In the world, small and medium enterprises (SMEs), which account for a higher proportion in the business community, are defined as the “engine of growth” and the “backbone” of the economy. In Vietnam, SMEs make up more than 97 per cent of the business community, employ more than 50 per cent of the workforce and contribute more than 40 per cent of the gross domestic product (GDP). However, they still face hosts of difficulties and obstacles in accessing business resources such as credit, production premises and markets.
With the support of the United States Agency for International Development (USAID), the Ministry of Planning and Investment hosted a workshop on the Law on SME Support in order to introduce and provide sufficient official information about the draft law to National Assembly deputies, authorities, localities, business associations and media agencies.
According to the General Statistics Office (GSO), Vietnam had 590,000 active businesses as of October 2016. Since 2005, the gap of registered enterprises and really active enterprises has increasingly widened. In 2005 - 2013, the ratio between registered businesses and really active enterprises was only 45 per cent. Nurturing and developing enterprises after the start-up has now become an urgent requirement in Vietnam.
Together with groundbreaking contents of the Law on Enterprise, strong reforms of the Law on Investment, active efforts of the Government to reform business conditions and sublicences and launch business development support measures to 2020 in the spirit of Resolution 35/NQ-CP dated May 16, 2016 and efforts to improve the business environment and enhance national competitiveness in the spirit of Resolution 19 (2014, 2015 and 2016 ), the Law on SME Support will produce a positive impact on the goal of achieving 1 million active enterprises in 2020.
To realise the goal of having million operational and taxpaying businesses by 2020, Vietnam needs to have 410,000 more businesses in the next four years. They will engage in production and business operations, promote economic restructuring and enhance economic productivity. Given the current investment capital of VND7.7 billion per enterprise, at least VND3,075 trillion (US$136.7 billion) will be invested in production and business. If this figure is realised in the next four years ending 2020, around US$34.17 billion will be added into the economy by domestic companies each year (this figure excludes capital supplemented by existing companies thanks to more favourable companies in support of SMEs). This value is 1.5 times higher than FDI value registered for investment in Vietnam in 2015 and 2 times higher than the FDI value disbursed in the year. It is even of greater significance when development resources from ODA loans decline. This important internal force, if liberated, will play a direct part in enhancing production capacity, service supply capacity and directly generate yield and GDP.
New businesses will primarily operate in processing, manufacturing, service and industrial sectors, thus contributing significantly to restructuring sectors and shifting production forces to more capital, labour and land-efficient sectors. This will play a direct part in raising Vietnam’s productivity and provide invaluable support for economic transformation and restructuring.
On average, an SME pays VND500 million of taxes into the State Budget a year. 410,000 future businesses will generate a new tax base extremely important in the medium term. SMEs engaged in direct export and import will double from 52,000 at present to more than 100,000 in 10 years. They will play an important role in strengthening connectivity between the Vietnamese business community and foreign communities, and grasp business opportunities from USBTA, WTO, AEC, TPP, and EVFTA other trade agreements.
With respect to employment, new SMEs will employ around 7 million workers to 2020.
As a lower middle income country, Vietnam’s support resources for SME development will not be plentiful and diverse as in developed countries. The Law on SME Support essentially takes into consideration limitations of this resource and has creative, effective and suitable supports in the context of Vietnam.
Bao Chau - Anh Phuong
Vietnamese
