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Ministry of Planning and Investment (MPI) Enterprise Development Agency (ASMED) Policies to Strengthen Viet Nam’s SME capacity in the Global Economic Crisis Pham Thi Hong Trang (MS) International Cooperation Official. Seoul, 8/2009. Content. Overview on Viet Nam’s economy SME in Viet Nam

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Seoul 8 2009

Ministry of Planning and Investment (MPI)Enterprise Development Agency (ASMED)Policies to Strengthen Viet Nam’s SME capacity in the Global Economic CrisisPham Thi Hong Trang (MS)International Cooperation Official

Seoul, 8/2009


Content

Content

  • Overview on Viet Nam’s economy

  • SME in Viet Nam

  • Major Problems

  • Government Policies


Seoul 8 2009

  • Overview on Viet Nam’s economy

  • SME in Viet Nam

  • Major Problems

  • Government Policies


Viet nam

Viet Nam

Viet Nam is located in the Eastern part of the Indochina

peninsula, bordering China to the North, Laos and Cambodia

to the West with a long land border of 4,550 km, and facing the

Eastern Sea (South China Sea) and the Pacific to the East and

the South

Climate: Vietnam lies in the tropics and monsoon

Topography: Three quarters of Vietnam's territory consist of

mountains and hills

Administrative Units: Vietnam is divided into 63 provinces

and cities.

Population: about 86,5 million people (Density 260 ppl per

square kilometer.

Language: Vietnamese. Capital: HA NOI. Currency: DONG


Overview on vietnam economy compare to the first quarter 2008

Overview on Vietnam economyCompare to the first quarter 2008

  • Industrial output increase 2.4%.

  • Agricultural output increase 0.9%;

  • Total sale in service sector increase 21.9%;

  • GDP in 1st quarter 2009 is 3.1% (compared to 7.4% in 2008)


Overview on vietnam economy compare to the first quarter 20081

Overview on Vietnam economyCompare to the first quarter 2008

  • Export turnover is US $4.7 billion, decrease by 15% compare to the first quarter 2008.

  • Import turnover is $4.3b, decrease by 45% compare to 2008;

  • Total committed ODA capital is US$26.23m;

  • Total newly FDI registered capital is $1.2m, equivalent 30% the same period in the previous year;


Overview on vietnam s economy

Overview on Vietnam’s economy


Overview on vietnam economy

Overview on Vietnam economy


Seoul 8 2009

  • Overview on Viet Nam’s economy

  • SME in Viet Nam

  • Major Problems

  • Government Policies


Seoul 8 2009

New SME DefinitionDecree 56/2009/ND-CP on Supporting for the development of small and medium-sized enterprise


Overview on sme in viet nam

Overview on SME in Viet Nam

  • Total number of registered SME: around 41,100

  • SME present around 97% of total enterprises

  • SME create around 3 million jobs, account for 40% GDP and 29% export value with growth rate of 18%/year

  • Registration is steadily rising since simplification of procedures and introduction of new laws


Number of enterprise by legal form

Number of Enterprise by Legal Form


Seoul 8 2009

  • Overview on Viet Nam’s economy

  • SME in Viet Nam

  • Major Problems

  • Government Policies


Major problems with sme

Major problems with SME

  • Lack of recognition of the great impact of globalization, the international and regional integration process

  • Have a small scale, have limited capital, a small number of employees.

  • Lack of information on input markets.

  • Limitation in market access; the quantity of products manufactured by SME is small in scale, mainly for domestic use, and even for very small local areas.


Major problems with sme1

Major problems with SME

  • Weaknesses in science and technology capacity and unskilled workers

  • Constraints in relation to linkages between business and production units

  • Unprofessional Internal management of SME

  • Lack of transparency in financial management


Technology capability of sme

Technology Capability of SME


Seoul 8 2009

SME technology capability

Most SME use backward technology, 3-4 generation compared to average level of the world

Most SME use technology in 1980s

Limited capability in technology research and innovation

Only 0.1% annual turnover is used for technology innovation (GTZ survey on 1200 enterprises

80% SME have no strategy to invest in science and technology


R d activities

R&D activities

  • Less than 5% SME implement R&D activities.

  • There is no enterprise in insurance and ICT sector implement R&D

  • Technology innovation happen most often in garment and automobile sector

    (VCCI survey in 2006 in 8 sectors: Garment and textile, automotive,

    insurance, banking, ICT, sea transportation, fishery, electronic)


Capability in technology research and innovation

Capability in technology research and innovation

  • 1% total cost used for R&D and 0.2% for technology innovation in all sectors

  • Almost enterprise has no strategy and budget for this activities


Innovation rates sme survey 2007 by ciem doe ilissa

Innovation rates(SME survey 2007 by CIEM, DOE, ILISSA)


Technology characteristics

Technology characteristics


Demand for techno innovation by sme new investment

Demand for techno innovation by SME New investment


Demand for techno innovation by sme investment purpose

Demand for techno innovation by SME Investment purpose


Reasons for the inability of sme to access to technology

Reasons for the inability of SME to access to technology


Major problems

Major Problems

  • Export market narrowed down and Export price decreased Factory closing Unemployment increase

    Example: Fishery export turnover by 10.7%

    Footwear sector 8.7%

    Tex and Garment 1.3%

  • Domestic market suffered from input cost.

    Q1 of 2009: 65,000 laborers lost jobs, 39,000 laborers partially unemployed, 3,000 laborers abroad returned home early

  • Difficulty in accessing to supportive financial resources.

  • Security Market go down and interest rate go up

    Difficulty in mobilizing capital.

  • Real Estate Market is freezing


Seoul 8 2009

  • Overview on Viet Nam’s economy

  • SME in Viet Nam

  • Major Problems

  • Government Policies


Seoul 8 2009

1. Urgent measures to be taken - Government Resolution No. 30/2009/NQ-CP: financial incentives

SME can get the following benefits:

  • 30% CIT payable deduction for 2009.

  • The remaining 70% CIT payable:9 months extensionfor the deadline ofsubmission of the tax payablesfor selectedSME.

  • For exporting enterprises: arefund of 90% input VAT. Obtaining the remaining 10% of VAT input refund once the payment documents are justified.


Seoul 8 2009

2. Government's stimulus packages

  • The first stimulus package: short-term lending (Prime Minister’s Decision 131): 4% interest rate subsidy

  • The second stimulus package: long-term lending (PM’s Decision 443): 4% interest rate subsidy

  • For agricultural and rural development (PM’s Decision 497): interest-free lending for agricultural machineries, 4% interest rate for agricultural inputs and materials


Seoul 8 2009

3. Government eases conditions for credit guarantee

  • Businesses from all sectors that have charter capital of a maximum of VND20 billion (US$1.13 million), or employ less than 500 workers, are eligible for credit guarantees.

  • Credit guarantee does not apply to consultancy, real estate, securities, services, or for loans to pay debt, but does apply to low-income and student housing projects or to build cemeteries


Short term measures to help sme over crisis

Short term measures to help SME over crisis

  • Credit guarantee program for enterprise: 575 billion VND

  • 4% interest rate subsidy program: 85 banks participate; 178.722 billion VND is disbursed;

  • Subsidy interest rate for export lending is 2.9%;


Short term measures tax policies

Short term measuresTax policies

  • To issue policies on tax delay, reduction and exemption (PIT, CIT and VAT);

  • CIT: To reduce by 30% on CIT for SME. Reduction of 9,900 billion VND in state budget, 6,800 billion dong delay to 2010;

  • VAT: 50% reduction in VAT for some goods (1,050 billion dong), reduction in state revenue of 1000 billion dong; delay up to 180 days for import goods;

  • PIT: Delay in tax revenue is 1,600 billion (1st quarter 2009)


Long term strategy

Long term strategy


Seoul 8 2009

New Government’s Decree 56/2009/ND-CPon supporting for SME development

  • New SME Definition

  • SME Development Plan

  • Support Policies


Government decree on supporting for the development of sme

GOVERNMENT DECREEOn Supporting for the development of SME

  • Scope of regulation:

    Prescribes the support policies and state

    management on supporting SME development.

  • Subject:

    Apply to SME, SME Support Organizations and State

    Management Bodies on SME development.


Seoul 8 2009

New SME Definition Decree 56/2009/ND-CP on Supporting for the development of small and medium-sized enterprise


Planning for sme development

Planning for SME Development

Ministries, Provinces,

Organizations

SME development plan

5-year Plan

Annual Plan

Overall 5 year

Socio-Economic Development Plan


Seoul 8 2009

The State management body in SME development in localities

MPI/ASMED

Relevant Departments, Organizations

Development Orientation

Policies and legal documents formulation

Supportive programs consolidations

Information

Supportive Programs Coordination, Guide and Examination

Annual Report on SME development

People’s Committees

DPI

SME Development

Plan

SME


Government decree on supporting for the development of sme1

GOVERNMENT DECREEOn supporting for the development of SME

30/6/2009, Prime Minister issued Decree 56/2009/ND-CP and will be

implemented on 20th August, 2009”

  • New definition of SME

  • Supportive policies are in more detail

  • Enhance the role of Enterprise Development Agency (ASMED): ASMED shall assist the Minister of Planning and Investment in performing the function of state management over SME development.

  • The State management body in SME development in localities: Department of Planning and Investment (DPI) to be the focal point in formulating the development programs and plans for SME.

  • SME development support plan: must be incorporated into the annual plan and 5-year plan of Ministries, agencies, localities, national economy plan with budget and solutions for implementation


Domestic sme policy trends and initiatives

Domestic SME policy trends and initiatives

  • Facilitating SME’s access to finance

  • SME accounting regime

  • Human resource training support for SME

  • Technical and technological assistance

  • Promoting market expansion


Domestic sme policy trends and initiatives1

Domestic SME policy trends and initiatives

  • Supporting local industry development

  • Supporting SME’s access to information

  • Building up SME promotion institutional infrastructure

  • Implementation of the SME Development Plan 2006 -2010

  • ODA attraction: ODA commit capital for 2009 – 2010 is expected US$8-10 billion


Thank you very much

Thank you very much

Contact:

Enterprise Development Agency

Ministry of Planning and Investment

No 6B, Hoang Dieu Street, Hanoi, Viet Nam.

Tel: +84 80 4 3231

Fax: +84 43 734 2189


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