Business integrity passport to global supply chains

A Vinamilk production line. The dairy producer has announced its Corporate Social Responsibility since 2013. (Photo nhandan.vn)

Hanoi - Experts are urging Vietnamese firms to incorporate integrity principles into their corporate governance since they believe business integrity would be the passport to global supply chains.

Dinh Thi Bich Xuan, deputy director of the Office for Business Sustainable Development (SDforB), Vietnam Chamber of Commerce and Industry, said business integrity had become the norm in the international business scene.

As such, Vietnamese firms need to embrace it as an indispensable part of their corporate governance, otherwise they would face the risk of losing ground internationally.

She also said Vietnam had signed 15 free trade agreements (FTAs), of which corporate social responsibility is among the most important. That means Vietnamese firms are obliged to act in the best interest of society as a whole.

"If they cannot follow the rules, they would lose out on business opportunities," said Xuan.

A survey conducted by VCCI last year shows that the proportion of Vietnamese firms incurring unofficial fees declined from 44.9 per cent in 2020 to 41.4 per cent in 2021.

More importantly, those that had to set aside over 10 per cent of their revenues to cover the fees fell significantly from 9.1 per cent in 2016 to 4.1 per cent during the period.

However, 'intentional delays in administrative processes to obtain speed money' has become more common with 57.4 per cent of firms facing the problem in 2021 against 54.1 per cent in 2020.

Tomas Kvedaras, a specialist at the Judicial Integrity Network ASEAN, said Vietnam was among the few countries in which the Government and firms had worked closely to improve business integrity and met with some success.

However, he stressed that integrity enhancement needs more than a close government-firm cooperation. Rather, it requires a comprehensive approach based on the involvement of all stakeholders in the economy.

He also urged Vietnam to put corporate social responsibility high on its agenda since global companies normally view it as an acid test of a good investment destination.

Ruth Turner, political and development counselor of the British Embassy in Vietnam, said business integrity is of vital importance to countries aiming to integrate deeply into global supply chains as the notion lies at the heart of many FTAs.

As part of its effort to improve business integrity, Vietnam has pushed ahead strongly with its fight against corruption. Remarkably, the country has moved up from the 113th position in Corruption Perspective Index in 2017 to 87th in 2021.

Vu Tien Loc, president of the Vietnam International Arbitration Centre, told Viet Nam News that corporate social responsibility and business integrity hold the key to the viability and profitability of Vietnamese firms in the future.

"The notions are no longer a choice, but a must for firms that want to survive and grow," said Loc.

From his observations, firms socially accountable to their stakeholders and the public are more likely to be resilient during crises as they gain more support from their customers, partners, and employees.

"And they are more likely to have access to the finance from ESG (Environment, Social and corporate Governance) funds," Loc added.

Spillover effects of supply chains on future growth The trend of supply chains shifting from China to Vietnam in the past several years is confirmed to continue and if there are no crises in Asia-Pacific, this trend will continue for the next 10 years to come at least, though the shift from China to Vietnam will happen at different paces for different sectors. Electronics is probably the most impactful for the economy and the most fast-paced one. The situation in China has already pushed the big electronic players to find alternatives.