Vietnam - Spirit of free enterprise to flourish in Vietnam

Vietnam should get behind its entrepreneurs and accept failure as an essential part of the business learning curve if it wants to consolidate its position as a long-term growth market, Ernst & Young Global Limited chairman and CEO James Turley tells VIR’s Nguyen Hanh during his first ever trip to Vietnam.

Late last year, Deloitte CEO Jim Quigley told VIR that half of the more than $1 billion in strategic investment for the group’s member firms over the next five years would come to China, India and South East Asia. What are Ernst and Young’s (E&Y) investment plans for high-growth emerging markets, including Vietnam?

Over the last five years, we have invested about $1.5 billion in high-growth emerging markets and we expect to continue that pace and perhaps increase it. Asia-Pacific – E&Y’s fastest growing region in the past few years – and places like Eastern Europe, Middle East, Africa and South America are where our investment dollars are going.

But investment is all about people. Today in China, E&Y has more than 10,000 people. The question is how we are going to get this number up to 30,000 people. In Asia-Pacific, we have 20,000, so how we can get this number up to 65,000-70,000 people. The reason we need to think this way is that’s what these economies are going to be relative to the global GDP within the next 10-15 years.

We have been living through the most dramatic change in geopolitical economic strength in any short period of time in the world’s history. In 2000, the five largest economies in the world were the US, Japan, Germany, Britain and France. In 2030, they will be China, the US, India and Brazil with the fifth spot a point of debate among economists. It could be Japan if it can hold on, or Russia, or Mexico, or Indonesia or even Vietnam. That shift is a long game we are playing and E&Y will not be out-invested by anybody.

Three of the big four – PwC, E&Y, KPMG and Deloitte – chalked up losses last year, according to Vietnam Association of Accountants and Auditors. If E&Y is among those three, how do you explain these losses given that E&Y is a services company and the demands for assurance, tax, transactions and advisory services are rapidly rising in Vietnam?

You shouldn’t be surprised because in high-growth environments we always invest ahead of the curve. E&Y Vietnam expanded its headcount from 200 to 800 in the last three years, a four-fold increase in a very short time. We’ve always invested in getting that additional headcount and sometimes that has resulted in small losses.

Is Vietnam important on E&Y’s investment roadmap?

The economic growth here has been very, very impressive. Back in the pre-crisis period of 2005 to 2008, the growth rate here was around 8–8.5 per cent, among the highest in the world. While the growth rate has slowed a bit because of the economic headwinds of the financial crisis, it is still at 5–6 per cent – a very strong rate in the global economy.

Of course, Vietnam like every country, especially high-growth emerging markets, does face some challenges. Inflation and the resulting impact including a slight reduction in foreign investment are among these. But I am confident that because of the very sensible, very forward-looking policy of the government and the strength of the entrepreneur class here, this country will remain one of the very important long-term growth markets.

One of the other things that gives me great optimism about Vietnam is the relative youth it has compared with other countries. I think the young, talented, enthusiastic and energetic workforce is a real positive boost for the economy. Because of these advantages, we have seen Vietnam rising in the rank of low competitive nations in World Bank and E&Y studies. I think that trend will continue.

Our country is now battling with the highest inflation rate in Asia, a chronic problem for years and its macroeconomic uncertainties have irked the business communities here. We heard board members of some foreign chambers of commerce in Hanoi claiming that Vietnam was losing its position as a frontrunner for foreign investment. What have your corporate clients around the world told you about Vietnam?

When I talk to clients around the world, I am not hearing any consistent drumbeat of people losing confidence in Vietnam. Certainly there has been a retrenchment overall in major project investment globally. This is the result of the manner in which really large global businesses started focusing in the crisis on being more conservative and worrying about protecting their own assets. I hear from companies they are still pretty confident about Vietnam. They love the demographics, they love the workforce and the energy of the workforce. People still see Vietnam as a real potential growth story. Do I think the dip is real? Yes, but I also think it’s temporary and I expect things to recover.

What should Vietnam do to write another chapter in its growth story?

I think part of this is about trying to make the country more and more attractive for foreign investment. I think a big part of driving economic growth in Vietnam comes from supporting the entrepreneurial sector. One of the things the government can do to support entrepreneurs is to make the economy stay open. Nothing discourages entrepreneurs more than protectionism. Another important thing is for a country not to over penalise failure. Most of the successful entrepreneurs in the world failed the first time out. In some Asian cultures, it’s better not to have tried than to try and fail. That’s a very bad thing for entrepreneurship because sometimes it’s all about trying and failing.

VIR

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