Chapter 1: Carrying the torch

When the 6th Party Congress was held at the end of 1986, Vietnam was in the midst of major economic difficulties. Despite strictly enforced price ceilings, inflation was hitting 700% a year. The country’s exports amounted to some US$500 million, less than half of its imports (US$1.22 billion). While the Government had recorded several notable achievements in healthcare and education, the country's economic growth was not sustainable due to the fiscal deficit. There was virtually no foreign investment and visits by Vietnamese nationals to international markets were rare. Apart from a handful of diplomats and aid workers, there were few foreigners from developed markets working in Vietnam. 

The reforms passed by the 7th Party Congress in 1991 greatly improved investment incentives, increasing the efficient and quality of production. Economic growth accelerated to 6%, thanks to previous investments in oil & electricity financed by Russia Government (formerly the USSR). Exports, of just over US$2 billion, were about four times as much as in 1986. Nevertheless, Vietnam was heavily dependent on three main commodities (crude oil, rice and seafood), casting doubt on the sustainability of this growth. 

The 1986 economic reforms resulted into insignificant impacts on foreign investment in Vietnam. Aid from Russia (formerly the USSR) and other Eastern European countries was cut off. Meanwhile, international financial institutions such as the World Bank and the International Monetary Fund (IMF) restricted aid to Vietnam to consultancy without financial aspects. This left Vietnam in a difficult position as the country was still healing from the war, using up much of the resources that could have aided economic growth. 

At first, foreign investors were hesitant to put their faith in Vietnam’s transition from from a centrally planned to a more market-oriented economy. Total approved Foreign Direct Investment (FDI) in 1992 was not much more than in 1988 when Vietnam granted the first licence for one foreign project, with implemented capital moving at an even smaller margin. This showed that foreign markets were somewhat uncertain about the Vietnamese market.

Only a small proportion of FDI commitments were disbursed in the early years. Apart from global economic upheavals, the bottlenecks in the local business environment cast doubts on foreign investor confidence.

The decision taken by EY organization to set foot in Vietnam was audacious, yet strategically visionary. The local landscape showed little promise for international investors at the time. However, the firm’s first founding leaders set the cornerstone by founding two representative offices of Ernst & Young Vietnam in Hanoi and Ho Chi Minh City as a strong vote of confidence in Vietnam’s Renovation (Doi Moi) policy.

This decision, while venturesome, was based on the numerous breakthrough policies the Vietnamese Government passed to support its vision of “untying” thinking by granting business rights to people and private businesses. EY, the first foreign auditing firm to invest in Vietnam, was proud to be on the Government’s side on its Doi Moi journey, aiming to abolish ordinance norms and grant autonomy to state-owned enterprises (SOEs); promote the transparency of business activities and policy mechanism; establish standards on operation, management and business culture. 

EY Vietnam journey witnessed the “open-door” policy, economic reforms and development of Vietnam over the past 30 years. The firm has been on the country’s side in good times and bad, through US embargo and global economic crises. 

When the global leading audit and consulting firm entered Vietnam, the independent audit sector was still in its infancy. Few were aware of such services and related regulations were non-existent. This created a myriad of challenges for auditing firms, especially for such a foreign organization, as auditing is a service impacting many sensitive areas.

In those days, Vietnamese people had little idea of the concept of audit and its terminologies. A quick search in the Vietnamese dictionary would yield a generic, ambiguous definition along the lines of “accounting examination, inspection or financial inspection”.

(Source: The report analyzing the 30-year development of the Vietnamese economy and its economic position, written by Associate Professor, PhD Tran Dinh Thien and Chu Minh Hoi)