Corporate culture in emerging markets
Vu Tu Thanh, the Vietnam representative of the US-ASEAN Business Council, outlines the government relations challenges confronting Western businesses as they strike into Asia’s emerging markets
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 The country is continuing to liberalise across all sectors, and the encouraging fact is that it is an irreversible trend
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One of the greatest differences confronting Western companies doing business in countries such as Vietnam is that there is no official recognition of lobbying. There is no such concept in the Vietnamese legal system.
But the government has taken positive steps in this area. In recent years the government has embarked upon public consultation for draft laws and regulations. This is also in part an aspect of the country’s commitment to the World Trade Organisation and other instruments. Every time a new regulation is drafted there are 60 days for comments to be posted online.
But the not so positive element is the level of responsiveness. That is a challenge – but there is not, at least, an official channel for businesses to inject their views into the decision making process.
Policy formulation
Each system of government policy formulation has its own advantages and disadvantages. A deliberative system with official channels can be unpredictable too. The unpredictability of the policy environment in countries such as Vietnam stems not from whether it is deliberative or not, but instead from the competence of policy-makers and officials.
The policymakers are improving themselves, although it is taking time. Unpredictability is a risk that companies investing in emerging markets must accept, and factor into their plans. However the government, at the top-level, is very responsive and we feel confident in the overall environment at that level. What takes more time, and what is less certain, is that those top level commitments translate down to a lower level.
Competence levels
The level of competence in dealing with foreign agencies is not the same across all government departments. The Foreign Ministry is more responsive to requests from foreign businesses than other ministries, who normally deal more with the domestic side.
The internal administrative procedures in some ministries are more restrictive than others. Recently the prime minister has announced plans to tackle red tape and that is a very encouraging sign.
At a provincial or local level the standards of competence and the responsiveness of officials varies. This environment is challenging and it needs a lot of local knowledge to navigate the system.
There are political and cultural differences when dealing with countries such as China or Vietnam. Culturally, Asians tends to defer to authority. So you have to go from one level to the next level, through different bureaucratic echelons.
However US companies tend to want to get to the “top guy” and sometimes it is very difficult to explain to them that you have to start with the gatekeeper and then go through various levels of authority. This can be frustrating and time consuming – although there are shortcuts, but they are not encouraged.
In many countries in Asia there is also a lack of understanding of the Western culture so there are ethical issues. For example if we invite officials to a knowledge sharing technical assistance seminar there is still a rule that the organizer provides a stipend for participants. It is a very small amount to buy lunch or a coffee but whilst it is normal operating procedure in Vietnam, it is however a serious violation of the rules for American companies. This requires explaining cultural issues on both sides.
Effects of liberalization
The Vietnamese administration is pursuing liberalization at a pace at which it deems appropriate. Vietnam has benefited far more from liberalization than the effects of the negatives impacts, particularly in energy and financial services.
However the liberalization in these sectors is not even – and it is unpredictable. It goes at a fast pace, it stops, and then it goes again. This means it is difficult for business to develop a long-term strategy. This is something we are trying to encourage the government to avoid.
These are just some of the challenges when doing business in emerging markets such as Vietnam. But the country is continuing to liberalise across all sectors, and the encouraging fact is that it is an irreversible trend.
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