Friday, September 25 2020


Rapidly growing firms pose risks

Update: August, 08/2015 - 09:14

Economic expert Nguyen Tri Hieu spoke to Hai Quan (Customs) newspaper about enterprises that use investments from suspect sources or earn money suspiciously fast.

Some fairly new and small Vietnamese enterprises suddenly announce they will launch major projects requiring huge sums of money. Does this throw suspicion on the financial capacity of these enterprises?

Internationally, it takes a new enterprise about three years to reach breakeven point. After that, they start to make profits. About a third don't reach break-even point in the first three years. This is also true for many Vietnamese enterprises.

Quite a few Vietnamese enterprises claim to be very successful without producing a huge profit margin ratio before the three-year breakeven point. This may indicate they are lucky at finding good markets or that their products are selling like hot cakes.

It's also possible that these enterprises are invested in by big banks or receive support from some super source of funds, particularly money laundered from real-estate projects.

Do you think the quick growth of enterprises that use investment from suspect sources affects the sustainable development of the national economy?

The rapid growth of firms that use investments from suspect sources helps to make national economic development unsustainable.

Successful enterprises contribute more money to the national budget through tax and by providing jobs. They also play a key role in the fields of real estate, exports and others.

However, on the dark side, if enterprises become rich in a short period of time, their production is often not sustainable and bears many financial and economic risks.

Do you think loopholes in our business environment and legal system have created opportunities for some enterprises to get rich quickly?

In one way or another, I should say loopholes in our legal systems have provided conditions for a certain groups of people to benefit themselves.

In addition, our market is emerging. Some business people have successfully seized this opportunity to make profits for themselves.

Operating along the line of a market economy, Viet Nam needs a stable market. This requires enterprises to have good business plans.

Should Viet Nam encourage the replication of many more quick successful enterprises?

Of course, particularly if they are labour intensive, such as those operating in the fields of rural agriculture, commodities production and textiles. They provide jobs for many people.

However, the biggest risk when enterprises develop so rapidly, is that they often not pay due attention to environmental protection and the practice of information disclosure and transparency and accountability.

On the side of the State Bank of Viet Nam, I think the bank should be highly responsible and quickly detect commercial banks that violate the Government's lending policies.

Last but not least, the Government should help enterprises that operate well, so that they can further extend their business. — VNS

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