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.

The series provides a tool for assessing the design and implementation of SME and entrepreneurship policies, identifying areas for improvement and sharing policy experiences among countries. These reports typically include one or two thematic chapters on issues of special relevance for national governments. In the case of Viet Nam, the two thematic chapters are dedicated to business linkages and business development services.

The report shows that Viet Nam has been one of the fastest-growing economies in the world over the last 20 years, driven by inward FDI and export promotion. While most of Viet Nam’s exports consisted of agricultural produce in the 1990s, today electronics account for half. As a result, Viet Nam’s economy is propelled by large industrial, mostly foreign-owned, companies, while SMEs play a relatively smaller role than in OECD countries. Nonetheless, Viet Nam also has a large domestic informal sector, which means official statistics are likely to understate the real contribution of micro and small enterprises to national employment and national GDP.

Viet Nam is a highly entrepreneurial economy, as shown by high rates of business entry and business exit and high rates of high-growth firms and gazelles, and the quality of the national business environment has improved in recent years thanks to regulatory reforms and the reduction of the corporate income tax rate from 32% to 20%. Although state-owned enterprises still account for a large share of the national economy, hindering competition in many product markets, and compliance with tax regulations remains difficult for SMEs, the 2018 SME Support Law may help to address some of the challenges that are holding back a more vigorous SME sector. However, action on other instruments is needed. Most existing SME programmes have thin budgets and some of them, such as the SME Development Fund (SMEDF) and the Credit Guarantee Fund (CGF), have experienced low demand.

The report offers policy recommendations in a number of areas. Preferential corporate income tax rates for small and medium-sized enterprises (respectively 5 and 3 percentage points below the standard CIT rate) should be enforced, as originally envisaged in the SME Support Law. At the same time, a separate presumptive tax regime could be introduced to favour the formalisation of own-account workers and micro-enterprises, including household businesses. Programmes such as the SMEDF and the CGF require operational changes to make them more attractive to both SMEs and partnering banks. Innovation support should go beyond R&D promotion to strengthen innovation capabilities in SMEs, while supplier development programmes should also embrace the services sector to help Viet Nam move up global value chains. Finally, more efforts should be made to ensure that women are adequately represented in all SME support measures.

The OECD review series is based on a standard methodology, which includes a diagnostic questionnaire completed by national government authorities, a fact-finding mission by an OECD team to hold interviews with policy and business stakeholders, and discussion of a draft report at a peer review session in the OECD Working Party on SMEs and Entrepreneurship (WPSMEE), which operates under the auspices of the Committee on Industry, Innovation and Entrepreneurship (CIIE). Due to the COVID-19 pandemic, the draft report of the Viet Nam review [CFE/SME(2020)11] was discussed by the WPSMEE at a webinar organised in June 2020 and was approved by written procedure in December 2020.

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