Author: Tronserve admin
Thursday 29th July 2021 10:44 AM
A Synopsis of SMEs in Southeast Asia: Vietnam
Small and Medium Enterprises (SMEs) play a
major role in most economies, particularly in developing countries. They are
important contributors to job creation and global economic growth, and take
major account for the majority of businesses worldwide. SMEs represent almost
90% of businesses and over 50% of employment around the globe.
Since 2018, the World Economic Forum (WEF) developed and introduced a new far wider and more in depth system called Inclusive Development Index (IDI) to provide a fairly holistic overview of a country. IDI measurements focus mainly on the following three different pillars: growth and development, inclusion, and intergenerational equity.
IDI report (2018) covers eight countries from Southeast Asia including Singapore, Malaysia, Thailand, Vietnam, Indonesia, Philippines, Laos and Cambodia. The report splits the countries into advanced economies and emerging economies, with Singapore the only country in the region to be considered as an advanced economy.
On the other hand, Global Competitiveness Report put Vietnam in the position of 67 out of 141 countries globally for 2019 rankings. The report has the following twelve pillars of competitiveness:
- Appropriate infrastructure
- Stable macroeconomic framework
- Good health and primary education
- Higher education and training
- Efficient goods markets
- Efficient labor markets
- Developed financial markets
- Ability to harness existing technology
- Market size—both domestic and international
- Production of new and different goods using the most sophisticated production processes
According to the above factors, the report covers quite a thorough observation on the countries in their capability.
Since the U.S.-China trade war began in 2018, many importers have scrambled to shift some or all of their production to Vietnam. As a manufacturing destination, Vietnam comes with its advantages and drawbacks, especially for SMEs with small capital. Industrial parks around Ho Chi Minh City are getting quite full and prices are going up. The Hanoi area also counts many factories, but there is a limit to the number of new projects it can welcome.
Shifting production away from China, at this moment of time, you may run into some major stumbling blocks in Vietnam as a large volume of production has already been moved over from China in 2018 and 2019, and many factories are now at capacity. This means that if you start reaching out to manufacturers, it is very possible that you will run into issues such as a lack of responsiveness or missed milestones.
Fueled by continuous growth, Vietnam continues to attract record foreign direct investment (FDI) in 2019. But the foreign direct investment into Vietnam declined 5 percent from a year earlier to USD 2.45 billion in January-February 2020. Foreign direct investment frequently involves more than just a capital investment. It may include provisions of management or technology as well.
ASEAN SMEs face traditional challenges including lack of skills to understand, prepare and utilize financial information for business decision making, and to add value to firms through strategic partnerships and business expansion. Traditional issues such as limited access to basic business skills, financing, innovation and technology, and incompatibility of government approaches to SMEs, remains persistent, particularly for micro entities.
In Vietnam, SMEs are defined as enterprises with capital investment of less than 100 million VND and total employees of less than 300. Small and Medium Enterprises play a crucial role in Vietnam’s economy and account for 98% of all enterprises with approximately 40% of GDP. As the government has made a number of reforms, SMEs are still facing challenges relating to credit, human resources, market access, and competition with foreign firms.
The latest incentives will further allow for a thriving environment for SMEs given their importance. Moreover, the government has to continue to commit in providing support and reforms to SMEs if it wants to meet its target of one million firms by 2020 from the current 600,000. Technology is the top investment priority of small- and medium-sized enterprises (SMEs) in Vietnam as they aim to ensure continued growth, according to the Asean SME Transformation Study.
Looking at its international trade relations, Amazon, the world’s third most valuable company is on the brink of announcing its expansion into the Vietnamese market. Samsung says Galaxy factories in Vietnam are at 'full capacity’. Vietnam is one of most important markets for many brands, thanks to a growing population of more than 97 million with a median age of about 30. In fact, pros and cons are applicable to any country, and Vietnam is no exception. But one thing is certain by contemplating the facts - Vietnam is strong and moving forward being a leading country among its fellow ASEAN countries.