JICA to support Vietnam in SME promotion and industrial development

Planned to be implemented between April 2020 and April 2023, the project for SME promotion and industrial development aims at improving the connection between local small and medium enterprises (SMEs) and the global industrial value chains with the support mechanism stipulated by the SME Support Law and supporting industries policies. 

The project's record of discussions was signed on December 19 in Hanoi between JICA Vietnam Office and the Agency for Enterprise Development under the Ministry of Planning and Investment.

Under the framework of this project, local SMEs with high potential to join the global value chains - the direct beneficiary of the project, will also receive direct technical support to be able to level up and meet the standards of global industrial buyers. Local SMEs will also receive indirect support through training provided to public and private SME support consultants.

Concurrently, the existing database of agencies and organizations supporting SMEs will be reviewed for the improvement of national SMEs website portal, which will contribute to the development of business linkage database between local suppliers and leading industrial firms operating in Vietnam.

JICA says that Vietnam lags behind other major ASEAN countries in terms of local procurement ratio. According to a survey conducted by Japan external trade Organization, Japanese firms, one of the biggest foreign investors in Vietnam, procured 34.2 per cent of its input raw materials and parts from local suppliers in 2016. 

This figure is much lower than that of other ASEAN countries such as Thailand (57.1 per cent) and Indonesia (40.5 per cent). "Although the country has attracted a large number of foreign direct investment projects, the merit is still weak for the local enterprises, especially SMEs", says JICA.

According to database of national business registration (MPI), there are about 750,000 active enterprises, most of which are of small and medium size. SMEs play an important role in creating jobs, reducing poverty, raising labors’ incomes, contributing to state budget and developing the economy. Non state-owned economic sector, in which SMEs are the majority, contributes 42 per cent of GDP and more than half of employment.

Despite the majority in quantity, SMEs have to cope with many challenges. The lack of enterprises of big and medium size is one of the shortcomings that restrains the connection between SMEs with the global value chains.