From the past until now, small and medium-sized enterprises have not received proper support from the ministries and central authorities to develop optimally. Therefore, the introduction of the draft Law on Supporting Small and Medium-sized Enterprises raises the question of whether this is a breakthrough that will change the mindset?
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The Small and Medium Enterprise Support Law hopes to provide significant assistance to small and medium enterprises.
Current Status of Policies Supporting Small and Medium Enterprises
Currently, according to statistics from the Ministry of Planning and Investment, small and medium enterprises account for 97% of the total number of enterprises nationwide, holding a particularly important position in the economy. However, for a long time, this sector has not received adequate support to achieve optimal development.
To be specific, over 80% of the policies and support programs for small and medium enterprises lack evaluations of support results and impact. Some programs only estimate the participation rate of small and medium enterprises, and some cannot even assess the level of enterprise participation.
Although support for this sector began in 2001 with the issuance of Decree 90/2001/ND-CP on November 23, 2001, by the Government of Vietnam on assistance for the development of small and medium enterprises (replaced by Decree 56/2009/ND-CP), the effectiveness has not been significant.
What enterprises need are specific support regulations on: production premises, participation in procurement plans, providing public services, etc., but many policies remain general and merely encouraging, without clear support provisions.
This results in only 30% of small and medium enterprises accessing support programs, while the majority are unaware of or unable to access these policies.
Additionally, the dispersed management and execution across many ministries and central authorities cause the support procedures to be heavily bureaucratic, making it difficult for enterprises to follow through.
This situation has led the small and medium enterprise sector to eagerly anticipate the new “lifeline” – the Small and Medium Enterprise Support Law.
Key Highlights of the Small and Medium Enterprise Support Law
Discussing the effectiveness of the Small and Medium Enterprise Support Law, Deputy Minister Dang Huy Dong stated that this law will provide the highest legal framework that is continuous, consistent, and comprehensive for small and medium enterprises.
The new law will help develop enterprises by increasing the number and improving the quality of their operations. This will be achieved through synchronizing support policies and programs based on selective support, aligned with the country's economic development goals and directions, the advantages of each locality, and national resources.
The law will specifically define the responsibilities and roles of the Government of Vietnam, central and local authorities, social organizations, and the private sector in supporting small and medium enterprises, strengthen the policy implementation system from central to local levels, and enhance private sector participation.
Sharing his views on the matter, Mr. Ho Sy Hung, Director General of the Enterprise Development Agency (Ministry of Planning and Investment), stated in the Investment newspaper that the law’s support measures will not create discrimination or inequality among small and medium enterprises. The draft law categorizes enterprises into different support levels, avoiding subsidies for unqualified enterprises that lack development capabilities and are at risk of dissolution or bankruptcy.
This ensures that potential enterprises receive the best support for development, avoiding investment in enterprises at risk of “dying.”
Moreover, according to Mr. Le Duy Binh, Director of the Economic Consulting and Management Company, this law will improve the profitability of small and medium enterprises through tax policies, reducing costs by 4,000 – 5,000 billion VND annually, and raising the number of enterprises engaging in direct import and export from 52,000 to over 100,000 within the next 10 years.
The law also aims to expand markets and enhance opportunities for small and medium enterprises in supplying goods and services to state agencies, valued at nearly 21 billion USD. Around 40,000 small and medium enterprises will have the chance to provide services and products through public procurement contracts worth 4.2 billion USD.
Furthermore, small and medium enterprises will have the opportunity to access at least 397,000 billion VND from commercial banks and 7,560 billion VND through credit guarantee funds.
Mr. Binh also stated that the law would create social benefits. To be specific, there will be about 8.5 million new jobs, including approximately 7.5 million jobs from newly established enterprises.
This will increase health insurance coverage from 70 million people to 78.2 million, achieving a coverage rate of 85.5% (compared to the current 76.5%), increase social insurance coverage to 50% of the labor force, and increase unemployment insurance coverage to 35%. The total additional income for citizens will amount to 32.6 trillion VND.
Is it truly a lifeline?
Alongside the desire to bring about effectiveness, this law also raises concerns about the implementation process, as well as worries that the enactment of the Small and Medium Enterprise Support Law could violate international commitments in the free trade agreements Vietnam has signed.
As mentioned above, Vietnam has implemented support policies for small and medium enterprises since 2001, but only 20% have been somewhat effective. Will the new law repeat this pattern?
According to Mr. Chau Minh Nguyen, General Secretary of the Dong Nai Business Association, there is a situation where leaders and officials "avoid" less affluent enterprises, making the implementation of the law difficult.
Mr. Tran Du Lich, Deputy Head of the Ho Chi Minh City National Assembly delegation, noted that while the support content has been well-prepared, it should focus on four main areas: credit, technology, human resource training, and market access.
Credit support should not only involve banks but also the small and medium enterprise credit fund and the credit guarantee fund. The guarantee fund should operate to guarantee rather than requiring enterprises to use collateral, as seen in Ho Chi Minh City’s policy, which makes the fund ineffective.
Experience from many countries successfully supporting small and medium enterprises shows that local credit plays a vital role in credit support. Therefore, the responsibilities of local governments should be clearly defined. Thus, the role of the Small and Medium Enterprise Development Fund should be emphasized to become a strong support for enterprises.
Regarding concerns that the enactment of the Small and Medium Enterprise Support Law might violate international commitments in free trade agreements Vietnam has signed, Mr. Lich affirmed that the support fully complies with Vietnam’s international commitments, as it is support, not subsidies, thus avoiding anti-dumping lawsuits.
Will these obstacles be overcome to ensure that the new law effectively supports small and medium enterprises?
The draft Small and Medium Enterprise Support Law includes 7 chapters with 49 articles. The support measures include: improving the business environment; access to credit; corporate income tax support; technology capacity support; training, consulting, and information; public procurement; market expansion.
Moreover, the draft identifies specialized support measures targeting small and medium enterprises with development potential in sectors where Vietnam has advantages.
There are 5 support programs, including: Start-up support; production efficiency improvement consultation; sector linkage and value chain development; innovation support; and integration support.
Ha Hang
Source: Business Forum
