The Vietnam Chamber of Commerce and Industry (VCCI) said the Law on SME must resolve business development issues relating to business scales that other laws have not worked out. Policy instruments should minimise the risk of “market distortion” and facilitate small and medium enterprises (SMEs) to access resources such as capital, land, production premises, financial resources and technologies.
VCCI has collected opinions from the business community on the Law on SME Support. On July 11, 2016, the agency collaborated with the Ministry of Planning and Investment to host the workshop on “Draft Law on SME Support: Perspective of the business community” in Hanoi and the event drew the attendance of hundreds of enterprises, associations and specialists and gathered a lot of valuable opinions.
Support for groundbreaking groups
VCCI said that the government must ensure fairness in accessing resources and approaching markets for SMEs and other types of enterprises. This is the biggest challenge in drafting this law.
The bill provides incentives based on assumptions while ignoring possible changes in investment decisions as lawmakers expected or not. In addition, with current administrative procedures, expenses of support access are quite high because State “cost supports" are often disbursed through the State Treasury or according to the Law on Budget, which are often very rigid while remaining costs are adjusted to market developments.
It is noted that when the State directly "supports a part of costs," and if it directly supports SMEs, it directly intervenes into the course of providing services and distorts the market.
VCCI said that the draft Law on SME Support has some relatively appropriate access solutions. Firstly, it supports SMEs quickly access input and output resources like capital, credit, production space, technology, personnel and market. Secondly, it has support programmes with specific objectives aimed to stimulate SMEs to develop sectors where Vietnam has competitive advantages.
These two solutions will complement each other. They will help SMEs in general not only increase in number but also grow in scale to be competitive enough to survive on the market. On the other hand, they will support some companies with groundbreaking competencies, innovation-based development and modern governance. And, this can be carried out with some specific support programmes. But, it is necessary to take programmes in force to avoid overlapping and dispersion.
Improving the business environment, administrative reform
According to VCCI, Clause 2, Article 9 of the draft law is unlikely to have efficiency because:
Current regulations may be interpreted that if the Law has discriminatory provisions on business conditions and access to resources based on business scale criteria are seen “lawful”. In fact, above business conditions are presented in many below-law legal regulations which are not guaranteed eligibility. Controlling discriminatory business conditions in access to resources based on business scale criteria essentially defined in bylaws is unreasonable and potentially ineffective.
According to the Law on Investment, closely controlling regulations on business conditions is not limited in bylaws but it also includes controlling law drafting and promulgation.
Notably, simplified scale-based discriminations in support of SMEs (e.g. SMEs declare taxes biannually instead of quarterly as bigger enterprises) should be allowed and encouraged.
Therefore, to ensure the effectiveness and eligibility of this regulation, VCCI proposed modifying Article 9 as follows: “Strictly prohibit the issue of discriminatory regulations on business conditions and access to resources based on business scale criteria is against the Law on Investment 2014 unless such regulations facilitate SMEs.”
According to VCCI, Article 10 on credit access support should have its title modified into “Financial access credit” because credit access is only one of capital mobilisation forms. SMEs can access capital through investment funds, financial leasing and stock market.
The draft law also states that the State will grant finances for commercial banks to fund SMEs. However, the document has not specified eligible cases for the State financing because provisions on the capital taking of commercial banks are too generic. Similarly, the regulation on “SMEs are prioritised to access State policy credit sources to serve production and business operations according to the law” does not specify the concept of “priority”.
Furthermore, it is necessary to supplement measures to diversify SME support forms by developing private investment funds.
Le Minh
Vietnamese
