Even though small and medium-sized enterprises account for 97 percent of companies nationwide, they have only recently come to be the focal point of policymakers, who are developing a comprehensive plan to empower SMEs to play a strategic role in the country’s growth.
The Ministry of Planning and Investment is drafting a legal framework to support SMEs that will be up for the national legislature’s approval next month, according to the government portal.
If the lawmakers sign on, it is estimated that 550,000 SMEs will stand to benefit from these policy initiatives.
Vietnam currently identifies SMEs as enterprises with fewer than 300 workers and annual revenue below VND100 billion ($4.5 million).
“It’s generally agreed that we have been slow to support small and medium-sized enterprises, however, better late than never,” said Deputy Minister of Planning and Investment Dang Huy Dong in the government's website.
He also admitted that the private business sector, including SMEs, has been “weak and lacking in everything”, while the government has yet to throw its full support behind them.
“All foreign direct investment companies and large-sized enterprises need to do is make a phone call to set up a meeting with top local authorities, but small and medium-sized firms may try for a month without success,” said Chau Minh Nguyen, the chairman of the business association in the southern province of Dong Nai.
“We should not see this move as the government supporting a vulnerable business sector; we must consider the growth of SMEs to be strategically vital to the country’s industrialization,” said economist and former lawmaker Tran Du Lich.
He suggested that policymakers provide further incentives for SMEs in support industries which play central roles in restructuring the economy and shifting to a new growth model.
Nguyen Van Phuc, vice chairman of the National Assembly’s Commission for Economic Affairs, said state-owned companies and private conglomerates are usually in a better position than small and medium-sized enterprises in terms of accessing cheap credit and other resources from the government.
However what SMEs need more than easier access to capital is a transparent and fair business environment, Phuc continued, which can only be created through administrative reform to cut the amount of cumbersome paperwork for businesses.
Under the draft document prepared by the Ministry of Planning and Investment, the government will encourage commercial banks to lend more to SMEs, having at least 30 percent of their outstanding loans to these businesses.
The ministry also suggested a variety of tax incentives that the government can utilize to boost the growth of SMEs.
The ministry also said the government should offer at least 20 percent of public procurement contracts to SMEs each year, or for at least to 20 percent of the funds allocated for those projects to go to SMEs.
Vietnam's start-up ecosystem is shaping as private companies contribute more to an economy once dominated by state firms and multinationals. Photo by AFP/Hoang Dinh Nam
Start-up nation by 2020
Vietnamese policymakers are embracing an ambitious plan to turn the country into a start-up nation in the next four years.
Recently, the Vietnamese government approved a package of fresh initiatives aimed at paving the way for the boom in technology start-ups
Under the project, the government will provide legal and financial support for an estimated 2,600 start-up companies across the country over the next 10 years.
The government plans to launch an online portal that will keep start-ups updated about technologies, policies and funding.
The government will also set up co-working spaces where startup companies can gain access to operational infrastructure for a minimal fee.
Start-ups will even receive financial support from the government for training, product testing and marketing.
The Ministry of Planning and Investment has already developed a set of incentives that will draw local and foreign venture capital funds into the country.
The goal, said Deputy Prime Minister Vuong Dinh Hue, is to have "one million start-up companies by 2020".