Great expectations
Vietnamese SMEs share a common wish that the upcoming APEC meetings will provide a platform for them to better connect with similar enterprises in member economies.
Once a month, businesses from the Hanoi Small and Medium Enterprise Association (Hanoisme) gather together at the Coffee Entrepreneurs program to discuss hot topics, difficulties, and advantages. In recent months, APEC has been one of the most discussed topics, with question raised along the lines of what advantages APEC provides for small and medium-sized enterprises (SMEs) and how can they take advantage of the opportunities APEC presents.
Trouble with access
Many SMEs lack information and are not well prepared to take advantage of opportunities from APEC, Mr. Mac Quoc Anh, Vice Chairman of Hanoisme, acknowledged, prompting the association to be active in organizing a range of programs to provide information to its members. In addition to the Coffee Entrepreneurs program, Hanoisme also holds other programs to call on members to participate in APEC discussion forums and exchange information and analysis to identify the opportunities APEC brings. Almost 2,000 members of the association attended a large and open forum where each brought a new and unique mindset on accessing APEC.
Despite being the driving force of economic growth, contributing 40 per cent to GDP and 17.26 per cent to the State budget, SMEs still face a host of difficulties, according to Mr. Nguyen Hoa Cuong, Deputy Director of the Enterprise Development Department under the Ministry of Planning and Investment (MPI) and Chair of the APEC Small and Medium Enterprises Working Group (SMEWG). The latest figures from MPI show that SMEs account for over 97 per cent of all enterprises but hold less than 40 per cent of total assets. Meanwhile, large-scale businesses make up about 3 per cent of all enterprises but hold 60 per cent of assets.
Difficulties in accessing finance are the reason why SMEs cannot develop and participate in global value chains despite having many creative ideas, according to Mr. Tran Quang Thang, Director of the Ho Chi Minh City Institute of Economics and Management. SMEs often don’t have collateral, so banks are afraid to lend to them even when projects have potential. “Some banks, both foreign and local, say it’s possible for SMEs to borrow up to 90 per cent of collateral or even 110 per cent, but the actual figure is only about 60 per cent,” he added.
Mr. Le Van Khuong, Head of the Enterprise Development Office at MoIT, said that even though nearly 300 industrial zones have been established in Vietnam, SMEs still find it difficult to locate a site for their business. They also continue to cope with a non-transparent business environment, low-quality human resources, and limited administrative capacity. The lack of capital for getting underway and then expanding are crippling challenges in many cases.
The level of participation by Vietnamese SMEs in the global value chain remains modest. Mr. To Hoai Nam, Vice Chairman of the Vietnam Association of Small and Medium Enterprises (VINASME), said that only 21 per cent of Vietnamese SMEs are linked to global value chains, while the figure in Thailand is 30 per cent and in Malaysia 46 per cent. In addition to supporting access to credit, according to Mr. Nam, expanding supply chain financing would create more incentives for the SME community to grow more sustainably. Diversifying financial services would also enable them to access appropriate financial services and take advantage of and grow rapidly within APEC.
Enhancing connectivity
The problem SMEs face aren’t limited to Vietnam and are found in other APEC member countries, so connectivity between SMEs in all APEC members is important, Mr. Anh said. There are now 110 million SMEs in APEC economies, accounting for 98 per cent of all enterprises and contributing 70 per cent of export value and creating jobs for 54 per cent of the region’s population. In recent years, APEC member economies have focused on how to support SMEs to improve their capabilities. Through e-commerce, digital commerce helps small businesses and SMEs improve their competitiveness and creativity in accessing international markets.
The Vietnamese Government hopes to receive cooperation from APEC members in strengthening the capacity of the tax system to encourage business production and fair competition and prevent transfer pricing and tax evasion by certain foreign investors. Prime Minister Nguyen Xuan Phuc has proposed setting up a fund to encourage SMEs to connect with multinational corporations and join the global value chain.
H.E. Ping Kitnikone, Ambassador of Canada to Vietnam, said that microenterprises and SMEs are often dynamic and innovative but their markets are mostly local. These enterprises need assistance in raising capital and accessing regional and global markets. SMEs in Canada contribute more than 40 per cent to the country’s GDP and more than 58 per cent of its exports, and are a driving force in the economy, she said. The Canadian Government focuses on promoting connections with other economic members by supporting a $7.5 million development cooperation project between Canada and APEC member economies to help SMEs step into international and regional markets. “Canada has been working with ASEAN to conduct dialogue,” Ambassador Kitnikone said. “It has also set up a Climate Change Support Fund to help Vietnamese SMEs and businesses access the fund. Canadian businesses believe that the Vietnamese market has potential, and many have been exploring the market and helping startups get contracts and put products in the market.”
Meanwhile, in order to promote connections between SMEs, Hanoisme developed and launched the online Enterprise Connection Center to bring members together and also connect with SMEs in other countries. According to Mr. Anh, each member can find information on domestic enterprises and foreign enterprises by industry, country, prestige, or capital, and then make contact directly.
For her part, Ms. Sim Ann, Singapore’s Senior Minister of State of Trade and Industry and Culture, Community and Youth, believes that APEC is a great platform for economies to share best practices. “We are learning a lot from each other in terms of the landscape faced by SMEs and different economies, and also in terms of what are some of the good practices that public sector agencies can adopt to help SMEs be more competitive, for instance in terms of digitalization and technology adoption,” she said. “I think among economies there are good experiences to be shared.”
Prime Minister Phuc has said that in order to achieve the objective of enhancing the competitiveness and innovation of SMEs, it is necessary to cooperate to help them access markets and engage more deeply in global value chains, enable microenterprises and SMEs to gain access to new technologies, improve their management capacity and competitive edge, promote entrepreneurship and business ethics, and develop a sustainable and environmentally-friendly startup eco-system to promote innovation by SMEs in the region.
The National Assembly has passed the Law on Support for Small-and Medium-sized Enterprises while the government has announced many important policies to build a healthy and “inclusive” business environment, he said. “Any plan for cooperation with good intentions for the Asia-Pacific region will only come to fruition if we have the confidence and the determination to work together to preserve the peaceful environment and ensure security and safety for the free flow of goods, services, and capital flows,” he emphasized.
Trouble with access
Many SMEs lack information and are not well prepared to take advantage of opportunities from APEC, Mr. Mac Quoc Anh, Vice Chairman of Hanoisme, acknowledged, prompting the association to be active in organizing a range of programs to provide information to its members. In addition to the Coffee Entrepreneurs program, Hanoisme also holds other programs to call on members to participate in APEC discussion forums and exchange information and analysis to identify the opportunities APEC brings. Almost 2,000 members of the association attended a large and open forum where each brought a new and unique mindset on accessing APEC.
Despite being the driving force of economic growth, contributing 40 per cent to GDP and 17.26 per cent to the State budget, SMEs still face a host of difficulties, according to Mr. Nguyen Hoa Cuong, Deputy Director of the Enterprise Development Department under the Ministry of Planning and Investment (MPI) and Chair of the APEC Small and Medium Enterprises Working Group (SMEWG). The latest figures from MPI show that SMEs account for over 97 per cent of all enterprises but hold less than 40 per cent of total assets. Meanwhile, large-scale businesses make up about 3 per cent of all enterprises but hold 60 per cent of assets.
Difficulties in accessing finance are the reason why SMEs cannot develop and participate in global value chains despite having many creative ideas, according to Mr. Tran Quang Thang, Director of the Ho Chi Minh City Institute of Economics and Management. SMEs often don’t have collateral, so banks are afraid to lend to them even when projects have potential. “Some banks, both foreign and local, say it’s possible for SMEs to borrow up to 90 per cent of collateral or even 110 per cent, but the actual figure is only about 60 per cent,” he added.
Mr. Le Van Khuong, Head of the Enterprise Development Office at MoIT, said that even though nearly 300 industrial zones have been established in Vietnam, SMEs still find it difficult to locate a site for their business. They also continue to cope with a non-transparent business environment, low-quality human resources, and limited administrative capacity. The lack of capital for getting underway and then expanding are crippling challenges in many cases.
The level of participation by Vietnamese SMEs in the global value chain remains modest. Mr. To Hoai Nam, Vice Chairman of the Vietnam Association of Small and Medium Enterprises (VINASME), said that only 21 per cent of Vietnamese SMEs are linked to global value chains, while the figure in Thailand is 30 per cent and in Malaysia 46 per cent. In addition to supporting access to credit, according to Mr. Nam, expanding supply chain financing would create more incentives for the SME community to grow more sustainably. Diversifying financial services would also enable them to access appropriate financial services and take advantage of and grow rapidly within APEC.
Enhancing connectivity
The problem SMEs face aren’t limited to Vietnam and are found in other APEC member countries, so connectivity between SMEs in all APEC members is important, Mr. Anh said. There are now 110 million SMEs in APEC economies, accounting for 98 per cent of all enterprises and contributing 70 per cent of export value and creating jobs for 54 per cent of the region’s population. In recent years, APEC member economies have focused on how to support SMEs to improve their capabilities. Through e-commerce, digital commerce helps small businesses and SMEs improve their competitiveness and creativity in accessing international markets.
The Vietnamese Government hopes to receive cooperation from APEC members in strengthening the capacity of the tax system to encourage business production and fair competition and prevent transfer pricing and tax evasion by certain foreign investors. Prime Minister Nguyen Xuan Phuc has proposed setting up a fund to encourage SMEs to connect with multinational corporations and join the global value chain.
H.E. Ping Kitnikone, Ambassador of Canada to Vietnam, said that microenterprises and SMEs are often dynamic and innovative but their markets are mostly local. These enterprises need assistance in raising capital and accessing regional and global markets. SMEs in Canada contribute more than 40 per cent to the country’s GDP and more than 58 per cent of its exports, and are a driving force in the economy, she said. The Canadian Government focuses on promoting connections with other economic members by supporting a $7.5 million development cooperation project between Canada and APEC member economies to help SMEs step into international and regional markets. “Canada has been working with ASEAN to conduct dialogue,” Ambassador Kitnikone said. “It has also set up a Climate Change Support Fund to help Vietnamese SMEs and businesses access the fund. Canadian businesses believe that the Vietnamese market has potential, and many have been exploring the market and helping startups get contracts and put products in the market.”
Meanwhile, in order to promote connections between SMEs, Hanoisme developed and launched the online Enterprise Connection Center to bring members together and also connect with SMEs in other countries. According to Mr. Anh, each member can find information on domestic enterprises and foreign enterprises by industry, country, prestige, or capital, and then make contact directly.
For her part, Ms. Sim Ann, Singapore’s Senior Minister of State of Trade and Industry and Culture, Community and Youth, believes that APEC is a great platform for economies to share best practices. “We are learning a lot from each other in terms of the landscape faced by SMEs and different economies, and also in terms of what are some of the good practices that public sector agencies can adopt to help SMEs be more competitive, for instance in terms of digitalization and technology adoption,” she said. “I think among economies there are good experiences to be shared.”
Prime Minister Phuc has said that in order to achieve the objective of enhancing the competitiveness and innovation of SMEs, it is necessary to cooperate to help them access markets and engage more deeply in global value chains, enable microenterprises and SMEs to gain access to new technologies, improve their management capacity and competitive edge, promote entrepreneurship and business ethics, and develop a sustainable and environmentally-friendly startup eco-system to promote innovation by SMEs in the region.
The National Assembly has passed the Law on Support for Small-and Medium-sized Enterprises while the government has announced many important policies to build a healthy and “inclusive” business environment, he said. “Any plan for cooperation with good intentions for the Asia-Pacific region will only come to fruition if we have the confidence and the determination to work together to preserve the peaceful environment and ensure security and safety for the free flow of goods, services, and capital flows,” he emphasized.
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