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DBM304: Business Environment

Dr. Conrad Lo, Jr., CPA, MSE

Business Environment Comparison between Viet Nam and Philippines

I. Country Profile:
Viet Nam is a long stretched country along the eastern coast of the Indochinese
Peninsula. Its neighboring countries are China (in north), Laos and Cambodia (in west).
Its area is 331,689 sq. km., about three times the size of Bulgaria or slightly larger than
the U.S. state of New Mexico. AS of 2016, the recorded population of Viet Nam is 92.6
million people and is considered as the 13th most populous country in the world. The
language is Vietnamese with English favored as a second language and there are some
who speaks French (since it has history with France in 1887). The capital of Viet Nam is
Hanoi (Ha Noi) and the largest city is Ho Chi Min City (also known as Saigon).

II. Background:
France occupied all of Vietnam by 1884. Independence was declared after World
War II, but the French continued to rule until 1954 when communist forces under Ho Chi
MINH, who took control of the north, defeated them.
US economic and military aid to South Vietnam grew through the 1960s in an
attempt to bolster the government, but US armed forces were withdrawn following a
cease-fire agreement in 1973. Two years later North Vietnamese forces overran the south.
Economic reconstruction of the reunited country has proven difficult, as aging
Communist Party leaders have only grudgingly initiated reforms necessary for a free
market. The government introduced a plan to achieve ‘Doi Moi’, which means
renovation. This program appeared to be quite successful. In 2007 Vietnam became WTO
member and re-established a normal relation since 1995. The shift away from a centrally
planned economy to a more market-oriented economic model has slowly improved the
quality of life for many Vietnamese.

III. Business Environment of Viet Nam in terms of Economics and Technology:

Economics/ Economy Technology
 Viet Nam’s economy has grown  Viet Nam ranks comparatively
rapidly between 2000 and 2013, at a well on innovation and
rate of 6% per annum on average. sophistication factors, which
 Domestically, the quality of goods suggests a promising potential for
and services has increased and the the future (ranks 76th on
range of choices available to innovation).
consumers has expanded.  Viet Nam is below the technology
 Internationally, exports are expanding frontier but can catch up by
and foreign direct investments (FDI) learning from others.
into Viet Nam is growing at a fast  Corporate Tax Incentives (CTI)
pace. were given to manufacturing
 Vietnam has a large labor force and industries that prioritized new
has experienced significant increase in investment or expansion projects
the capital stocks. that supports the high technology
 There are high levels of domestic sector.
savings but also large inflows of FDI.  Investment Sector of Viet Nam
 According to World Economic includes Power plants,
Forum, Global Competitiveness infrastructures for science and
Report in 2013-2014, Viet Nam technology, hydrometeorology,
ranked 70th in the world on the Global and high-tech zone.
Competitiveness Index*.  Trung Son Hydropower Project:
 Viet Nam ranks highest on efficiency- Meeting Growing Energy
th Demands. This also add 1,055
enhancers overall: Market size (36 ),
labor market efficiency (56th) and GWh of electricity per year to the
th national grid and creates job
goods market efficiency (74 ).
 The top three Manufacturing Sectors opportunities, provides basic
in 2012 are Food & Beverages, services for more than 2,000
Metals/ Fabricated and Minerals, people.
respectively (refer to Figure 1).  Viet Nam ranked 89th in terms of
 As to the Types and Sizes of Firms, a Technological Index.
slight decline in the number of
private-owned firms in 2012 as
compared to 2011. It is also observed
that a very few state-owned firms
were left in 2012 as compared to
 As to sizes of the firms, micro-sized
firms remain constant while a decline
in the number of small, medium and
large sized firms can be observed.
 Viet Nam’s development record over
the past 30 years is remarkable:
economic growth and development
and transformation of Vietnam from
one of the World’s poorest nations to
a lower middle-income country.
 Viet Nam’s economic performance in
2017 has been resilient, reflecting
export-oriented manufacturing, strong
domestic demand and gradual
rebound of agriculture sector.
 GDP growth is estimated at 6.8
percent in 2017—the fastest
expansion in the past 10 years since
*Global Competitiveness Index includes pillars of competitiveness, which serves as basis
for measuring competitiveness. It summarizes: basic requirements for factor-driven
economy, efficiency enhancers for efficiency-driven economics, and innovation and
sophistication factor innovation-driven economies.
Source: General Statistics Office, Hanoi, Viet Nam

Source: General Statistics Office, Hanoi, Viet Nam

Source: General Statistics Office, Hanoi, Viet Nam

Source: General Statistics Office, Hanoi, Viet Nam

IV. Business Environment Comparison Summary between Viet Nam and

Viet Nam Philippines

Vietnam is a densely-populated developing Philippine GDP growth, which cooled
country that has been transitioning from the from 7.6% in 2010 to 3.9% in 2011,
rigidities of a centrally-planned economy expanded to 6.6% in 2012 - meeting the
since 1986. Vietnamese authorities have government's targeted 6%-7% growth
reaffirmed their commitment to economic range. The 2012 expansion partly reflected
modernization in recent years. Vietnam a rebound from depressed 2011 export and
joined the World Trade Organization in public sector spending levels. The
January 2007, which has promoted more economy has weathered global economic
competitive, export-driven industries. and financial downturns better than its
Vietnam became an official negotiating regional peers due to minimal exposure to
partner in the Trans-Pacific Partnership troubled international securities, lower
trade agreement in 2010. Agriculture's dependence on exports, relatively resilient
share of economic output has continued domestic consumption, large remittances
to shrink from about 25% in 2000 to less from four- to five-million overseas Filipino
than 22% in 2012, while industry's share workers, and a rapidly expanding business
increased from 36% to nearly 41% in the process outsourcing industry. The current
same period. State-owned enterprises account balance had recorded consecutive
account for roughly 40% of GDP. Poverty surpluses since 2003; international reserves
has declined significantly, and Vietnam is are at record highs; the banking system is
working to create jobs to meet the stable; and the stock market was Asia's
challenge of a labor force that is growing second best-performer in 2012. Efforts to
by more than one million people every improve tax administration and expenditure
year. The global recession hurt Vietnam's management have helped ease the
export-oriented economy, with GDP in Philippines' tight fiscal situation and reduce
2012 growing at 5%, the slowest rate of high debt levels. The Philippines received
growth since 1999. In 2012, however, several credit rating upgrades on its
exports increased by more than 18%, year- sovereign debt in 2012, and has had little
on-year; several administrative actions difficulty tapping domestic and
brought the trade deficit back into balance. international markets to finance its deficits.
Between 2008 and 2011, Vietnam's Achieving a higher growth path
managed currency, the dong, was devalued nevertheless remains a pressing challenge.
in excess of 20%, but its value remained Economic growth in the Philippines
stable in 2012. Foreign direct investment averaged 4.5% during the MACAPAGAL-
inflows fell 4.5% to $10.5 billion in 2012. ARROYO administration but poverty
Foreign donors have pledged $6.5 billion in worsened during her term. Growth has
new development assistance for 2013. accelerated under the AQUINO
Hanoi has oscillated between promoting government, but with limited progress thus
growth and emphasizing macroeconomic far in bringing down unemployment, which
stability in recent years. In February 2011, hovers around 7%, and improving the
the government shifted from policies aimed quality of jobs. Underemployment is nearly
at achieving a high rate of economic 20% and more than 40% of the employed
growth, which had stoked inflation, to are estimated to be working in the informal
those aimed at stabilizing the economy, sector. The AQUINO administration has
through tighter monetary and fiscal control. been working to boost the budgets for
Although Vietnam unveiled a broad, "three education, health, cash transfers to the
pillar" economic reform program in early poor, and other social spending programs,
2012, proposing the restructuring of public and is relying on the private sector to help
investment, state-owned enterprises, and fund major infrastructure projects under its
the banking sector, little perceptible Public-Private Partnership program. Long
progress had been made by early 2013. term challenges include reforming
Vietnam's economy continues to face governance and the judicial system,
challenges from an undercapitalized building infrastructure, improving
banking sector. Non-performing loans regulatory predictability, and the ease of
weigh heavily on banks and businesses. In doing business, attracting higher levels of
September 2012, the official bad debt ratio local and foreign investments. The
climbed to 8.8%, though some independent Philippine Constitution and the other laws
analysts believe it could be higher than continue to restrict foreign ownership in
15%. important activities/sectors (such as land
ownership and public utilities).
Technology index (a measure of country’s
technological readiness. This index is Technology index (a measure of country’s
created with such indicators as companies technological readiness. This index is
spending on R&D, the creativity of its created with such indicators as companies
scientific community, and personal spending on R&D, the creativity of its
computer and internet penetration rates.) of scientific community, and personal
Viet Nam ranked 89th in the World as computer and internet penetration rates.) of
compared to the Philippines. the Philippines ranked 62nd , 27% more
than Viet Nam.