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Essential element

Released at: 10:50, 24/10/2015

Essential element

Mr. To Hoai Nam, Vice President and General Secretary of the Vietnam Association of Small and Medium Enterprises (VASME), spoke with VET.

by Hoang Thu

What would you say about the performance of Vietnamese enterprises in general and small and medium-sized enterprises (SMEs) in particular this year?

In the first half of 2015 the number of newly-registered enterprises totaled 45,406, with registered capital of VND282.4 trillion ($13.1 billion), up 21.7 per cent and 22.3 per cent, respectively, against the same period last year. SMEs account for the highest number of enterprises in Vietnam’s economy. They play an important role, especially in creating jobs, increasing incomes, and contributing to mobilizing private resources for investment, development, and poverty reduction. SMEs generate more than half a million new jobs annually, employ 51 per cent of private sector workers, and contribute 40 per cent of GDP.

What are your thoughts on the impact of trade agreements on the performance of Vietnam’s SMEs?

International integration will create more opportunities for export enterprises as markets will be expanded. Some tariff barriers will fall to zero, and Vietnam’s key export sectors will grow.
Domestic enterprises, meanwhile, must face falling market shares due to higher competitiveness. Even at home, some enterprises face difficulties in commodities, as 70 per cent of raw materials are imported.

Vietnamese enterprises also face challenges in terms of quality. Many products manufactured for the first or second time by enterprises are of good quality but after that quality cannot be maintained. This will be a major challenge when Vietnamese enterprises compete with foreign enterprises.

What sectors will be most affected by integration?

Integration with the Eurasian Economic Union (EEU) will mainly affect the steel industry. Though agricultural products in these countries can be imported to Vietnam at zero tariffs, their existing production is mostly for domestic supply, not for export. Vietnam will be unaffected in this regard.  

However, in the ASEAN Economic Community (AEC), Vietnamese rice will be greatly affected. Rice from Thailand and Myanmar is of good quality. Vietnam’s rice exports are large in volume but low in value, and greatly depend on China (50 per cent is exported from Vietnam to China and 10 per cent is exported to China via foreign brands from Thailand or Myanmar). This is also the case for apparel and essential consumer goods.

How are Vietnam’s SMEs prepared for integration?

Vietnamese SMEs remain unfamiliar with preparations for integration. Many are yet to pay attention to preparing human resources or price policy or identifying goods with advantages.

To seize the opportunities brought by integration, what weaknesses must local SMEs address?

First, SMEs need to look at the structure of goods and markets to see what products can compete and what markets to hold on to. A number of activities follow that, for example improving productivity, focusing on innovation, reducing the dependence on resources, and continually seeking opportunities to join global supply chains.

It is also necessary to review price to see if it meet a market’s requirements, and pay due regard to product quality and technological innovation.

What would VASME suggest the government do to support SME tackle the negative effects of integration?

The government should build a development strategy for SMEs and private sector enterprises spanning 10 to 20 years. The activities of SMEs must be improved, growth in science and technology prioritized, added value created, and support to enterprises provided so they may participate in global supply chains and exports.

The support now provided to SMEs must change. There have been many programs introduced that have been ineffective.

Vietnam’s legal framework should be amended so it is suitable with international law and the laws of the community Vietnam will join in integration. There should be a policy to protect the dynamism, creativity, and development motivation of SMEs. Most creativity in Vietnam comes from individuals or the private sector rather than scientific groups or State institutions. 

Does VASME have any programs to support the development of SMEs during integration?

The Association focuses on three main matters.

First, it provides SMEs with information on markets and international law so they can protect their rights. We also try to ensure SMEs have an equal position in trade relations and in competition with other enterprises, including State-owned enterprises and FIEs.

The second is training in practical skills for enterprises. Training programs from the State and the Ministry of Education and Training are mostly theoretical and are cumbersome and inefficient. There is no specific training on diplomacy, negotiation, and understanding the characteristics of foreign partners. We offer simple but practical advice, so that enterprises can have an advantage in business negotiations. 

Thirdly, we provide consulting and support relating to capital as well as other areas. 

We have new policy and training courses at different times. We also post information and provide enterprises with an environment and forum to share their experience with each other. 

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