Nation urged to cut down on red tape

Thuy Anh

(VNS) Viet Nam observers are waiting to see what concrete steps the Government will take to improve the efficiency of the economy, according to the HSBC's latest Viet Nam at a Glance report.

It says that the observers are most interested in seeing "how the government will reduce red tape" and improve the business environment to support "Viet Nam's highly productive and efficient farmers, manufacturers and entrepreneurs as well as keen foreign investors."

They also want to see the Government improve coordination between the local and central government as well as different ministries to effectively implement regulations as well as deliver development goals, the report says.

Furthermore, Viet Nam observers are keen on seeing the nation improve its processing capability to increase the value of its exports and reduce import costs; and increase agriculture productivity to meet rising demand.

The report says Viet Nam's economy can be considered to be stabilising, but is still dragged down by several factors.

The HSBC's Purchasing Managers' Index (PMI), comprising new order, output, employment, suppliers' delivery time and stock of items purchased sub-indexes, deteriorated slightly from September's 49.2 to 48.7 last month, which marks a ninth month of contraction for 2012.

While the drag from the domestic side is stabilising, Viet Nam's manufacturing sector is being hit by weak external demand, especially from the Eurozone, Japan and the US. The latest data from the Eurozone continues to point to a recession into the fourth quarter, which means that for the rest for year, exports to the region should continue to be sluggish, the report says.

The US election as well as "anticipation of a fiscal cliff has left consumers and corporates holding back investment and consumption," hurting demand for Vietnamese goods such as garments and footwear as well as electronics.

The report also noted that a gradual recovery in China would counterbalance some of the slowdown in western demand, as China became Viet Nam's second largest export destination in 2011.

"What's most positive about October's breakdown is the rise in employment, although this primarily reflects already planned expansion rather than an overall improvement of the economy. This means that despite sluggish economic growth and a challenging external environment, manufacturers in Viet Nam see growth opportunities and are carrying out plans to expand in preparation for when growth returns," the report says.

It says there has been a deceleration of import demand in both consumption and for production goods. For example, motorbike and car imports contracted, reflecting tightening consumer expenditure. Even with a year-to-date increase in oil prices globally, the value of petroleum imports has declined this year.

"In fact, for all of the top six import items, only electronics saw an expansion this year, reflecting a change in export structure," the report says.

It sees the garment and electronics sectors as major export earners in the future, gradually replacing raw material exports.

The report agrees with Viet Nam's efforts to attract high-tech investment in Viet Nam as a way "to absorb excess labour as well as get access to international good practices and technology."

However, a more concerted effort is needed to develop the capability to supply inputs as well as build up local capacity, it says, warning that without this, a waning of Viet Nam's wage competitiveness could result in a very harmful reversal of investment flows.

However, year-to-date exports to China have exceeded last year's total. While China's domestic economy has slowed, Viet Nam's exports to the country have increased.

This is due to the fact that the country is increasingly attracting foreign investment as China's cost of production rises, which ultimately means that some goods produced in Viet Nam will get exported to China as the Asian giant is well-integrated into the global electronic supply chain.

The report says this is an opportunity for Viet Nam to implement policies to acquire technological knowledge so that its future competitiveness will be beyond cheap wages. For example, it can create inputs for China's supply chain as well as process its natural resources such as crude and coffee to make Vietnamese brands internationally competitive.

New report on jobs, hiring

There is a strong demand for qualified accountants in Viet Nam despite the economic slowdown.

A report prepared by HR firm Robert Walters says that as companies start focusing on .establishing long-term stability of their businesses in Viet Nam, there will be an increasing demand for "tax, compliance, internal auditing and legal professionals who can help keep companies in line with regulations while driving down operating costs."

It has noted strong demand for accounting professionals with ACCA or CPA qualifications across all functions and levels.

"Professionals with strong business acumen and experience working with cross-functional teams were in high demand in the first half of 2012, and this trend is expected to continue," the report says.

It says front and middle office hiring in the first half of 2012 was "extremely cautious," with some demand for risk professionals and relationship managers.

There was "slow, but steady" demand for retail banking professionals in the second quarter of 2012 as the sector showed signs of positive growth.

With the State Bank of Viet Nam looking to tighten control of credit risks, "banks are expected to actively hire risk control experts to strengthen this function," the report says. It also forecasts a continued demand for relationship management experts and "positive hiring" in the direct sales, consumer sales and card products departments.

Overall, the banking and financial services sector is set for "cautious but optimistic growth," in the coming months, the report says.

It says there was active hiring of HR staff in the first half of the year, with professionals across diverse backgrounds being actively sought after.

HR generalists were in high demand across the FMCG (fast moving consumer goods), pharmaceutical, automotive and technology sectors and the trend is set to continue.

The report says employee retention remains a key concern for many firms, with employers willing to offer higher remuneration packages for HR talent with strong communication and interpersonal skills.

Stock market needs support

Viet Nam should bring back investors to the stock market by removing the individual income tax imposed on securities investments (usually collected by brokerages when shares are sold) and reducing corporate income tax on securities companies so that they can lower trading fees for investors, an industry insider says.

Bui Nguyen Hoan, HCM City chief representtive of the Viet Nam Associatio of Securities Business (VASB, says a reduction in interest rates and loosening of the quota on loans for securities investment will also help the market revive.

Securities companies should be divided into two types: a brokerage that will neither invest in securities itself nor offer underwriting services; and securities trading firms that will not provide brokering services. This, Hoan feels, will prevent securities companies from abusing investors' capital.

Brokerages, for their part, must improve the quality of their staff, both in terms of competence and ethics, to win investors' trust.

Cash accounts of investors should be opened on their behalf at a commercial bank selected by the investors themselves, Hoan suggests.

He says a tighter management and inspection regime in corporate governance, information disclosure and trading regulations that increae transparency are also needed.

Authorities should issue regulations and allow the trading of derivatives, beginning with futures contracts and options for shares of high liquidity. Later on, these futures and option contracts can be extended to foreign currency, gold, coffee and oil.

Hoan also feels there should be an institution to manage the financial market system.

Although organisations like banks, insurance companies, securities firms and investment firms "have mutual relations," they are independent in their professional activities; therefore the institution would cover the whole system and avoid overlapping or contradictions in financial policies, he explains. —VNS

The stock market Viet Nam still suffers from a lack of fairness and transparency in the system, he says.

The absence of major State-owned groups is another factor discouraging growth of the stock market in Viet Nam, which is yet to match the potential of a country with a population of almost 90 million population, according to Hoan.