

The rate of businesses withdrawing from the market was the largest in many years, with up to 15,000 each month. The size of newly established enterprises decreased in both registered capital and workforce compared to the same period last year. The Vietnamese business community is weakening.

The state's resources are limited while the difficulties faced by businesses are huge. In the current global and domestic context, what should businesses do to overcome difficulties and grow?

Implementing resolutions issued by the Party and National Assembly, the government and authorities at all levels have made efforts to support businesses with unprecedented solutions. However, the global situation remains unpredictable, and the internal problems that have been facing the economy over many years are becoming increasingly evident.

The state's resources are limited, while the difficulties businesses are facing are enormous. At this time, businesses should not “wait for God’s help but must save themselves first.”

Vietnamese businesses are once again facing a life and death struggle to survive, keep jobs for workers and contribute to the overall development of the country. Once again, the spirit of entrepreneurship, innovation, and creativity in the business community must be promoted.

Over the past few decades, we have written a miraculous story about the outstanding development of Vietnamese businesses and entrepreneurs. From being absent on the country's economic map, thanks to the reforms initiated and led by the Party that ignited entrepreneurial aspirations and the first wave of startups, today we have over 6 million business entities, including 900,000 enterprises, 5.2 million business households and tens of millions of entrepreneurs. They are steering the country’s economic boat, contributing about 45% of GDP.

Were entrepreneurs the main force behind the "great escape from poverty"?

That's right. Entrepreneurs were the core force behind the great escape, bringing tens of millions of Vietnamese out of poverty, and turning Vietnam into a middle-income country which is taking firm steps on the path to prosperity. The entrepreneurial spirit over the past third of a century is worthy of being honored. And now, we are standing before a requirement for a second wave of startups in the economy.

The second wave focuses on innovation and creativity to upgrade the business community and economy. The first step to escape poverty was difficult, but the second, aiming to make the country rich and strong, will be much harder.

What must be done to make the second startup wave meet the expectations of innovation and creativity to make the country rich and strong?

Continuing the entrepreneurial journey, "starting a business again and starting a business a business forever" must be our mindset. If you want to start a business, please look straight at the truth. The startup movement over the past decades has produced more than six million business entities for the country - an undeniably great achievement.

But that is only one side of the coin, the other side that we need to clearly identify is that our business community is big with more than six million business entities, but not strong enough, with low levels of management, technology, professionalism and human resources quality.

We still have too few large and medium-sized enterprises in the vast sea of small and micro businesses. Labor productivity and competitiveness among Vietnamese enterprises are not high. Many businesses show a lack of social responsibility, and violate business ethics and laws.

We don't have a generation of industrialists yet, or many businesses and brands of global stature. The scale of our economy is large, but the proportion of the informal sector is still high, accounting for 30% of GDP. Up to 70% of Vietnam’s exports still depend on FDI firms and 50% of industrial output is also created by this sector.

The economy depends heavily on capital, technology and foreign markets. The economy's self-resilience and internal strength remain low. Local enterprises have not been able to connect effectively with foreign counterparts, and are still mainly outsourcing while being resource and labor intensive. With this economic structure, we can escape poverty but will not be able to overcome the middle income trap to join the group of highly developed economies.

Some say that a country is only strong when we have a strong contingent of businessmen and become wealthy when the business community knows how to get rich. What are your comments?

The 13th National Party Congress set a roadmap for Vietnam to become a developed country. Once again the core role for economic development has been placed on entrepreneurs. The country is only strong when we have a strong team of entrepreneurs. The country is only prosperous when the business community knows how to get rich.

In the current context, our businesses and entrepreneurs are carrying out a dual task of standing firm to overcome the immediate difficulties and restructuring in the direction of innovation and creativity for sustainable development.

Therefore, the recovery requirement for the Vietnamese economy and business community does not mean returning to yesterday's state, but establishing a new, higher state of balance, with a better structure. Recovery must be accompanied by upgrades to meet the requirements of the new period. I believe that Vietnamese businesses will succeed in this new startup and restructuring process.

To be successful in the new startup and restructuring process, do businesses and entrepreneurs need to rethink?

Businesses, no matter what level, must review themselves, from vision, strategy, structure, human resources management, technology, products to customers, partners and markets to orient restructuring to meet the requirements of innovation and creativity. They must perform more responsible business activities, implement digital transformation, uphold social responsibility, and push ahead with green and sustainable development. That is a challenge and also a huge opportunity.

As the global economy is being restructured and global supply chains are shifting, Vietnam, with its favorable geopolitical and geo-economic location, socio-political stability, "bamboo diplomacy" policy which is steadfast but flexible, strong energy and entrepreneurial spirit, has been chosen as the destination of the global supply chain, especially in the fields of digital technology and high technology (including semiconductor chip technology), clean energy, and circular economy.

Once again, Vietnam is expected to be the destination of a new wave of higher quality investment in the global economy. A once-in-many-decades opportunity is coming to Vietnam, helping it connect and upgrade local businesses.