Inclusive business (IB), recently introduced to Vietnam through several international initiatives, has proved to be a very promising business model that can help the country sustain its poverty alleviation efforts while benefiting businesses in multiple ways. Vietnam Business Council for Sustainable Development (VBCSD) is among the first and most active organisations to promote IB in Vietnam.
In less than 15 years since the start of its economic reform in 1986, Vietnam has transformed itself from one of the poorest countries with per capita income below US$100 per year, to a lower middle income country with per capita income of US$1,130 by the end of 2010, according to The World Bank report on March 6, 2012. However, along with the social and economic development, the gap between the rich and the poor in Vietnam becomes a big challenge. According to the Brookings Institution of the United States, the percentage of low-income people in Vietnam who have total revenue less than US$5 /day was 67.1 percent in 2012, ranked top 2 in Asia. Thus, the lower-income or so-called bottom-of-the-pyramid (BoP) segment of Vietnam market is estimated to consist of more than half of its population, concentrating mostly in the rural areas.
Low-income people are facing the challenges of low quality housing, high densities, poorly maintained infrastructure, health and environmental hazards, frequent flooding due to poor drainage, and inadequate social services. On the other hand, the development of the industry and service is creating the shortage of labour, raw materials and markets for businesses.
Although IB offers new opportunities for both business and the BoP segment, the inclusion of lower-income people into the business value chain as suppliers, employers, consumers and distributors based on a win-win business partnership requires fundamental changes in business attitudes and strategies, as well as the awareness of lower-income people and appropriate policies from the Government. VBCSD has devoted significant efforts to facilitate those changes. In particular:
-Since its establishment, VBCSD has formed the Working Group on IB that gathers leading multinational businesses who are active in the field, such as Friesland Campina Vietnam and Unilever Vietnam. This working group has also attracted the participation of non-governmental organisations such as the Netherlands Development Organisation (SNV) and the Centre for Environment and Community Research (CECR). The congregation of businesses and non-governmental organisations effectively facilitates the exchange and the systematisation of experiences in the field of IB as a development tool.
-Currently, VBCSD actively conducts communication and awareness-raising activities on IB. Based in Vietnam Chamber of Commerce and Industry (VCCI), it effectively makes use of the three, popular among business circles, magazines and a newspaper of VCCI. Hundreds of articles have been published in three years to promote the concept of inclusive business and disseminate success stories. VBCSD has also collaborated with national and local TV stations to produce talk shows that involve pioneers in IB.
-Since 2011, VBCSD in collaboration with SNV has been implementing Vietnam Business Challenge Fund (VBCF), which provides technical assistance and non-reimbursable funding of up to 49 percent of the total investment or US$800,000 for an IB project. The scale of funding depends on the innovation, sustainability and feasibility in trading, especially the social impacts of the project. Till now, 23 companies in three key main factors such as agriculture, low carbon growth and infrastructure have been selected as VBCF beneficiaries.
-For the period 2014-2015, VBCSD in collaboration with VBCF plan to organise at least 8 learning sessions on IB across the country. Instructors or trainers will be leading experts in IB and business leaders which are successfully implementing this business model in Vietnam. Participants will be the leaders of small and medium enterprises in the sector of agriculture, low carbon growth and infrastructure.
-VBCSD effectively uses its unique intermediary role between businesses and the Government, and relevant ministries. IB is among the major topics of discussion that have been brought to the table during semi-annual meeting of its members and the country’s Deputy Prime Minister. It is also a key topic of VBCSD recent Corporate Sustainability Forum, a major event of business community, which serves as a platform for policy dialogue with the Government and civil organisations on the topics of sustainable development.
-At present, VBCSD is developing a proposal on pilot implementation and dissemination of IB in tea, coffee and milk as part of VCCI Action Plan on Improving Business Environment and Competitiveness that will be submitted to the Government in June this year. The major challenge for this proposal is the lack of funding from the Government, due to the recent economic downturn of the country. To face that, VBCSD is mobilising resources from its members and looking for support from international partners.
In summary, VBCSD sees IB as an appropriate business model that will help the country sustain its poverty reduction achievements, increase the effectiveness of its economy and further liberate the country’s abundant rural workforce. The Council works persistently to promote the model through communication, training, seed funding (through VBCF) and policy advocacy. The Council, however, is short of resources, while its membership fee and the state budget support is not likely to be able to cover. Financial and technical support from devoting international donors, therefore, will be very important.