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COVER STORY

In it together VET asked analysts and consultants about
the nature of family businesses in Vietnam.

Family businesses, or more broadly the Flexibility in family businesses often prevails also working outside of the family business
family economy, is the core of the econ- over businesses in other sectors. In addition, and seeking international exposure. Such expe-
omy in many countries. In Vietnam, there family experience and business confidentiality rience not only helps them understand their
are currently about 100 large family businesses also help them make a difference, retain cus- family legacy but also captures business lessons
and they contribute about 25 per cent of the tomers, and succeed. For the successor, the from larger corporations and provides an
country’s GDP, according to figures from the key factor in balancing family traditions and overview of domestic and foreign markets. I
Vietnam Chamber of Commerce and Industry their own direction is the connection with the believe successors are ambitious to grow the
(VCCI). Clearly, this is a crucial segment in family legacy. This legacy can be business business and still value family traditions. After
the development of the private sector. Family know-how, experience, knowledge, or culture Covid-19 and the rise of digitalization, the
businesses often record outstanding success that has shaped and led the business. The next next generation and their modern thinking
in the first two generations and then tend to generation is poised to make an impact, espe- will have more opportunities to lead businesses
decline from then on. It is a real challenge to cially in terms of technology and digital trans- to recover and thrive. %
transfer the management and the legacy to formation. However, they have not been suffi-
the next generation. Three basic factors create ciently empowered or entrusted to reach their
advantages for family businesses. The first is full potential. Successors may be seen as lacking
a close bond with each other based on blood in professional experience and people man-
and family traditions. Between members of a agement skills compared to older family mem-
family business, there is a good understanding bers. They also have less opportunity to be
of each other’s strengths and weaknesses, a involved in important decision-making. In
high level of trust, and the sharing of cultural addition, with a family business tradition estab-
values and business goals. These create a great lished since inception, coming up with inno-
sense of responsibility and motivation for vative ideas may face opposition from members
business growth. Next, with decision-making who are afraid of change or wish to respect
power vested in a small number of family traditional values. In recent years, as well as Mr. Andree Mangels,
members, these companies can make quick serving an apprenticeship under the previous General Director, Adecco Vietnam
decisions in response to market fluctuations. generation, more and more successors are

The private sector has served as one of have stepped up in terms of corporate gover- period for families to pull their resources
three growth engines of Vietnam’s econ- nance and put in place programs aimed at together, find the right path, build their startup,
omy, in addition to State investment and enhancing the well-being of their employees. grow their wealth, find success, and train
foreign investment. Family businesses have The factors boosting local family businesses their successors. The constraints seem to be
established themselves as a main force in the include the entrepreneurial spirit of Vietnamese preparatory work and the time required for
country’s development, generating significant families and people, policies and legal frame- the next generation to be trained and gain the
jobs and tax contributions. They are found in work from the government, which help mobi- necessary skills to take over. Besides knowledge
all sectors of the economy but primarily in lize available capital and raise the confidence of business management and corporate gov-
production and services. Workplace produc- of the private sector, good demographics, and ernance, which many learn at top schools in
tivity in the private sector has increased, and a stable political environment. These funda- the US and the UK, hard work, discipline,
so have incomes. Private sector companies mentals have helped nurture and develop pri- and an understanding of the business culture
vate enterprises, with the success of forerunners are still needed for the next generation to
boosting the confidence of the next wave of take ownership of the family business. We
enterprises. We are facing many rapid changes have never before seen so many changes and
in the social and business environment, and innovations as we have in the last few decades.
with each generation there are innovations As such, we should expect that those who
and challenges for them to conquer. As such, can adapt the most are the ones who can gain
it seems that a good understanding of the the most success in this environment. The
family business tradition and the ability to next generation of business leaders should
adapt and bring new ways of doing business invest in industries and technologies that will
is desirable for successors to continue the generate the most advantages and added value.
Ms. Nguyen Lan Phuong, family business’s success. Vietnam has opened Their business’s traditional advantages can
Partner, Baker & McKenzie Vietnam up its centralized economy for a bit more serve as the foundation, but they need to
than three decades now. This is not a long explore new ways to maintain growth. %

Many family-owned businesses like nesses in Vietnam make, in addition to jobs, remains a novel concept. Even now, with cor-
Biti’s, Kinh Do, Pomina, and Minh Long local economic development, State budget porate governance practices and standards
were established during the very first days of revenue, and other matters. One of the prin- having improved under the 2020 Law on
Vietnam’s new-found business freedom and ciples of the market is that companies are Enterprises, the rights of shareholders or
continue to succeed and serve as role models run by managers in the interest of shareholders owners are often far from being respected.
for others, especially because of their admirable or company owners. Unfortunately, reality In non-family companies, shareholders can
entrepreneurship. This is one of the most shows that this is not always the case, especially no longer make a decision or influence a
important contributions family-owned busi- in Vietnam, where corporate governance decision by the company, as they have passed

16 | VIETNAM ECONOMIC TIMES | JUNE 2021