Mr. Pham Van Thinh. Photo: Deloitte
Mr. Pham Van Thinh, CEO of Deloitte Vietnam, tells VET about the impact of the US's withdrawal from the TPP and the challenges Vietnamese businesses face in a changing global economy.
How will the US’s withdrawal from the TPP affect export enterprises in particular and Vietnam’s economy in general?
As the leader of the agreement, the US’s withdrawal from the TPP means that it will almost certainly not proceed. Looking back on all the predictions about the TPP from economic experts over the last year, the impact of the agreement on Vietnam’s economy was expected to help GDP grow by almost 10 per cent by 2025. Therefore, it is obvious that the TPP’s demise will significantly impact on Vietnam’s economy. The US is still the country’s largest export market, with a major influence on economic growth. Even if the TPP goes ahead without the US’s involvement, the expected benefits for Vietnam will be much less than initially believed. In particular, in the absence of a US-Vietnam free trade agreement (FTA), the TPP not being introduced combined with the protection policies of the Trump administration will have a major impact on Vietnam’s exports to the US in the medium term.
What are the advantages and disadvantages facing Vietnamese enterprises in 2017?
People around the world are hoping for a strong global economy generally and a strong US economy in particular, despite the negative effects of protectionism. Petroleum prices are recovering, though at a low level, which will have a positive effect on countries that export petroleum. However, some important partners of Vietnam are seeing a slow recovery. Growth in Japan and China is predicted to ease compared to previous years. Two markets Vietnam has recently signed FTAs with, South Korea and the EU, are both going through difficult times.
Domestic production has seen positive changes following environmental events that negatively affected production. This is expected to continue. The macro-economic situation remains stable, with inflation, interest rates and foreign exchange rates being well managed. The commitment by the “constructive government” to reform the economy, complete the legal system, and improve administrative procedures and the investment environment will attract higher domestic and foreign investment.
However, we will also have to face many major challenges. The bad debt problem in the banking system continues to be an obstacle and affects the economy’s stability and sustainable growth. The issue of public debt also requires attention. With the recovery of petroleum prices and the appreciation of the US dollar, inflationary pressure will return. In addition, the negative effects of the environment and climate change have had a considerable impact on enterprises operating in the agricultural sector, and environmental problems experienced in 2016 affected the psychology of foreign investors.
Vietnam is expected to maintain its growth, with financial institutions predicting a possible increase of 6.3-6.5 per cent this year. Businesses therefore have the favorable conditions necessary to continue growing. The question is whether they continue to innovate and adopt new technologies to improve their internal capabilities and enhance competitiveness and expand markets.
In a changing economy, what do businesses need to do?
The global economy is moving and changing quickly. What we are talking about is the fourth industrial revolution: the rapid development of science and technology and a “flat” world. Vietnamese enterprises are mostly micro, small and medium-sized, so they face many challenges in terms of technology, finances, market access, and low labor productivity in the context of integration and a changing economic landscape. Vietnamese enterprises need to improve their corporate governance, enhance their competitiveness, build appropriate strategies, and seize opportunities, overcome challenges, and develop sustainably.
As the leader of Deloitte Vietnam, which provides professional services for businesses, what do you think about the establishment and closure of many businesses in recent years?
In a market economy, businesses opening and closing is perfectly normal. The relatively large number of businesses closing in recent years shows that Vietnam’s businesses are not well prepared for market entry. Such preparation includes not only capital and market issues but also other vital issues such as strategies, new technology application, and human resources, etc. We talk a lot about startups but I don’t think that everyone has a full view of this issue and carefully prepares. The number of newly-established businesses every year is very encouraging, and I believe that the new generation of entrepreneurs will be better prepared and take more drastic action, thereby creating more sound businesses and pushing up the country’s economy.