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SME and Entrepreneurship Policy in Viet Nam

image of SME and Entrepreneurship Policy in Viet Nam

This publication presents the findings of the OECD review of SME and Entrepreneurship Policy in Viet Nam. It offers an in-depth examination of the performance of small and medium enterprises (SMEs) and entrepreneurship in Viet Nam, the quality of the business environment, and national policies in support of new and small businesses. The report shows that Viet Nam is one of the most globally integrated economies in the world, building its solid growth performance on the attraction of foreign direct investments and export promotion. Viet Nam’s business environment has considerably improved in recent years, although important reforms are still needed in certain policy areas. Viet Nam's SMEs contribute to national employment and national GDP proportionally less than in the OECD area, although official statistics do not take into consideration the large informal sector that mostly consists of self-employed people and micro-enterprises. Viet Nam’s SME and entrepreneurship policies are relatively new, dating back to the early 2000s. In this respect, the 2018 SME Support Law is an important milestone which may help address some of the challenges that are holding back the development of a more vigorous domestic enterprise sector. Key policy priorities in this regard, building better business linkages between multinationals and local enterprises and stronger business development services, are the subjects of two thematic chapters of the report.

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SME and entrepreneurship characteristics and performance in Viet Nam

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.

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