Vietnam being stopgap in US-China trade war?

The world economy in 2019 is in the global declining cycle. The US-China trade war contains loose cannons to Vietnam, so what investment decisions should businesses be careful with? What is the most important thing to make risks become opportunities?

The talk of Dr Mai Huu Tin, U&I Group President, in the Vietnam Business Outlook 2019 workshop appealed more than 300 entrepreneurs from beginning to the end of the session.

"Looking closely at the investment shift in the world's furniture industry, I realise that major furniture companies in the world have factories in China. With the new tariffs that the United States applies to China, most of the international enterprises from different countries doing business in China are planning to move.

I would like to state that Vietnam will not be the only country to benefit from the US-China trade war. Actually, we should beware of the loss. It is sure that labour-intensive sectors will face even more difficulties as companies moving to Vietnam will offer much higher salaries. China’s neighbouring countries such as Vietnam will certainly become a target of Chinese goods, so how are the commodities which have been facing harsh competition from China supposed to survive?

Sharing with TheLEADER, Dr Mai Huu Tin, U&I Group President looked deeping into this matter.

So do you think that the technology-related industries have favourable conditions to flourish?

Dr Mai Huu Tin: Regarding the automobile industry, I do not think so. We have not had the basis to supply spare parts for the Vietnamese automobile industry yet apart from some interior auto parts of THACO. THACO is exporting car seats to Korea, but I am afraid that exporting to America is a distant dream at present.

When Chinese consumer goods businesses are blocked to the US, they will push their stocks to neighbouring countries, including Vietnam. How could we deal with it?

Dr Mai Huu Tin: As a market of 90 million people, Vietnam will definitely face this challenge. The will and the preparedness are very important.

Regarding this topic, I personally find the M&A activities are vigorously going on. In fact, we have very few businesses big enough for China to buy; they are acquiring a lot of Taiwanese businesses that have been in Vietnam for many years. Tens of M&A deals took place in the south of Vietnam.

In your opinion, why do Chinese businesses accept making goods of acceptable quality at extremely reasonable prices?

Dr Mai Huu Tin: There are many factors. The first one is their management capacity is clearly better than us. The second one, much harder, is that they have the whole and better supply chain and material. However, the most important point is flexibility. They did not continue to run large orders to fill the capacity of the factory anymore. Over the past 10 years, they have shifted to production on demand in large numbers and now moved to tailoring to the needs of each customer.

Vietnam does not have the supply chain yet, so we have to buy from Korea, Taiwan. However, to apply innovate technology, to become more flexible operation, to better meet the needs of consumers with the slightly higher price are things we all can do.

Billionaire Jack Ma stated that in the near future, the situation would be controlled by small and medium enterprises as they have access to new technology, supply chains and logistics, as well as the flexibility. From the perspective of a multidisciplinary conglomerate, what do you think of this statement?

Dr Mai Huu Tin: I think Jack Ma might have said that in a special context to startups only, since large enterprises still have tremendous advantages in scale. To startups, challenges are great for their growing process, but they cannot wipe out big enterprises. They will be dangerous once being awakened because they have too much potential.

Within U&I Group, I apply Jack Ma's statement in my way. I own 50 companies, but I deliberately make it smaller once they grow big. The heads of small companies will be more alert. Usually, a large business often becomes pleased with itself and unwilling to get out of the comfort zone, so the curiosity and challenge acceptance are greatly reduced.

Moreover, in small companies, many young people will have the opportunity to devote and strive to become leaders. In my opinion, small businesses are to be highly specialised.

What do you think about the environmental threats when China has raised its environmental standards, and industries like plastic are looking for a new stop?

Dr Mai Huu Tin: Looking back, there are three shifting waves of investment from China to Vietnam. The first one is when labour costs started to rise in seven to eight years ago. The second one is when polluting enterprises in China were forced to close and had been in Vietnam for about two years, many of which are in paper and plastic industries. Now is the third one, due to the imposition of US tariffs.

I cannot give answers on behalf of the authorities, but I witnessed that the application of environmental regulations in Vietnam has been uneven. However, businesses getting rich by doing harm to the environment cannot develop sustainably.

What kinds of crops do you think that we should focus on to export?

Dr Mai Huu Tin: I have learned a lot from 14 agriculturally advanced countries in the world. The world's most consumed fruit is banana, the second is avocado, and the third is pomegranate. If we focus on these three fruits, there would be no excessive fruit supply any longer.

According to expert Vu Thanh Tu Anh, enterprises need to be more cautious about investment in 2019, focusing more on internal affairs. What should they do?

Dr Mai Huu Tin: I totally agree with Mr Dang Van Thanh that we cannot develop without talents. Most of the risks lie in humans. Investing in human resources is a decisive factor, I think. Persuading business people in the world to think of their Vietnamese counterparts as being reliable is an urgent issue right now.

Thank you very much!