Vietnam business associations failing their members: survey

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Workers assemble wall clocks at a factory of Viet Anh Company in Hanoi

Business associations in Vietnam are too weak to protect or support their members, a recent survey has found.

The Vietnam Chamber of Commerce and Industry (VCCI), which conducted a survey of this kind for the first time, assessed 78 out of around 400 business associations based on five criteria development strategies and management capabilities, financial and facility status, the ability to attract members, the ability to influence government policies, and the ability to develop a business community.

Dau Anh Tuan, deputy head of the chamber's legal department, said the results did not portray a bright picture. "Most associations ranged at basic or fairly good levels. Few scored high."

A basic requirement for business associations was the need to master domestic and foreign laws and policies to apprise their members about their rights, responsibilities, and interests, Tuan said.

But most of the associations - 36 percent of the surveyed ones were national and the rest city and province-based - lacked legal capabilities.

Seventy six percent of them did not even have a legal unit, with 68 percent not having a single official overseeing legal issues, the survey found.

"Legal consultation is the least practiced activity," Tuan said.

Pham Van Chat of the Vietnam International Arbitration Center said many associations simply turn their backs on members, more when there are export disputes involving foreign countries' laws.

He gave the example of a case in 2010 when a Singapore company sued a Vietnamese rice exporter for US$1.4 million compensation after the latter's shipment was found to be 11,500 tons short.

He tried to contact the chairman of the Vietnam Food Association seven times asking for some support, but never got through to the person.

The Vietnamese firm was not penalized, he said, but "that was a sad story about the role of business associations."

The survey said the Vietnam Association of Seafood Exporters and Processors and Vietnam Leather and Footwear Association were the only ones to have stood by their members when they faced anti-dumping and anti-subsidy lawsuits by foreign plaintiffs.

It also found many associations not working to promote their industry, with 28 percent of them saying they run whatever programs they can instead of checking what the industry and its customers need. Only 17 percent of the associations researched actual market demands.

Financially dependent

Economists said the survey shows why a large number of businesses prefer not to join their industry associations.

Hanoi has hundreds of thousands of small and medium-sized enterprises but only around 800 have joined the Hanoi Small and Medium Enterprises Association. But even they do not all pay the membership fees since they are not worried about possible suspension, the survey found.

Le Dang Doanh, former head of the Central Institute for Economic Management and former adviser to the Minister of Investment and Planning, said many businesses find no benefit in joining associations that do not speak for them.

"I asked several businesses why they do not join any group, and they said it is a waste of time," Doanh said.

When they join an association they expect to have their problems and complaints to be taken to the authorities, but the associations usually fail to since they rely on government support for both funds and human resources, he said.

As a result, they act as cheerleaders for the government most of the time rather than try to persuade it to make policy in favor of members, he explained.

The survey found that most associations seek funding from the government, and that 83 percent of their personnel are former government officials.

Tuan said the associations, many of them poor without even their own offices, also have to pander to larger members.

The Vietnam Cashew Association proposed in December that the agriculture ministry should only issue export licenses to businesses with a capacity of at least 2,500 tons a year, claiming that would improve the quality of exports.

But it later had to withdraw the recommendation after getting flak from smaller members, who said they had not been informed and slammed the move as "a sneaky effort" to push them out of business.

The Vietnam Coffee and Cocoa Association and Vietnam Association of Seafood Exporters and Processors made a similar plan, which was also panned by small members.

"There are problems either when business associations speak for a minority or when they are too close to the authorities," Tuan said. "An association is a healthy one only when it can represent a majority of its members."

VCCI chairman Vu Tien Loc said a legal framework should be put in place to effectively develop business associations since they are needed for global integration.

The Vietnamese Constitution allows free establishment of associations but the Law on Associations has remained a proposal for years now.

Analysts criticized the business associations for being impotent when export volumes rose last year but not earnings after exporters undercut and sabotaged each other.

Vo Van Nam, former head of the Vietnam Institute for Trade, said business associations are meant to foster cooperation between their members and between members and other stakeholders so that they reach a consensus on prices and partners.

But in Vietnam they are not doing that, he said, adding many of them may not even have plans for this since many of their heads are retired officials who are only in it for monetary benefit.

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