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Vietnam will be Promised Land for small, medium-sized enterprises

Sunday, July 26, 2015, 15:43 GMT+7
Vietnam will be Promised Land for small, medium-sized enterprises
People register to open up their businesses at the Ho Chi Minh City Department of Planning and Investment.

Editor’s note: Le Anh Tu, 26, from Ho Chi Minh City, joined the “Ky Vong Viet Nam 20 Nam Toi” (“My Expectations for Vietnam in 20 Years”) writing contest with his dream that Vietnam will become the Promises Land for small and medium-sized enterprises in 2035.

The growth of small and medium-sized enterprises (SME) is a trend which has thrived in the past several years, and will continue to affect different regions and each country.

I aspire that Vietnam will be the Promised Land for SMEs in the next 20 years.

The surging start-up wave

SMEs are always an essential constituent in the economic development structure of such developed countries as the U.K., France, Germany and the U.S. Over half of the gross domestic product of advanced countries every year is contributed by SMEs.

In New Zealand, up to 99 percent of entrepreneurial activity starts from enterprises of less than 50 workers. SMEs also form the backbone of the economy in Japan, South Korea and other countries.

Over recent years in Vietnam, businesses with fewer than 300 workers (based on Article 3, Decree 56/2009/NĐ-CP issued on June 30, 2009 by the government) have seen robust growth in both quality and quantity.

In terms of the number of registrations, according to the Vietnam Association of Small and Medium Enterprises, SMEs occupy up to 96 percent of the total number of businesses. This speaks volumes about the scale and vitality of the model.

However, the association’s statistics also revealed that for the time being, SMEs boasting approximately US$121 billion make up 30 percent of enterprises’ total registered capital. Medium-sized businesses account for a mere 2.2 percent, while small and extremely small companies represent 29.6 and 65.7 percent, respectively.

In addition, as compared to other ASEAN countries, Vietnamese SMEs lag behind their counterparts regarding both quantity and quality. According to World Bank statistics, the business registration ratio in Vietnam is 0.77 out of every 1,000 people, while that in Malaysia and Singapore is 2.28 and 8.04, respectively.

As Vietnam integrates deeper into the international economy, the wave of start-ups has spread among the local youth.

Major cities such as Ho Chi Minh City and Hanoi are currently home to many start-up clubs and groups, with their founders and members being young people. The phrase “start-up” has become a common search keyword and cropped up in their everyday conversations. To start up fruitfully, the initial step is founding SMEs.

The country’s future is dependent on youths. For an economy to thrive sustainably, apart from corporations and general companies boasting huge human and financial resources as the driving force, contributions from SMEs are not insubstantial.

Our country is on its way to becoming modernized and industrialized. In a vision of 20 years or more, I think SMEs deserve due attention right now.

Long-term solutions

It takes many solutions and a comprehensive vision to spur on SME growth. Starting up is closely linked to founding SMEs. Therefore, management difficulties in start-ups are also core problems of SMEs.

As SMEs operate in a wide array of areas, ranging from service, technology and agriculture to handicrafts, solutions are also varied. However, it all comes down to common problems such as capital, technology, work force and long-term strategies.

Legal assistance and supportive measures from the state and professional associations are also much needed.

First, from the perspective of enterprise management, leaders should grasp core management knowledge, be well-informed about their currency flow and product value, and know how to run a business, tap into human resources and abide by existing laws.

A business cannot call for outside assistance if it is plagued by so many problems. Managers, co-founders and staff should make a point of learning from the management models adopted by advanced countries and improve their expertise. 

Second, SME associations at central and local levels need to forge links and tap into youths’ zeal to launch start-ups.

The associations should also cooperate with start-up clubs and groups, which serve as innovation incubators. If so, many good SMEs would come into being and bloom.

Thirdly, the state should devise specific policies and regulations on SMEs to provide them with maximal assistance, particularly in finance and capital. If SME’s strength typically lies in their abounding innovative ideas, capital mobilization is generally a splitting headache in the initial phase of their start-up process.

Therefore, central and in-between financial institutions need to be transparent. Lending procedures should also be simplified to facilitate businesses’ access to capital sources.

State credit organizations can also team up with international financial institutions such as the World Bank to nurture and boost businesses’ growth.

The Ministry of Planning and Investment has recently submitted a draft SME Law to the National Assembly. If the bill is passed, this will be a major step forward, paving the road for robust SME growth in the time to come.

“Ky Vong Viet Nam 20 Nam Toi” is a competition organized by the World Bank in Vietnam and Tuoi Tre (Youth) newspaper that encourages local youths to write down their wildest, yet feasible, dreams about how Vietnam will change in 20 years’ time.



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