Working out Supportive Solutions for SMEs

More than 47,800 enterprises have stopped operating and paying taxes or declared bankruptcy during the first nine months of this year. The does not reflect the overall picture of the activities of enterprises, but it has shown the dark side of business operation. Business conditions have caused many difficulties for enterprises. In addition, the difficulty lies in SOEs’ resources which have not been utilized effectively. Therefore, SOEs are likely to face more challenges when maturity is coming and contingencies are depleting at the end of the fiscal year.

 

At the conference for comments on the Draft of Development Plan for SMEs in 2011-2015, held by the Department of Enterprise Development (Ministry of Planning and Investment – MPI), Ms Pham Thi Thu Hang, General Secretary of Vietnam Chamber of Commerce and Industry (VCCI) paid special attention to the number of 48,700 enterprises that have dissolved or ceased operations for the first 9 months in 2011. Therefore, there should be urgent and long-term measures to support this business sector. Key issues where SMEs need support include funds, labour quality, market information and macro policies.

According to the representative of the Department of Enterprise Development-MPI, the systems designed to support SMEs are still improper. Cooperation among the relevant ministries, departments and central agencies in the plan implementation is ineffective and impractical. The support has not really been useful to the business community during the past time. In addition, it makes matters worse when privileges are commonly provided to the largest enterprises in localities, as their role and contribution still dwarfs that of other small enterprises despite their overwhelming quantity. Therefore, on the finance aspect, credit guarantee funds for SMEs have been established, but have not been allocated. Support for science and technology, human resources management also has been regulated in polices, but still failed to take effect due to the financial problem. The total estimated fund for SME support in 2011-2015 will be about VND 3,470 billion, including VND 1,870 billion from the central budget and VND 1,500 billion from local budget and VND 100 billion from the business community.

To overcome this limitation, significant changes have been made to the draft submitted to the Government. Focus is laid on the role and development of SMEs. SME development should be considered a strategic long-term, consistent and thorough program of Government, the central task of economic development policy of the country. Therefore, the Government will create a favourable legal environment for SMEs that ensures fair competition with effective mobilization of all resources for development investment.

According to the draft, it is estimated that by 2015, 450,000 SMEs will have been set up (8000 enterprises more than the period 2006-2010) with export contribution of 10-12 percent (currently about 7 percent), accounting for 40 percent of the total social investment capital, contributing about 30 percent of GDP and 35 percent of the total state budget and creating about 4 million jobs (in 2006-2010 they created 2.7 million). Eight groups of solutions were put forward with the emphasis on three major groups including human resource training, support for science and technology and production premises with the initiative to develop industrial clusters for SMEs and market information support. These are considered necessary factors that help develop the internal resources of the firms rather than capital solutions.

 

It is high time that Vietnam worked out optimal supportive solutions for SMEs to ensure the sustainable development of the Vietnam economy. While the SOEs take up a lot of social resources, they have made a very modest contribution to GDP.