Without a plan, cost cutting
can harm business
by Thuy Anh
Without a strategic vision, cost cutting to improve
competitiveness can go wrong and harm a business.
"Organisations often resort to impulsive, top-down and arbitrary
cost reduction and headcount targets that have unanticipated and perverse
results, and sometimes these actions just shift costs rather than eliminate them
altogether," John Ditty, chairman of auditing and consulting firm KPMG Viet Nam,
warned participants at a seminar organised last week by Kaisa Consulting on
facing the challenges of global competition.
He cited the example of his firm. It recruits 200 university
graduates every year and provides them two to three years of on-the-job
training. He said he could not reduce the recruitment number to just 50 to cut
costs since, a few years later, the economy might boom again and customers would
complain about the poor service though some money was admittedly saved
Instead, businesses should take a strategic approach to costs
through a combination of optimising business processes and cutting procurement
and supply chain costs among others, he said.
Poor planning and forecasting were at the core of much of the
duplicated and unproductive time reported in most financial functions, he said,
urging businesses to get to the root of inefficiency in the forecasting
The economic recovery has helped boost both the life and
non-life insurance sectors. Life insurance companies have collected a total
premium turnover of VND8.49 trillion (US$459 million) in the first nine months,
up 12 per cent from the same period last year. New contracts accounted for more
than VND2 trillion, marking a 33 per cent rise, which was way beyond the
industry’s expectation since the economy was still foundering.
Eleven life insurance firms signed almost 465,000 new contracts
in all, up 13 per cent. Around 54,000 contracts were renewed, for a rise of 4
per cent, with Prudential alone accounting for almost 47,000. Dai-ichi Life
followed with over 3,600 revived contracts.
The number of contracts in effect at the end of September stood
at nearly 4 million and the number of agents at nearly 92,000, a 28 per cent
increase. The increase in the agent numbers as well as the introduction of new
products are attributed to the market’s growth.
The general insurance sector reported a turnover of VND9.86
trillion in the period under review, a 23 per cent increase. The Association for
Vietnamese Insurers noted that undercutting rates to unreasonable levels showed
signs of lessening.
Vehicle (car and motorcycle) insurance led in terms of turnover
with VND3.25 trillion, up 45 per cent.
Settlements were worth VND3.54 trillion, or around 36 per cent
of the total premiums collected. US insurer AIG had the highest rate with 70 per
cent while Bao Minh paid 58 per cent. The high rates were due to the devastation
Tropical Storm Ketsana caused in the central region, especially to property,
Apart from an expected rise in economic growth once the global
crisis abates, the country’s large agriculture sector, which remains largely
untapped, is also expected to provide an opportunity for insurance companies.
The Ha Noi Stock Exchange (HNX), which opened on July 14, 2005,
as the Ha Noi Securities Trading Centre, marked its 1,000th trading session last
Friday. It has attracted almost 240 companies from around the country and
700,000 trading accounts from individual and institutional investors.
This month it has received almost 10 applications for listing
and the HCM City-based Power Engineering Consulting Joint Stock Co has announced
that December 1 would be its first trading session at the exchange.
One of the two most important functions of stock exchanges is to
help listed companies raise funds for their business development and nearly half
the firms listed on the HNX have issued new shares, according to Tran Van Dung,
the bourse’s general director. Last year, 54 companies raised a total of VND6
trillion (US$335 million) by issuing shares, up from 54 firms and VND4.45
trillion in 2007.
The exchange also fulfilled the other main function with its
liquidity improving consistently. While the average daily trading value in 2005
was over VND2 billion, the figure by the end of last month was almost VND789
"From the initial six listed companies with a combined listed
value of VND1.5 trillion, the figure has increased to VND35.5 trillion while the
market capitalisation is up to VND150 trillion, or almost 10 per cent of the
country’s GDP," Dung said.
The growth of the exchange is expected to help speed up
equitisation of State-owned enterprises.
Nguyen Hoang Hai, general secretary of the Viet Nam Association
of Financial Investors, suggested that the exchange should improve oversight to
ensure everyone complies with the law.
"We investors have a special concern about the quality of the
goods (securities) and therefore we want the exchange to draw more businesses
with good performance and transparency and ensure rumours do not have a bearing
on investors’ decisions."
The State Securities Commission has asked the Ministry of
Information and Communications to join with the two bourses – the other being
the older HCM City exchange – and securities companies to curb rumours
spreading. — VNS