Vivek Pathak, regional director for East Asia and the Pacific, International Finance Corporation, tells Viet Nam News reporter Mai Huong that while the private sector plays a vital role in deepening international integration, the process should be done correctly, because the cost of undoing things can be very high.

Viet Nam is speeding up its global economic integration. What role does the private sector play in this process?

The private sector plays a critical role in Viet Nam’s economic integration process. The domestic companies are competitive, productive and they can compare with the best global companies in terms of people, processes, manufacturing and marketing.

I think the private sector will be probably the most important aspect when Viet Nam increases international trade.

Local companies have been growing by leaps and bounds over the past 20 years. Many have started to list stocks, gain new forces and develop quickly in global trade. They are strengthening management and speeding up integration.

However, I think they should open up their economies more, especially when Viet Nam is speeding up integration. More competition is good as it helps the best companies do even better.

It is commonly held that Vietnamese private businesses are not competitive against foreign firms. What is your opinion?

I wouldn’t necessarily agree with you that Vietnamese firms are less competitive. I’m quite sure in some manufacturing sectors, local companies can compete with the best of global firms. However, in the industries which need a lot of research and development, foreign firms have an edge because they have the scale and market to do that.

But what we’re seeing now is that a lot of manufacturing is moving into Viet Nam and you have transfers of skills and technology, so it’s good for local firms to grow. Globally, suppliers to global firms have started to compete. A particular instance is the white goods sector. And this process is ongoing.

What should the Government and companies do to become more competitive and take better advantage of economic integration?

I think there are certain things where the Government can help. First, they should create a level and transparent playing field for all businesses. This is the most important thing the government should focus on.

The second area should be training. The country needs skills in some sectors and it’s crucial to have vocational training and skills training. To attract and create quality jobs, the country needs to have quality people with higher level skills. In this area, the government can invest in vocational training schools and in English training, or the private sector can do so.

Companies, meanwhile, should keep up to date with what’s happening in the world, in the areas of technology and global trade. This is not so hard in this Internet era. They need to continue to improve their management to move up the value chain.

Many people say that Viet Nam is moving too quickly in the integration process and domestic companies are not ready yet. What is your view?

In my opinion, it’s much better to do this when the country liberalises and opens up, but we should do it correctly rather than quickly. Most of the time, the cost of undoing something we do very quickly is much more than when we take the time to do it correctly.

There are many examples of countries liberalising their economies, like the United States, and they do it very well. Competition is good in the long run. Certainly, there will be losers and gainers in the short run, and companies must prepare for this.

The Vietnamese Government has issued policies to support private businesses and I think the policy is clearly moving in the right direction. As to its impact, it often takes a few years of implementation see how a policy is working.

What are IFC’s suggestions to develop the private sector in Viet Nam?

I think there are two to three areas that are important to have a strong business sector. One area is clearly infrastructure. In order for the companies to be able to attract investment, the country needs good infrastructure, especially logistics.

The second area is financial sector where small- and medium-sized enterprises can access financial services. If companies cannot access capital, they cannot grow.

The third critical thing is the level playing field to encourage competition. The Government should not contain or constrain the private sector from doing things.

You need regulations and rules but there’s difference between regulating the economy and controlling the private sector.

In India, for example, there is no notion of local and foreign companies in the IT sector. The government opens up the IT sector, liberalises it and attracts investment; and the result is that India’s IT sector has now become world class. – VNS