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Preparations for AEC largely inadequate

Released at: 12:00, 03/06/2015

Preparations for AEC largely inadequate

Mr. Robert Tran, CEO for USA, Canada and Asia Pacific at business strategy development consultants the Robenny Corporation, talks about the challenges facing Vietnam's SMEs

by Linh San

Robenny recently released a survey on the extent of the knowledge among Vietnam’s small and medium-sized enterprises (SMEs) regarding the ASEAN Economic Community (AEC). Can you share the results with our readers?

The survey revealed that a remarkable 72 per cent of local SMEs do not know very much about the upcoming AEC. The survey covered some 1,000 local SMEs, and 72 per cent do not know what is going on with the AEC or even what the AEC is. The remainder said their knowledge of what the AEC is or what it’s about is about 50/50. They don’t seem to care about the AEC, saying it is the government’s job to know and that they are only small businesses. This is dangerous, as they have not prepared for the formation of the AEC.

What challenges will they face in entering AEC markets?

It’s not just local SMEs in Vietnam; regional SMEs will also face challenges in terms of their small or medium scale, financial resources, human resources, operations, and business efficiency. Having joined the AEC they must change and adapt to a larger market with much more sophisticated tastes and a raised level of expectation.

In Vietnam, for instance, firms might make acceptable products, which may be good enough for the local market and meet consumer expectations. But when entering the AEC market they will have to revise their product quality and design to meet the higher standards and expectations of a larger and more discerning market.

So that is the challenge, but it could also be an opportunity for local companies to improve and enhance their products to meet the specific needs of the AEC market and the international market as well.

Economic experts have pointed out that human resources is a major issue for Vietnam with the AEC, as the country lacks skilled workers and suffers from low productivity. Do you think this is the case?

I agree partially but not fully, as it depends on the level of the human resources in question and the industry. For example, the C-Suite Executive levels (CEO, CFO, CIO, etc.) for all industries are pretty much the same throughout the AEC. Most foreign companies from North America, the UK, and Europe are considering or searching for or already promoted local C-Suite Executive Candidates to CEO positions, such as HSBC Vietnam and ANZ Vietnam. There are so many experts in animal healthcare and agriculture in Vietnam working under the best practices found in the region.

I agree, though, about the low productivity comment. There are so many reasons for it, such as salary and benefits, working environment, attitude, discipline, and lack of skills. For example, the salary budget for one worker in Singapore would be enough to pay three to five workers in Vietnam, depending on the industry. This doesn’t mean that the Singaporean worker is much more skillful than the Vietnamese worker. If the salary in Vietnam was pushed up to the regional level I’m sure people would do their absolute best to upgrade their skills to the highest level possible.

If you were to do a quick survey at all industrial parks in Vietnam you would find that workers hop from one factory to another, for just a few hundred Vietnam dong in extra salary. NOT because they are disloyal (a lot of foreign companies complain that Vietnamese workers are short on loyalty). It is because what they earn does not cover their living costs. We have to come back to the root cause of problem, which is C&B, or Compensation & Benefits, for workers. PLEASE, never pass this job on to the government. If a foreign company really wants to keep their workers they must study the labor market and living costs, and I mean TRUTHFULLY STUDY.

What are the opportunities for Vietnam, especially for its business community, when the AEC comes into being?

I think that local end-users will be the ones to benefit the most from the AEC as they will have access to more products of better quality and prices. End consumers can have a completely new experience with the massive number of products on offer in the region.

As for local SMEs, they can now join in the supply chain or become suppliers themselves for large companies in the region. For instance, a major manufacturing company in Singapore or Thailand that wants to enter Vietnam may approach different SMEs in the country. Local SMEs, therefore, can seize the opportunity to become a supplier of these large companies and enter a much larger market in the AEC.

Once they successfully establish themselves as suppliers within the AEC they can become suppliers for member countries of the Trans-Pacific Partnership (TPP).

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