Vietnam offers special policy to support start-ups and SMEs

By Lam Le   May 17, 2016 | 04:29 pm PT
Small and medium sized enterprises (SMEs), start-ups and innovative enterprises are to receive special support from the government, according a resolution to support enterprise until 2020.

Under the resolution, all enterprises, irrespective of type and sector, have equal right in access to resources like funding, land and investment.

Vo Tri Thanh, Deputy Director of Central Institute for Economic Management - the key government think tank, told VnExpress International the resolution shows that the new Prime Minister is sending a message about his commitment to reform. However, "it's a long road from intent to implementation," he added.

The resolution signed by Prime Minister Nguyen Xuan Phuc on May 16 aims that by 2020, Vietnam will have at least one million enterprises, which are competitive and sustainable. The private sector is to contribute as much as 49 percent of GDP and a third of enterprises have innovative activities each year.


The government plans to adopt a law on SMEs later this year to further provide a favorable conditions for SMEs, said Thanh.

Special support for SMEs and start-ups

In order to achieve the above objectives, the resolution lays out five solutions, most of which are designed to support SMEs, start-ups and innovative companies. 

The reason for the recent focus on SMEs, according to Thanh, is the relative absence of medium sized enterprises in Vietnam, which limit diffusion of FDI and technology. Also, "Vietnam is interested in developing the support industry," which relies on medium enterprises. On the other hand, "it is unadvisable to focus on large state-owned enterprises as their the monopoly power harms the business environment."

Based on the principle that the government should be serving the private sector, the resolution is geared towards creating a favorable ecosystem for start-ups and SMEs. This includes policies to both encourage entrepreneurship and to provide financial support.

The Ministry of Planning and Investment will set up a Council to Encourage Development of SMEs with the Prime Minister as chairman. The council will coordinate and monitor implementation of SME policies.

On the individual level, Vietnam plans to halve income tax for individuals working in hi-tech information technology, application of high-tech in agriculture and food processing. Universities are also to encourage their students to become entrepreneurs through a specially designed curriculum. Plans are in place to establish enterprise nurseries, support centers and programs to encourage innovation and start-up under a public private partnership. 

Funding for start-ups and SMEs will be more readily available as Vietnam will redesign the SME Development fund, the National Technological Innovation Fund and other private sector funds. Ministry of Agriculture and Rural Development will also design a mechanism to improve access and use of agricultural land by businesses while by Q3/2016 the Ministry of Finance will submit revised regulations on credit guarantee for SMEs through Vietnam Development Bank and Credit Guarantee Fund.

Regarding costs, Ministry of Finance will study options to reduce taxes incurred by SMEs.  

However, Thanh warned that "it's not easy for this policy to be effective because of the huge number of SMEs and so it'd be hard to mobilize enough resources for all. If the policy is not transparent enough, the support may distort the business environment." 

Ensuring the right to do business and equal access to resources and business opportunities

Enterprises in industrial zones would be able to use their land as collateral to take loans from banks and mobilize long term funding after the Ministry of Natural Resources and Environment revises land regulations in Q3/2016.

Additionally, Ministry of Finance will devise a mechanism to allow revenue from land transfer to compensate for revenue from business operations

The Ministry of Science and Technology will introduce additional quality standards to help commercialize products by enterprises. Procedures to apply for intellectual property are to be simplified while also better protecting this right.

Reduction of operation costs for enterprises

Land rent and fees payable by enterprises, as well as expressway toll are to be lowered. The MOF will also study to revise Corporate Tax Law to expand on costs eligible for tax exemption, including capacity building, administrative support, advertising and marketing.

Furthermore, Vietnam Chamber of Commerce and Industry will investigate and calculate official and unofficial costs incurred by enterprises and compare these with the region to propose a solution to reduce costs.

Protection of enterprise’s rights and interests

Inspection and auditing plans must be pre-announced to avoid any overlapping and there should be no inspection without a clear legal reason, especially in the area of tax management.

Economic and civil relationships are not to be criminalized. 

Administrative reform 

Business regulations are to be clearer and more transparent while bureaucracy is to be reduced. All business procedures and outcomes of recommendations and complaints are to be made public on the relevant government portal.  The “one door” policy is to be further promoted whereby any request to submit additional paperwork has to be justified and done once in writing.

Provinces and cities will organize dialogues with enterprises and the press twice a year to keep up with and resolve any bottlenecks in the area. In parallel, enterprises will be able to submit queries to the local authorities via a hotline or a government portal.


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