VN needs start-ups to become sustainable

Update: February, 18/2016 - 10:37

by Ngoc Bich

An official from the Viet Nam Chamber of Commerce and Industry (VCCI) has voiced his opinion that it is necessary for Viet Nam to encourage a start-up entrepreneurial spirit and launch a national programme to develop enterprises.

He explains that the number of enterprises in the country has been standing at 500,000 over the past few years which is too small for a 90-million-person country. He emphasized Viet Nam should set a target of one million well-performing enterprises by 2020 and five million in the far future to grab opportunities brought by economic integration, especially when a large free trade area has been formed by the recently-signed trans-pacific deal.

To create such a large number of enterprises, I believe, is not difficult as long as business registration procedures are easy to do. However, the problem is how to make the enterprises develop sustainably after they are established and compete with their foreign rivals right in their homeland.

In reality, Viet Nam sees a lot of new enterprises established and dissolved every year. For example, according to the Statistic Office's report, last year, 71,000 enterprises had to temporarily cease operation and were dissolved, an increase of 22 per cent compared to the previous year's figure. In the fierce competition environment, it is normal for inefficient companies to leave the market. However, in this country, there is another important reason behind it. That is the small-business mentality.

From his own experiences, Neil Thanedar, CEO and Founder of LabDoor, a mobile health startup providing report cards for medicine cabinets, describes the small business mindset that sees company profit as a top objective, while the start-up spirit is based on a community's demand. In other words, small businesses provide what they have, but start-up companies provide what customers need.

Balaji Viswanathan, Product Manager at Black Duck, a VC Funded Startup in Boston, described a small business as a self-sustaining organization which is designed to generate revenue or even profit from the first day of operation. That's why it is less risky but also less profitable. A start-up founder must be much more creative and do a lot of experiments. He might have to wait for a long time before his project gives "explosive payoffs".

Facts in Viet Nam show for most people, a start-up is still thought to be an early stage in a business process though the term has somehow become used worldwide as the term to describe a type of business. Besides, people doing business are driven by expectations of quick returns and self-interest. The way of thinking seemingly makes the small-business mentality outweigh the start-up spirit in the country. Therefore, raising a start-up entrepreneurial spirit should first start with changing people's mindset. Creativity and ambition to serve the community would help build a more sustainable business. Many successful start-up cases have proven that founding teams are people who have serious aspirations and passion for values that they bring to communities and societies.

Another variable is deciding in which sector the country should promote the programme. The VCCI official suggested that the national programme on start-ups and developing enterprises be conducted in every sector. This might be not suitable for the moment.

Instead, the Government should focus on one or two sectors. Last year, the Government issued a decree to give guidance on the implementation of the Law on Investment which states that start-up projects in high-tech and information technology will be given more priority.

However, focusing on technology is not enough. When Viet Nam joins the Trans-Pacific Partnership, the most vulnerable sector predicted by economic experts is agriculture. Ironically, it used to be hailed as one of the country's biggest advantages.

The country is said to fail in competing with foreign counterparts in this sector because it mostly exports the crude products, while it lacks investment in product chains and processing as well as research in new varieties.

Thus, encouraging start-ups in this sector would help a large part of the population who live on farming by creating more jobs. It also helps the country to promote one advantageous and potential production sector. — VNS