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ENTERING INTERNANTIONAL BUSINESS ENVIRONMENT- VIETNAMESE ENTERPRISES‘S CHALLENGES CHANGING AND FACING INTRODUCTION By way of industrialization and modernization, international economic i

ENTERING INTERNANTIONAL BUSINESS ENVIRONMENT

- VIETNAMESE ENTERPRISES‘S CHALLENGES

CHANGING AND FACING

INTRODUCTION

By way of industrialization and modernization, international economic integration has brought to Vietnam many benefits and achievements in national construction and development of the country Vietnamese Party and the Goverment have been agreed

in opinion through the parliamentary meetings, especially on the meeting of the Parliament No XI, we prioritized to discuss some programmes on deep integration process for international economy In fact, after Vietnam joined WTO, our Party and the government always create favorable conditions for Vietnamese enterprises developing internal strength, boost production, increase exports and ensure fair competition in the region To achieve this ojective, the Vietnamese enterprises need to invest properly and fully human resources, financial ability, technological innovation, and strengthen relationships with partners and customers in domestic and abroad, sustainable development strategies, increase management ability as well as build positions in the market, or improve brand positioning to increase the competitiveness

of Vietnamese enterprises in domestic and overseas market These factors help businesses more actively in finding market and market share both in our local market

as well as in international areas From these advantages, we will develop in a most effective way, to avoid the risk of rejection because we don’t meet social demands, as well as can not exist under the rules of the competition In addition to the development and the strength, the enterprises will have many opportunities to reach out overseas projects, the opportunity to work with the investment-oriented project in a effective way With these advantages, we are very successful enterprises in the Vietnamese market, under the Board of Director’s directions, our company has decided to expand

its business on a global platform – face with the international competitive business encironment To make investment to achieve high efficiency, we have studied through advisory channels, sources of information, calculation and evaluation business efficiency, using some analysings as following:

I Analysis of differences between the business environment in Vietnam and the global business environment:

The difference between the business environment in Vietnam and global business environments mainly occur due to cultural differences:

Vietnam is a country with a culture of Collectivism and Masculinity, so the power distance gap is big, has tendency to avoid uncertainty and deal with time in a circle, spiral way Therefore, the business environment in Vietnam will be heavily influenced

by this culture: Because collectivism attitude, all business decisions will be decided by the collective This has the advantage that this decision will be made very realistic because it was deliberate by the collective, avoiding subjective factors when it is determined by a person However, in a global business environment, a decision made too late will lose business opportunities due to competition, the competitors can catch our chances Collectivism could make members in the group dependently, they do not willing to think or explore new things todevelop their personal creativity, which makes Vietnam Business becomes identity and completely unable to compete on the world market In addition, collectivism can also cause conflicts of rights (wages divided the same in Vietnam Business whether members can devote as much or as little) And that means motivation and personal development is suppressed

Vietnamese culture is masculinity: men are considered more important than women,

by chance we suffer loss of talented human resources from women because women are unnoticed and don’t have advanced training while there are talents are female In Vietnam, there are many successful business woman like Ms Cao Thi Ngoc Dung,

chairman of the Board of stones Phu Nhuan Jewelry Company, Ms Nguyen Thi Phuc Lam, General Director of Bao Viet Group, Mai Kieu Lien - Chairman and CEO Vinamilk (VNM), Nguyen Thi Mai Thanh, Chairman of Refrigeration Electrical Engineering (REE), etc We think the number of successful business woman is much more if Vietnamese erase the concept of woman contempt

Vietnam is also a country with a large power distance, all business decisions will be made by the highest authority in the enterprise, so the initiative or idead will be limited in the organization This will also reduce competitiveness when Vietnam entered the business in the global environment

Since Vietnam (as well as in some other Asian countries) have culturetime multi line (polychrnic) punctuality is not respected, but also the concept of "The late one was the most important " This concept should be revised thoroughly if we want to enter global business environment, especially when we corporate with partners who has the concept of linear time (monochromic) that the concept of time is money,they don’t satisfied with the late

In addition to cultural differences, Vietnamese Business must change if you want to join the global business market, the recruitment of Vietnamese enterprises must also change: not hiring and has priority for members in a family, relatives, acquaintance

On opposite, we have to prioritize ability factor as the top one, so that only qualified personnel can really help businesses stand and win the harsh international business environment

II Vietnam Business changes need to be made to be able to compete globally:

Table published by the year 2011-2012 of the World Economic Forum (WEF), the indicator of global competitiveness, including 12 key indicators:

3 Competitive factors 12 indicators and

ranking (142 countries)

Vietnam's ranking (2011-2012)

2 Infrustructure (90/142)

3 Macro Economic Environment (65/142)

4 Health care and primary

education(73/142)

Effective improvements 5 Eductation and

university education (103/142)

66/142

6 Goods market effective (75/142)

7 Labour market effective (46/142)

8 Financial market develpment (73/142)

9 Ready for technology (79/142)

10 Scale of the market(33/142)

Creative factors and

sophisticated 11 Sophisticated in bussiness (87/142) 75/142

12 Innovation (66/142)

If we compare 2011-2012 with 2010-2011, Vietnam has reduced its ranking to 6 levels This proves that Vietnam should quickly change a number of indicators to be able to increase capacity in the global competition

As reported by the World Economic Forum 2011-2012, here are 14 factors that Vietnam needs to improve to have a chance to compete globally:

1 Inflation

2 Finance approach ability

3 Unstable Policy

4 Foreign exchange regulations

5 Infrastructure does not meet the requirements

6 Labor force is not well trained

7 Tax provisions

8 Corruption

9 Poor professional ethics

10 Government Bureaucracy

11 Government's policy is not stable

12 Tax

13 Restrictions on labor law

14 Poor public health-care

In our view, for Vietnam to enhance global competitiveness, the Government must make the following points:

- Strengthen the control of inflation immediately

- To promote the export than import (export-import balance)

- Good management of loan capital, reduced interest rates to 1 figure, increasing bank loan accessibility

- Promote the development of infrastructure

- Privatization of the business sector

- Improving the education system, particularly English language training

In sumary, the Vietnamese government should think thoroughly: State management, private business, the global competitiveness of Vietnam will improve quickly

III Challenges in the international environment that Vietnam does not have:

Here are four major challenges that Vietnam Business faces when joining the global business environment:

1 Competition:

More fierce competition will take place, with more "competitors"on broader and deeper aspects

2 The benefit distribution

All over the world the, from globalization, benefit distributions are not equal Countries with low economic development have benefit less than development countries In each country, the benefit distribution is also unequal A part of the population have benefit less than others, even with the negative impact of globalization; bankrupt a business division and increased risk of unemployment, inequality will be more powerful To avoid this situation, we need to have a welfare policy and social security right; must thoroughly understand and implement good policy of the Party: "Economic growth must couple with poverty reduction, make improvement and social justice at every step of development."

3 Interdependent between countries:

While there is international economic integration in a world of globalization, the inter-dependence between countries will increase In terms of national resources is limited, incomplete legal system, lack of experience in market economy operations, this is a big difficult towards these countries

4 New problems arise:

International economic integration poses new problems in environmental protection, protection of national security, the maintenance of cultural identity and tradition of the

people, against the pragmatic lifestyle, working for money as well as running, follow

up money all the time

IV We - Vietnam Enterprises – what should we do to overcome these challenges?

A Seek for the assistance of the Government on policies, development direction of the economy:

1 To further improve the legal framework, administrative procedures reform and fiscal policy, so that business investment environment is equality, transparency, stability and ventilation

- On completion of the legal framework: The general law continues to improve the economic and legal framework in particular in the direction that all citizens and organizations are entitled to do what the law does not prohibit The State ensures the frame legal activity which is an essential requirement In the next 5 years, the economy entered the period of integration into the world economy and the region, we will have implementation of bilateral and multilateral commitments on economic, creating a business environm that is equity, transparency, stability, ventilation system

on the basis of full legal stability These factors will create favorable conditions for business development in both quantity and quality, to attract more are all sources of capital for investment development

- To promote administrative reform: Although it has achieved some initial success in administrative reform, but in general administrative work in our country still exist many problems, the capacity of the state apparatus still is weak, slow changes, as shown in the following aspects such as: awareness of the state in general is unequal transition between the central and local levels, between relevant agencies at the same level, and slow than the change of legal system compared with rich, dynamic environment in recent years; psychological and working attitudes Working methods and management tools of the relevant agencies do not have change significationly to fit the procedure, the new policy Scientific, professional working in a market

economy of state agencies is still low Those parts and necessary tools for the implementation of the Enterprise Law in particular, support and business development

do not to build, consolidate and strengthen as prescribed

- To promote the study and using some methods to reduce the business cost, so that operation cost is the most competitive compared with other countries in the region such as regularly organized and maintained online discussion, from these activities enterprises can now receive business consultation, submission, tax implementation procedures and collected primary information as quickly and cheaply as possible; reduce procedures for business registration through the setting a nationwide networked system of business registration

- Fiscal policy: Adjust appropriately tax system to encourage business start-ups, to encourage small business development and job creation At the same time, the implementation of the reform of accounting, statistics in the direction of simplification, encourage enterprises to declare and pay tax

Amend the provisions of the Value Added Tax, Import and Export Tax in the direction of determining the transparent, clear standards in accordance with the bilateral and multilateral agreements which Vietnam has signed and regulations principles of integration

2 Implementation of appropriate policies to improve the shortage of the production, and environmental protection: While many state enterprises are allocated land but they don’t use in an efficient way – there is fallow land or use under other purposes, the Company (including mainly private-sector enterprises) face many difficulties in finding business premises with huge costs Even if enterprises have land for the production, they still cost a lot of money and time the care about all the necessary procedures to obtain the land use right certificate to be able to mortgage This has contributed to the investment restrictions which used to be have limited of the enterprise

In order to solve the problem in terms of production and business enterprises, the 2003 Land Law and the guidance of the Government's Decree No 180/2004/ND-CP,

181/2004/ND-CP, 188 / 2004/ND-CP , has defined a number of specific issues But

so far, , to create conditions for enterprises in accessing land and can use land use rights as collateral, mortgage loans from credit institutions, it is impossible because the implementation of the provisions of the 2003 Land Law and Decree guiding is ongoing and has difficulty

3 Research and promulgate policies to encourage development funds for Enterprise, enhancing ability to access credit capital for operation

While commercial banks have said that they do not lack the capital to lend, but there are so many businesses can not build business plan to convince the bank loan Meanwhile, businesses owners will argue that they are very difficult to access credit loans The problem here is that supply and demand is not met and the State's role is support to create conditions for the supply and demand for money that meet requirements More details are as following:

On the Enterprise, state support for training so that these enterprises have the ability to set up a feasible business plan to persuade banks to lend; encourage businesses in the same industries contribute capital to set up funds for helping each other

On the banking side, the state should study and provide preferential policy, ensuring that profits obtained from commercial banks are interest paid by corporate customers

4 Promote dissemination of information, technical and technological information to enterprises, improving the capacity of enterprises to identify, select and adapt technologies

Lacking of information is one of the major barriers to the development and enhancement the competitiveness of the Company So, in the next plan period, we need to focus all necessary resources for setting up a system to collect and process information to support the business

Besides, it is necessary to encourage the cooperation and technology sharing between the enterprises, develop effective research programs that can be apply in commerce,

encourage the development of joint model between research institutes, universities, technical schools now

5 Encourage businesses to participate in the affiliate industry at all levels and support the development of business associations

In general, the world of affiliate business is always mentioned in the form of business association, link beam (cluster) However, in Vietnam, both forms of development only at a limited level and efficiency is not high Therefore, there should be more appropriate policies to encourage the development of associations in the direction of training support staff associations; ministries, to create favorable conditions for the opportunity to participate in the activities in the sectors of management in accordance with the law, consult organizations to improve the management regulations state sectors; help develop industrial zones weakness in the auxiliary industry; encourage the development of links between enterprises and research organizations and educational high level of development through appropriate policy support

6 Aid in key areas to enhance the competitiveness of some sectors in which Vietnam has advantages

According to the experience of many countries, because all governments have limited budgets, while the support demand from the Company in general and business in particular is very large and generally beyond the capacity of Government, in every certain period, every country selected a number of areas in which his country has the advantage to focus on developing In Vietnam, in very limited financial conditions for Business support activities, the more we must be consistent with the key principles help, aid can only be done with a few business, but make sure that after receiving the aid, the business may be able to compete Business support activities should avoid dividing equally because each firm receives assistance will not solve the difficulties of the business as we did before

7 Encourage development of services market which has oriented from market economy, separate directly provide services functions out of the state management functions