Business Beat
Living conditions in HCM City are getting worse, with more traffic jams, flooded streets after heavy rains, and pollution. Even though major public transportation projects are being talked about for the coming years, the situation will get worse before it can get any better.one of the reasons for the chaos is that the city can’t control its population growth. You can’t use administrative measures to limit the inflow of immigrants from other provinces because people are entitled to seek jobs where they want. But orientation of the city’s development goals can indirectly make a difference.
It’s a strategic mistake to think that HCM City should excel in every production sector. Labour-intensive sectors like footwear, garments, and textiles - once the city’s strongest industries - are no longer competitive. If the city tries to give incentives to these sectors, businesses will try all means to recruit cheaper labour from neighbouring provinces. This will create pockets of poor populations clustered around industrial parks. It would be better for neighbouring provinces to develop these sectors, taking jobs to where the workers live.
Building factories in HCM City means transporting raw materials from provinces, more immigrant workers and more pollution. It’s time the city stopped trying to attract investment at all costs. It needs to foster an environment where businesses can offer high quality services and produce quality goods that bring in added value. In the short term, HCM City might suffer from a temporary drop in GDP growth rate, but eventually this is the only way it can go to compete with neighbouring provinces. After all, living standards are not calculated on GDP growth rate alone.
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Figures released at a seminar on information technology in State management in HCM City last week were so impressive they teetered on the brink of utopia. HCM City has set a goal that by 2005, all State agencies will exchange information via a network, and all data concerning residency, business registrations, and tax payments will be digitally stored and retrieved.
The ambitious goals involve shifting contacts between State agencies and citizens to the virtual world as much as possible. These are feasible in terms of technology and equipment. The problem is the lack of qualified staff to implement the goals.
In another programme, IT people said they wanted 30 per cent of all businesses based in HCM City to get involved in e-commence by 2005. Suppose it takes three trained technicians at one company to take care of the e-commerce operations, the number of required staff to reach 30 per cent would be in the tens of thousands.
But more importantly, experts say what matters here is the way people approach their jobs at State agencies. No one can guarantee that a person doing badly in the real world will improve his performance and attitude once working in the digital world. Huge investment is a possible waste if no effort is made to build a workable system first.
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The construction industry is deep in debate about whether the State should set a floor price in project bidding. Offering the lowest bids is the way construction companies are winning tenders. Competition leads to a situation where the winning bid price is just half, or even one third of the estimated price of the project. No wonder shoddy work and unfinished projects are a common occurrence in the industry.
Those against a floor price say free market principles force contractors to lower their prices to win, and it is the job of project owners and contracted supervisors to ensure the work is done well. People arguing for the floor price say it is State money that is at stake and competition should lead to better quality and not the other way around. Both sides forget one basic thing: poor quality in construction work is made possible when project owners and contractors are in the same boat, sharing the profit they steal from the State. In this case, a floor price will make their personal gains fatter rather than stopping them. Instead of arguing about prices, a solution could be found in separating project owners and contractors, and forbidding ministry staff from being involved in bids or having an interest in construction companies.
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The Ministry of Planning and Investment has just proposed a solution for loss-making sugar mills – letting them go bust if they are still in the red after debt restructuring. Two-thirds of sugar mills are losing money because their production cost is higher than their selling price. The Government has responded to the financial difficulty of the mills with a range of measures: provision of working capital, interest-free loans to finance sugar stockholding, and reduction of value-added tax. The mills are also protected by high taxes on imported sugar. Although the cost of maintaining the sugar mills is high, people say crushing the sector would lead to unemployment for many farmers. But under commitments made under the ASEAN Free Trade Areas framework, Viet Nam has to lower import tax for sugar very soon. After this occurs the loss of sugar mills will certainly be greater because the price of Vietnamese sugar is higher than imports. Stopping subsidies and letting go of the weakest mills will help the remaining mills improve their competitiveness in the long run.
VNS
