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Fastest growing businesses won’t get rich from land
A growing trend over the last 10 years is that successful enterprises, including Vietnamese leading private enterprises, sooner or later jumped into other business fields of real estate, finance or banking, diverging from their core business fields.
The success from… land
Logging companies have become real estate developers. Electricity cable companies have also become real estate companies. Refrigeration engineering companies and silk producers have also traded real estate because it is land which can bring fat profits to them. Even FPT, the Corporation for Financing and Promoting Technology, well known in Vietnam as a software giant, now also has a big proportion in its revenue coming from mobile phone distribution and Internet services.
The problem now is many Vietnamese leading companies do not strive to improve their production capability, or apply sciences and technologies to upgrade their products’ quality in the global economic integration. The big enterprises, described as the backbone of the national economy, have been gathering strength on trading real estate or stocks. That explains why the productivity of the national economy was so low last time.
There are three reasons behind this.
First, with the existing problems in the national economy, including infrastructure, labor force and technologies, enterprises are meeting difficulties when integrating into global value chains. Once facing the limitation in the domestic market capacity, enterprises think they have no more room to develop their core business, because they are not competitive enough in the world market.
Second, Vietnamese businessmen are still seeking short term profits and seeking short investment opportunities.
Third, the business environment still has many loopholes which encourage businesses to make short term investments instead of long term investments.
FAST500 enterprises should go their own way
On February 24, 2011, for the first time, the ranking of the 500 enterprises which had fastest growth rates in 2010 (FAST500) was released by Vietnam Report and VietNamNet.
The ranking shows the overwhelming proportion of enterprises operating in the manufacturing sector, the rise of the private economic sector and the encouraging results of small and medium enterprises.
Among the “rising stars” of the national economy, private enterprises and manufacturing enterprises account for a large proportion.
FAST500 witnesses the presence of many private enterprises which account for 78 percent of total enterprises, much higher than the percentage of state-owned enterprises (17 percent).
Especially, enterprises in the manufacturing sector account for 49.2 percent, far exceeding the number of enterprises in construction and service sectors (The same 17 percent). Manufacturing enterprises also account for an overwhelming proportion on the list of top 100 enterprises in comparison with the construction sector and service sector (38 percent vs 12 and 20 percent).
Among manufacturing and processing enterprises, food processing is the sector which has the highest number of enterprises, accounting for 24.4 percent of enterprises in the same field. However, the compound annual growth rate CARG in 2006-2009 of the enterprises that make products from prefabricated meals and motor vehicles was the best.
Analysts believe that this should be seen as a good thing that manufacturing enterprises are the fastest growing enterprises. However, they have also warned that the enterprises may turn into real estate companies one day, if they do not have strong enough determination and the State does not pave the way for them to develop.
Minh An
vietnamnet
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