Vietnam can be the best place in the world: EuroCham
Vietnam has changed actually to become now not only a country of cheap labor but a country of sustainability, growth, and investment.
EuroCham Chairman Alain Cany enthusiastically shared with The Hanoi Times his view on Vietnam’s prospects and how the country can be the best place in the world.
|EuroCham Chairman Alain Cany.|
What do you think about the challenge and opportunities for the Vietnamese economy amid growing global uncertainties?
I think it's two ways. Of course, in the short term, there are two new big challenges. The first is that the global demand is going to decrease and is already decreasing, I can see in some sectors the level of orders went down significantly.
And I believe in the fourth quarter, and probably the early next year, a very difficult situation for Vietnamese exporters. This will affect FDI and Vietnamese companies as well.
The second also is the increase in cost. We have seen, in logistics and energy as well, a large increase in cost, affecting everyone, especially the business's profitability.
Some small businesses probably suffer more than big ones, and Vietnamese companies suffer more than internationally invested companies. So this worries me a bit because if you cannot make money from your business, you will not be able to employ more people and treat your employee well with increased salaries or other benefits.
So, I think next year will be more challenging than 2022 due to global uncertainty. Nevertheless, Vietnam has become more attractive for FDI investment, which is a major pillar of Vietnamese growth. I can see that in the investors' minds, Vietnam has become not only a country of cheap labor but a country for sustainability, development, and investment.
I think the Vietnamese economy is becoming sizable with a growing middle class. And it's becoming one of the key players in ASEAN and may be very soon in Asia. I can see from all the foreign investors I am meeting, especially European companies, they consider Vietnam now as a more long-term place for investment.
Recently, we have seen some big investments from European companies like Lego, which is looking to build a zero-carbon factory in the south of Vietnam. But we have also seen quite a lot of investment in pharmaceutical or chemical companies to build up new factories in Vietnam, probably because they were impressed by the commitment of Prime Minister Pham Minh Chinh in Glasgow and the willingness of Vietnam to become a cleaner economy. I think that will result in high costs, but it will drive FDI to Vietnam, bringing new technology and jobs. And for this, I think you have some negative factors in the short term but some very positive factors in the long term.
What do you see Vietnam in today's global value chains and its efforts to further integrate into the global economy?
We are working very closely with the Government to go in this direction. I think Vietnam still needs to improve its infrastructure, especially in transport and logistics. Vietnam is becoming an attractive option for China's plus-one policy, and this would bring in new investment. I think the country will be among the top five manufacturing places in the world.
Let's say there would be only two or three at max in Asia, maybe two or three in Europe, and two or three in the US. You will have three blocks, and Vietnam will be among the top 10 players in the world.
Covid-19 opened our eyes. We have to be more diversified in sourcing. So, we are not going to relocalize everything in our own country but we are going to select maybe six to 10 places in the world where we will organize big manufacturing. So if there is an issue somewhere like Covid-19, we can source from somewhere else.
|Lego is set to build its first neutral carbon factory in Vietnam worth around $1 billion.|
Another issue is that China currently makes up 80% of manufacturing in the world, and if there are problems, we will get into trouble. So this is why the strategy is changing, and companies are going to organize two, three, or four different sources.
Vietnam is extremely well positioned. And the country is already attracting FDI for this. The prospects for next year are even more encouraging. The Government should pay attention to infrastructure. One of its weaknesses of Vietnam is its logistics infrastructure which is very much behind its regional peers. The Government should take advantage of the slowdown of exports to invest more in the economy and develop infrastructure.
And I believe, of course, Prime Minister wants to go for a digital economy, which is very good. The green transition is very important. But besides this, Vietnam should improve the port systems and logistics overall, which is very important for the supply chain. If you want to become one of the big manufacturers of the world, you need to have the logistics in place. And for the time being, Vietnam is very weak in terms of logistics, it takes a lot of time to go through the customs in the port, and they are not very well organized. So I think there is a lot of work to be done here in the North, the Center, and the south of Vietnam.
What should the country improve to move forward?
The role of the Government is important because it sets up the policy and the regulation. And I think this has changed tremendously. And this is why FDI is growing in this country because it has changed. And the business environment is becoming increasingly attractive, but it's still a long way to go. Especially even if the regulation is okay, implementation at the local or provincial level is often a bottleneck for us as an investor. The interpretation of the law is different at the provincial level compared to the central level because, unfortunately, Vietnamese law is sometimes not demonstrated.
So Vietnam is facing quite a lot of bureaucracy. And this also encourages corruption. Because if you can't interpret the law, you need to sweeten the decision.
I know the leaders are more and more serious in fighting against wrongdoings, but there is still a long way to go. We can see that the Party is taking action to reduce wrongdoings which is good, but on the other hand, they should not disrupt the business. So they have to deal very carefully with the situation. But in making business regulation simpler, Vietnam will also avoid wrongdoing because then you have the rule, and you play according to the rule. There is no different interpretation of the rule.
So this is something where Vietnam has to make a lot of effort. If you compare Vietnam with Indonesia or Thailand, the level is quite comparable to Vietnam, but with Singapore, Vietnam is very far behind. Of course, Vietnam cannot be Singapore overnight, which is not the point. But Vietnam should go in that direction.
And in parallel, if Vietnam can go to digitalization, a green economy, and a cleaner way of doing business with good policy and regulation, it will be the best place in the world. And as European companies at EuroCham, this is what we are trying to do.
We have had very good dialogues with the Government at all levels. In Europe, we struggled for about 30 years to implement the policy and made many mistakes during the process. So we would like Vietnam to avoid making the same mistakes. And working together, we would like Vietnam to adopt the right policy quickly to attract even more FDI.
But more than that, I think about the challenges for Vietnamese companies. And you know, with all these FTA in place, the challenge for Vietnamese companies is the competition from foreign companies. So this would be the motivation for Vietnamese companies because they have to face domestic competition to become stronger before they go to compete overseas.
All in all, this should be a combined effort between the public sector, the Government to set up the scene and the policy and the framework, but also the private sector, all the Vietnamese companies from state-owned to SMEs, to make the effort to change the habits of doing business to follow better governance.
This is particularly important because customers in Western countries and Vietnam have become increasingly demanding in terms of product quality and production.
So Vietnam has to make an effort to move in that direction. And if we succeed, you know, I'm very passionate about this country and being a Vietnamese myself, if we succeed, we will be the champion, and we have the chance to be a champion if we work together.
Thank you for your time!
In the first nine months of 2022, Vietnam posted a GDP growth of 8.83%, the highest nine-month growth during the 2011-2022 period. This puts the country on track to hit a GDP growth of around 8% for this year, among the fastest-growing economies in the world.
Hanoi has been among the key economic hubs that contributed to such high growth, with an economic expansion of 9.69% in the nine-month period, thanks to a gross regional domestic product (GRDP) enlargement of 15.71% year on year, the highest growth rate in recent years.
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