Better legal framework needed for small, medium-sized enterprises

Better legal framework needed for small, medium-sized enterprises

After the Law on Support of SMEs took effect in early 2018, a decree on the fund to promote SMEs and several circulars on human resources and counsellors to help SMEs were issued.

However, after nearly two years of implementation, the law has had little positive impact, according to Bui Thu Thuy, deputy director of the Enterprise Development Department under the Ministry of Planning and Investment

She spoke at a meeting on SME support organised by the Ministry of Planning and Investment on Tuesday in the city.

Under the law, more than 50 cities and provinces across the country have organised activities to support SMEs and start-ups, but many localities are confused about implementing the law as they have failed to identify the key product value chains in their areas, according to Thuy.

SMEs account for the majority of the country’s total number of businesses, but have not joined product value chains, according to Thuy.

Exports of many key commodities have had very strong growth, but 70 per cent of exports are from foreign-invested enterprises (FDI), she said.

Nguyen Dinh Tue, director of the Centre for Support and Development of SMEs in HCM City, said: “A lot of content in the law is not consistent, and even in conflict with other relevant laws such as the Enterprise Law and Tax Law.”

“This has made SMEs ineligible for support,” he added.

He recommended that the law clearly identify the difficulties facing SMEs and the “appropriate support” that is available.

Nguyen Duy Tan, director of Tien Giang Province’s Enterprise Promotion and Investment Promotion Centre, said that SMEs lacked not only capital and land for production, but also information about policies, technologies and markets.

They also lack sufficient human resources and necessary skills, he added.

The Law on Support for SMEs, with four chapters and 35 articles, focuses on principles, content and resources to support SMEs, and defines the responsibilities of agencies, organisations and individuals related to support for SMEs.

Under the law, SMEs are defined as micro-enterprises and small- and medium-sized enterprises with fewer than 200 employees (who receive social insurance) per year.

The enterprises must meet one of the following two criteria: total investment capital does not exceed VND100 billion (US$4.3 million) and total revenue from the previous year is not more than VND300 billion; or they are officially classified in certain fields such as agriculture, forestry, fisheries, industry and construction, or trade and services.

The law requires that support for SMEs must respect market rules and fall in line with international treaties of which Viet Nam is a member.

The support given to SMEs must be done transparently in terms of beneficiaries, procedures and processes, as well as resources, support level and support results, according to the law.

SMEs, which account for 95 per cent of Viet Nam’s business community, play a major role in the country’s economy and account for 98 per cent of all enterprises with about 40 per cent of GDP.

In the first quarter of the year, as many as 15,000 enterprises closed (an increase of 20.8 per cent compared to the same period last year), and more than 15,300 enterprises completed filings for dissolution, according to the General Statistics Office.

The Government aims to have at least one million “healthy” enterprises by the end of 2020, which means that each year, at least a total of 150,000 new enterprises must be set up.

While the government has made a number of reforms, SMEs continue to face challenges related to credit, human resources, market access, and competition with foreign firms.

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