Engaging in the international integration process, Vietnamese enterprises have to compete against new rivals including trans-national and multi-lateral companies with powerful financial potential and high technology standards and competitive capacity. This is really a great challenge for small and medium-sized enterprises which are operating with a low capacity.

Dr Pham Thu Hang, Director of the Support Center for small and medium sized enterprises (SMEs) said, “The strong point of Vietnamese people is high business iron-will and they all want to engage in the integration process.”

According to a recent survey conducted by the World Bank, Vietnamese people’s business iron-will is even higher than Chinese people’s.

Source: VOV
In the past five years since the promulgation the Enterprise Law, more than 200,000 private enterprises have registered for operation and the figure is expected to hit 500,000 by 2010.

Vietnamese enterprises are very confident in the integration process as they see many good opportunities provided by globalization. They have focused on renewing technology and sharpening the competitive edge in hope of becoming strategic partners for foreign enterprises. A number of Vietnamese trademarks have secured their certain footholds in the international market thanks to enterprises’ increased possibility of achieving greater export market penetration.

Currently, Vietnamese enterprises can compete quite well with traditional products in low value-added areas such as garments and textiles, leather footwear, crude oil and seafood.

According to the General Statistics Office (GSO), by the end of December 31, 2004, Vietnam had only 97,155 valid enterprises despite the registered enterprises numbered as many as 200,000. Of the total, 93.5 percent are SMEs – each having an average of 41 workers.

However, UNDP Vietnam economic expert Martin Gainsborough said that the biggest challenge for Vietnam in the next decade is how to climb up the ladders of technology and increase its competitive capacity in supply chains rather than focusing on exporting catfish, garments and textiles and leather footwear. This is a challenge for most Vietnamese enterprises, particularly SMEs.

A survey of 529 Vietnamese enterprises by the VCCI showed that most Vietnamese enterprises are competitively weak. While doing business, capital is a decisive factor in competitive advantage. However, 73 percent of Vietnamese enterprises are operating with a registered capital of below VND10 billion. This causes more difficulties for them to access loans.

Nguyen Trong Hieu, director of the Department for the Development of Small-and medium-sized enterprises under the Ministry of Planning and Investment, said only 32 percent of SMEs are capable of accessing bank loans while 32 percent of them find it difficult and 36 percent are beyond hope.

In addition, 57 percent of SMEs said they use average-level technology. High material costs, which account for 42 percent, also pose a disadvantage for SMEs. For instance, the competitive edge of the Vietnamese footwear sector and the garment and textile sector is low because they do not have available sources of material supply. Moreover, most of materials are imported, leading price hikes. Researchers said Vietnamese shoes or shirts may cost 30 percent more than the same products made in China.

Pham Chi Lan, an economic expert, said the Vietnam’s investment climate has not yet been open and transparent. Vietnamese SMEs are still weak in terms of capital, technology, material supply, human resources, management skills and market access. She said the role of the State in renewing mechanisms and building an opening and fair business environment must go together with other reforms to reduce production costs for enterprises.