This publication presents the results of the OECD country review of small- and medium-sized enterprise (SME) and entrepreneurship policy of Viet Nam. It was prepared at the request of Viet Nam’s Ministry of Planning and Investment (MPI) and carried out in collaboration with Viet Nam’s Agency for Enterprise Development (AED), which reports to the MPI. This publication is part of a review series undertaken by the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (CFE) which has so far covered the following countries: Brazil, Canada, Indonesia, Ireland, Israel, Italy, Kazakhstan, Mexico, Poland, the Russian Federation and Thailand.

This report presents the findings of the OECD review of SME and entrepreneurship policy of Viet Nam, which was undertaken over the period 2019-2020. The report assesses the main strengths and weaknesses of Viet Nam’s SME and entrepreneurship policies and offers policy suggestions to help address the main existing challenges. It includes chapters on SME and entrepreneurship characteristics and performance; the business environment for SMEs and entrepreneurship; the governance of SME and entrepreneurship policy; SME and entrepreneurship support programmes; business linkages; and business development services.

This chapter summarises the main findings of the report. It shows that Viet Nam’s (formal) SMEs contribute to national employment and national GDP proportionally less than in the OECD area, but that a large domestic informal sector implies an underestimation by official statistics of the real weight of micro and small companies in the economy. Viet Nam’s business environment has considerably improved in recent times, although there are still areas where major policy reforms are needed. SME and entrepreneurship policy has a recent history in Viet Nam; however, the recent SME Support Law signals the commitment of the government to actively promoting domestic SMEs. The government has introduced a number of programme measures that specifically target SMEs and entrepreneurs, although programme budgets have sometimes been small and some of the initiatives have experienced low take-up. Finally, the promotion of business linkages between multinationals and domestic SMEs and the support of business development services have been two policy priorities of the government.

This chapter provides an overview of the main characteristics of SMEs and entrepreneurship in Viet Nam. It starts by showing how industry, notably manufacturing, plays a major role in the national economy. SMEs account for much less of employment and value added in Viet Nam than in OECD countries, although official statistics do not take into account the large domestic informal sector. Viet Nam’s average labour productivity has grown significantly in the last decade; interestingly, however, official statistics do not show major differences in productivity levels by sector and between medium and large enterprises. Business R&D spending in SMEs is limited but, based on survey data, local SMEs appear to be quite innovative, especially in product and process innovation. An assumption is, therefore, made that this innovation is mostly of a frugal nature. Finally, Viet Nam emerges as an entrepreneurial economy, as shown by high business churning and high rates of high-growth firms and gazelles. This is the outcome of a fast-growing economy that generates business opportunities for both local entrepreneurs and foreign investors.

This chapter looks at business environment conditions in Viet Nam. It shows that Viet Nam’s rapid growth over the last 20 years has been driven by exports and FDI, especially in manufacturing. To succeed in this strategy, Viet Nam has simplified its business regulations and alleviated corporate taxation, although the role of the state in the economy is still large and hinders competition in many domestic markets. To support business growth, the government is currently considering the introduction of a preferential tax regime for SMEs. The chapter also looks at SME financing conditions, showing that state-owned banks continue to be a major source of SME lending in Viet Nam despite recent reforms in the credit market. Turning to human capital and skills, basic education is of high quality in Viet Nam, but there are signs of inequality in access to higher education and skills mismatches in the labour market. Finally, the national innovation system is still at an early stage of development, in line with the lower-middle income status of the country.

This chapter offers an overview of governance arrangements in SME and entrepreneurship policy in Viet Nam. The chapter highlights how SME policy has a recent history in Viet Nam dating back to the early 2000s. More recently, the SME Support Law (2018) signals the commitment of the government to the promotion of the domestic SME sector and sets out some important measures for its further development. Some aspects of the SME Support Law are working well (e.g. incubator and cluster development), others may require some adjustments (e.g. formalisation of household businesses), while others are still waiting for formal approval by the Parliament (e.g. SME preferential taxation). SME and entrepreneurship policy sees the involvement of different ministries and provincial governments in Viet Nam, thus calling for appropriate institutional co-ordination arrangements. In this regard, the role of the SME Development Council could be revamped with the aim to enhance policy co-ordination. Finally, there is adequate monitoring of SME support measures, but a lack of more rigorous impact evaluations.

This chapter describes and assesses national programmes supporting SMEs and entrepreneurship in Viet Nam in the areas of access to finance, innovation, internationalisation, public procurement, workforce skills, entrepreneurship education and women’s entrepreneurship. SME financing programmes, notably the SME Development Fund and the Credit Guarantee Fund, feature low take-up, calling for operational adjustments in their design and implementation. Innovation is a common policy target, but it has mostly focused on R&D support and technology promotion, while building innovation capabilities at the firm level has been overlooked. In the area of export policy, Viet Nam’s recent improvements in trade facilitation should be complemented with programmes improving the export-readiness of SMEs and their capacity to engage in e-commerce. Entrepreneurship education is starting to move its first steps in higher education, while there is still little going on at the primary and secondary level of education. Finally, support for women’s entrepreneurship has recently been strengthened, but it could be better mainstreamed by ensuring that women are adequately represented in all government SME and entrepreneurship programmes.

This chapter provides an overview of business linkages between multinational enterprises (MNEs) and local small and medium enterprises (SMEs) in Viet Nam and national policies supporting these linkages. Viet Nam has attracted a large amount of foreign direct investment (FDI); nevertheless, business linkages between MNEs and domestic firms are still relatively undeveloped. Vietnamese suppliers are mainly relegated to lower-tiers of integration in the global value chains (GVCs), specialising in low value-added parts/components or assembly functions. To capture stronger gains from GVC integration, a multi-pronged approach should be taken to increase opportunities for local sourcing of inputs and intermediate products by foreign investors, focusing in particular on: strengthening firm-level capabilities through training and innovation support; developing supplier upgrading programmes boosting the capacity of local SMEs to comply with international technical standards and codes of conduct; setting up institutions offering specialised services to supporting industries, such as testing and certification agencies; providing supply chain finance; and involving universities in building up the technical and soft skills needed in GVCs.

This chapter describes and assesses the current institutional arrangements for providing business development services (BDS) to start-ups and small and medium enterprises (SMEs) in Viet Nam, the support services offered, and the approaches taken to meet their needs. The main aim of BDS is to enhance the competitiveness of SMEs by strengthening their managerial skills and, consequently, their ability to compete in domestic or international markets. The Agency for Enterprise Development (AED) is charged with BDS promotion in Viet Nam, notably through the three Assistance Centres for SMEs (known as TACs), which are located in the three main cities of Ha Noi, Da Nang, and Ho Chi Minh City. The TACs play an important role for SME development and should be strengthened, notably by facilitating access to their services by SMEs located in distanced locations. Going forward, it would also be important to further stimulate the rise of a private market for BDS, for example by helping SMEs cover the costs of private sector consultancy services, as well as to develop mechanisms to co-ordinate the effective delivery of quality BDS across central ministries/agencies, provincial authorities, business associations, and private providers. In parallel, it will also be key to ensure the good quality of the private sector BDS being subsidised by taxpayer’s or donor’s resources.