Vietnam is increasingly attracting world attention as one of the fastest growing economies in Asia. It was recently ranked 34th in an Ernst & Young report into the globalisation of major economies around the world.
Ernst & Young Asia-Pacific managing partner Lou Pagnutti tells VIR’s Lien Huong his positive views about Vietnam’s global integration and also some challenges that the country will have to address to succeed in the future.
How do you measure globalisation and how has Vietnam positioned itself in the process?
The world is in a very interesting time in the context of globalisation. What we are seeing now is that countries in different places have different approaches to globalisation. There are some countries having closed economies like Iran or India which have not been open to investment from outside. They have closed their borders, ranking very poor in the globalisation index. Then you can see countries like Singapore where the dependence on global trade and trade with other countries is very high.
Actually the trend is very positive in Vietnam in terms of globalisation. The country scored 34th out of 60 in the globalisation index. This is a very positive trend which we think will bring about many good things for the Vietnamese economy.
Globalisation has brought challenges for individual businesses. In which ways do you think that the Vietnamese firms can overcome the challenges?
The first is to make sure that you have a global-local balance. What we have seen in the last several years is that there has been a whole new series of companies, which we called emerging heroes, that have performed very well through the recession. What they are really able to do is to focus on developing a strong and successful business in their local market, knowing customers very well and developing a successful model before they went beyond borders. The other factors are of course innovating locally, making sure that you have right relationship with regulators and the government, which is going to be very important and making sure that you have developed a good leadership team as well.
Vietnam is an export-led economy with exports contributing about two-thirds to its gross domestic product (GDP). Do you think that Vietnam has a global and domestic trade imbalance?
I think the fact that Vietnam’s rising income level in recent years and as it will become an industrialised country until 2020 will create huge opportunities in this market for domestic businesses to serve the local market.
At the same time, if you look at the trade right now, Vietnam still has a deficit. There have been tremendous opportunities for Vietnam to increase its exports to Asian market, which represents very huge demands and growth, particularly in its neigbouring Chinese market. So, we believe that there remained very big market opportunities beyond Vietnam’s border.
The trend in Vietnam is very positive and I agree that the focus on domestic market is critical. But in order to continue improve globalisation ranking, it is important to keep the border open in the context of encouraging foreign investment to continue in Vietnam. So it is important to have a healthy balance, making sure that the country is very focus on its domestic market but at the same time looking for the opportunities that exist beyond its border.