EC Sponsors for Vietnam's Sustainable Development 

" The European Committee (EU) is concerned about poverty reduction and sustainable development in Vietnam through programs on private sector promotion. The supply of better financial services for small and medium-sized enterprises (SMEs) in a bid to create employment opportunities in Vietnam plays an important role in this program,”Markus Cornaro, Ambassador/Head of the EU Delegation in Vietnam said in the opening ceremony of SME Development Fund (SMEDF) on March 24, 2005 in Hanoi.

SMEDF is one of the EU’s major pledges to assist the development of the private sector and to ensure a level playing field in Vietnam during its transition to a market economy. The project was activated on September 1, 2004 and will last for four years. It provides medium loans (five years) and long-term loans for credit institutions which are able to submit feasible strategy on lending SMEs. Training courses will also be held for projected credit institutions and the SMEDF to enhance SMEs' lending capacity as well as to strengthen the capability of risk assessment. This is considered the second phase of EU’s sponsor projects for Vietnam.

Chairman of the Management Board of SMEDF Nguyen Duc Khang revealed that the total amount of credit for banks reached around €15 million (equivalent to VND290 million), which is collected from lending for repatriated refugees and SMEs in first phase (EU’s sponsor from 1997-2000 period). In the framework of a lending component of SMEDF, three to four participating banks will be provided with medium and long-term loans which are scheduled for freeing up twice a year in line with market lending regulations. Selection of qualified banks has been slated for completion in June.

The EU has also reportedly provided technical assistance worth €995,000 to bring the project into play. The purpose of training component of SMEDF is to enhance the capacity of banks’ staff which aims to strengthen the project’s sustainability.

This support is significant, as Vietnam is confronted with high unemployment rates both in urban and rural areas. The EU and its member nations pledge for strong assistance to SME development in Vietnam. A comprehensive route for reform in the finance sector, new Competition Law and Corporate Law are seen as essential landmarks helping SMEs fully promote their capacity and create more employment.

• Kim Phuong