A steel company at the Tan Tao industrial park in HCM City. Due to their lack of resources, small and medium-sized enterprises cannot upgrade technology or invest in research and development (Source: VNA) HCM City (VNA) – Micro-, small- and medium-sized enterprises (MSMEs)account for nearly 97 percent of the total number of businesses in Ho Chi MinhCity, with more than 90 percent of newly-established ones every year belongingto this category.
But despite being the backbone of the city and country’s economy, MSMEs facingmany challenges in accessing funding to upgrade technology to boostproductivity and competitiveness.
According to a survey by the HCM City Business Association, of the number oforiginal brand manufacturers (OBM) – enterprises that design their ownproducts, buy components produced by others and sell products under their ownbrands – operating in city’s six key industries of mechanical engineering, foodprocessing, chemical-plastics-rubber, electronics-information, textile-garmentand footwear, only 48 percent are MSMEs.
Moreover, MSMEs that operate as OBM in mechanical engineering,chemical-plastics-rubber and electronics-information use limited or out-of-datetechnologies.
Do Phuoc Tong, chairman of the HCM City Association of Mechanical ElectricalEnterprises, said that most mechanical enterprises are MSMEs or householdbusinesses.
Since they lack new technologies and research and development capacity, MSMEs,usually working as sub-contractors for big companies or second- and third-classsuppliers, mainly handle raw materials and assemble products with very lowvalue addition, he said.
Besides, Vietnamese consumers’ preference for “foreign brands” is also a bigchallenge for MSMEs.
Tong said there are Vietnamese products that match the quality of foreign-madeitems, but they are not accepted in local markets until they are exported tooverseas markets like Japan, South Korea, Taiwan and Thailand and imported backto Vietnam.
Export-import enterprises claimed it is because Vietnamese export products are“better” than local ones though local manufacturers said they are of the samequality.
Whatever the reason is, the fact remains that enterprises have to bear thelogistics costs of sending their products overseas to sell them at home.
MSMEs are unlikely to grow rapidly in the near future due to shortcomings inGovernment policies, one of which is the tax regime, according to experts.
To attract foreign investment, the Government waives tax on import ofmachinery, equipment and tools by foreign direct investment (FDI) companies foruse in manufacture. But local enterprises have to pay 10 percent import tariffon the same stuff.
The cumbersome procedures involved in getting loans also make it harder forMSMEs to operate. Most lenders demand mortgage of assets which is a big problemfor MSMEs.
Nguyen Dinh Tue, director of the Centre for Supporting Small and Medium sizedEnterprises, said because of financial constraints, MSMEs cannot upgrade theirtechnologies or improve productivity to compete on price.
To support MSMEs, the Government needs to create a healthy business environmentand reduce issues like red tape and harassment. Besides, to help them accesscredit, the Government should share their risks to reduce their mortgageburden, Tue said.
Director of the city’s Department of Trade and Industry, Pham Thanh Kien, saidhis department is considering a lending rate cut in preferential loans forenterprises to below 7 percent.
The municipal Department of Trade and Industry recently said it would continueto work with the State Bank of Vietnam’s Branch in HCM City to implement thebank-enterprise link-up programme in the city with a focus on five sectors andindustries.
They are agriculture and rural development, exports, MSMEs, supportingindustries, and enterprises that adopt new technology.
Under the programme, credit institutions in the city can sign up to lend toenterprises at a preferential interest rate of 6.5 percent for short-term loansand 8–9 percent for medium- and long-term loans.
Moreover this year, banks will consider further cut interest rates forenterprises that borrow a second or a third time through the programme.
The link-up programme, initiated by the SBV, began in 2012. Last year, banksprovided loans worth more than 300 trillion VND (13 billion USD) to 15,778enterprises participating in the programme.-VNA
But despite being the backbone of the city and country’s economy, MSMEs facingmany challenges in accessing funding to upgrade technology to boostproductivity and competitiveness.
According to a survey by the HCM City Business Association, of the number oforiginal brand manufacturers (OBM) – enterprises that design their ownproducts, buy components produced by others and sell products under their ownbrands – operating in city’s six key industries of mechanical engineering, foodprocessing, chemical-plastics-rubber, electronics-information, textile-garmentand footwear, only 48 percent are MSMEs.
Moreover, MSMEs that operate as OBM in mechanical engineering,chemical-plastics-rubber and electronics-information use limited or out-of-datetechnologies.
Do Phuoc Tong, chairman of the HCM City Association of Mechanical ElectricalEnterprises, said that most mechanical enterprises are MSMEs or householdbusinesses.
Since they lack new technologies and research and development capacity, MSMEs,usually working as sub-contractors for big companies or second- and third-classsuppliers, mainly handle raw materials and assemble products with very lowvalue addition, he said.
Besides, Vietnamese consumers’ preference for “foreign brands” is also a bigchallenge for MSMEs.
Tong said there are Vietnamese products that match the quality of foreign-madeitems, but they are not accepted in local markets until they are exported tooverseas markets like Japan, South Korea, Taiwan and Thailand and imported backto Vietnam.
Export-import enterprises claimed it is because Vietnamese export products are“better” than local ones though local manufacturers said they are of the samequality.
Whatever the reason is, the fact remains that enterprises have to bear thelogistics costs of sending their products overseas to sell them at home.
MSMEs are unlikely to grow rapidly in the near future due to shortcomings inGovernment policies, one of which is the tax regime, according to experts.
To attract foreign investment, the Government waives tax on import ofmachinery, equipment and tools by foreign direct investment (FDI) companies foruse in manufacture. But local enterprises have to pay 10 percent import tariffon the same stuff.
The cumbersome procedures involved in getting loans also make it harder forMSMEs to operate. Most lenders demand mortgage of assets which is a big problemfor MSMEs.
Nguyen Dinh Tue, director of the Centre for Supporting Small and Medium sizedEnterprises, said because of financial constraints, MSMEs cannot upgrade theirtechnologies or improve productivity to compete on price.
To support MSMEs, the Government needs to create a healthy business environmentand reduce issues like red tape and harassment. Besides, to help them accesscredit, the Government should share their risks to reduce their mortgageburden, Tue said.
Director of the city’s Department of Trade and Industry, Pham Thanh Kien, saidhis department is considering a lending rate cut in preferential loans forenterprises to below 7 percent.
The municipal Department of Trade and Industry recently said it would continueto work with the State Bank of Vietnam’s Branch in HCM City to implement thebank-enterprise link-up programme in the city with a focus on five sectors andindustries.
They are agriculture and rural development, exports, MSMEs, supportingindustries, and enterprises that adopt new technology.
Under the programme, credit institutions in the city can sign up to lend toenterprises at a preferential interest rate of 6.5 percent for short-term loansand 8–9 percent for medium- and long-term loans.
Moreover this year, banks will consider further cut interest rates forenterprises that borrow a second or a third time through the programme.
The link-up programme, initiated by the SBV, began in 2012. Last year, banksprovided loans worth more than 300 trillion VND (13 billion USD) to 15,778enterprises participating in the programme.-VNA
VNA
