Vietnam Business Forum interviewed Mr Dang Duc Thanh, Member of the Executive Board of the 5th term of the Vietnam Chamber of Commerce and Industry (VCCI) and CEO of Dream House Investment Corporation regarding VCCI’s performance in the past time and its plan to adapt itself to a new development period. Hoang My reports.
As a member of VCCI Executive Board in the fifth term, how do you assess the current development of the business community in Vietnam, especially real estate businesses?
In the past time, the State has introduced a lot of measures to deal with problems and introduced many incentives for business development. In fact, Vietnam now has more than 600,000 companies established, compared with 300,000 enterprises in 2007. However, global economic crisis which started in 2008 and domestic economic downturn have caused hundreds of thousands of enterprises to end operations or go bankrupt.
Apart from objective reasons, the collapse of Vietnamese enterprises is also caused by their internal weaknesses.
In my opinion, the valuable lessons drawn from the failure of enterprises are:
The first is the determination of business strategy. Many companies have gone bust or slid into dilemma due to unfocused investment (particularly investment into previously hot sectors like securities and real estate) while they need to invest in core businesses because their small scale and vulnerability to outside factors. They lack preparations for external shocks.
The second is the excessive use of capital capacity of businesses. Many companies reportedly used short-term capital for long-term investment. This is one of primary causes for the collapse of many real estate companies. Most borrow high-rate loans from banks which may be many times bigger than their owner’s equity.
The third is that many CEOs lack competency. In many cases, a company is set up in order to borrow money from banks more easily. For instance, shipbuilder Vinashin set up nearly 200 new member companies within just two years to borrow money from banks and appoint incapable managers for such companies.
In late 2012 and early 2013, the Government and State management agencies adopted many policies and solutions to unfreeze the real estate market. What is your opinion about those moves? Do you think these moves are enough to activate the real estate market or do you think additional action is required?
The Government and State agencies have introduced many policies and measures to break open the real estate market. But, there is no better remedy than fix land and housing policies. Many land and housing policies need to be adjusted but Decree 69 (issued on August 13, 2009) must be adjusted immediately as its contents on land-use planning, land price, land-reclaiming price, land compensation and resettlement are of no use after four years of enactment. This decree is seen as a direct cause for the current freezing of the Vietnamese real estate market. Where the content “collect land-use money on the basis of market prices” must be modified to address difficulties of real estate companies and revitalise the real estate market.
What will VCCI need to do to support businesses effectively in the sixth term, especially ongoing hardships facing the business community?
The No. 1 function of VCCI is representing the Vietnamese business community. Apart from gathering and connecting businesses, it also protects and supports businesses. The VCCI Executive Board must focus on answering the following five questions: (1) What laws are protecting Vietnamese businesses? (2) What laws are needed to protect Vietnamese businesses? (3) What loopholes in current laws need to be replenished to protect Vietnamese businesses? (4) Why is there a need for adding the criminalisation of economic and civil relations (in order to restrict the power of competent bodies, making businesspeople and citizens feel that police is a service force, not a threat), and (6) What supports do Vietnamese businesses need from the State?
Indeed, in recent years, many companies have been wrongfully convicted. It takes a long time to build up the reputation of a company. But, it is seriously stained after the company is charged and then cleared of all, or all but minor violations. Many even go bankrupt because of such incidents, while authorities only issue an apology to wrap up the case.
The above five practical questions are raised at the “Applied Economic Forum” organised by the Saigon Economic Club and waited for analysis and answer. After analysing “What supports do businesses need from the State,” VCCI will have the foundation to ask the State for help to strengthen Vietnamese businesses. For example, one of the requests Vietnamese businesses sent to the State is to “lower lending rates to equate those in countries in the region and in the world” (7 percent per annum or so) like Thailand, Indonesia, Taiwan and Singapore. In fact, many countries have much lower lending rates like Taiwan with 2 percent per annum or Japan with 1 percent. Meanwhile, lending rates are much higher than regional countries (From 2007 to the present), hovering above 12 percent per annum. In addition, businesses have a lot of other legitimate requests but they have not been proposed for help. Most importantly, Vietnamese businesses must be protected by a complete legal system rather than the so-called “give-take” mechanism.
In the past time, VCCI’s very proactive activities have produced encouraging results. VCCI has played an important role in promoting and applying the Resolution 09 of the Politburo on entrepreneur roles in 2011. However, in the next term, VCCI needs to promote the role of every individual member of the Executive Board by consolidating and launching operating programmes of each VCCI division. The board needs to assign specific activities and objectives to each division. In order to promote the role and the wisdom of each member of the Executive Board to the development of business community, VCCI must, through its Legal Department, complete proposals on legal affairs with connection to business protection in Vietnam to send to the State. VCCI needs to set up the Club of Vietnamese Economists to provide insightful research and analyses for business executives. It will also help provide constructive ideas concerning businesses and entrepreneurs. It will also have training programmes to raise the level of current and future CEOs in Vietnam.
Đăng ký: VietNam News
