Asian Development Bank Assists Small and Medium Enterprises in Vietnam
Dec. 2 – Last week, the Asian Development Bank (ADB) agreed to provide Vietnam with a US$50 million loan to foster the sustainable growth and development of small and medium-sized enterprises (SMEs) operating in the country. The loan will last 25 years with a low annual interest rate of 2 percent.
SMEs have become key drivers of Vietnam’s economy following a series of policy reforms starting with the Enterprise Law of 2000.
As a result of these reforms, the number of registered enterprises in Vietnam grew to over 550,000 in 2011, up from 14,500 in 2000. SMEs now represent nearly 97 percent of the country’s firms, and 46 percent of its GDP. The domestic private sector accounted for 59 percent of total employment in 2011, up from 29 percent in 2000.
While the government recently made significant progress in streamlining registration and business procedures, many obstacles still exist for these enterprises. The US$50 million loan seeks to establish a clearer and more efficient business environment for this integral driver of Vietnam’s economic growth.
As in many rapidly-developing economies, business regulations are changing almost as rapidly as GDP growth. Between 2005 and 2009, Vietnam issued more legal normative documents that affected businesses (17,164) than in the previous 18 years combined. To simplify this regulatory maze, the government set a goal to reduce compliance costs for businesses and citizens by 30 percent. Reform of customs and tax payment processes still remains high on their list of priorities.
“While the Government made great efforts to enhance policy reforms to support the creation, survival and growth of SMEs, more needs to be done to foster a greater scale of SME development, essentially required for the country to achieve more sustainable and inclusive growth,” said ADB Country Director for Vietnam, Tomoyuki Kimura.
Aligning its goals with Vietnam’s Socio-Economic Development Strategy 2011–2020, ADB funds will go towards simplifying administrative procedures, reducing tax and compliance costs, improving Vietnam’s legal environment and increasing access to capital.
This comes at a critical time for Vietnam as the country prepares for the Trans-Pacific Partnership (TPP) which is expected to open the country’s economy to more trade opportunities in addition to international competition.
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