Opening remarks by the co-chairs
- Mr Phuc, Director-General (DG) of ASMED echoed the Vice Minister’s statement by presenting the state of the SME sector, while underlining the importance of better coordination between Government and donors in the light of the formulation of the Socio-Economic Development Plan 2006-2010. Indeed, Prime Minister’s Instruction No. 33/2004/CT-TTg, of 23 September 2004 on the Socio-Economic Development Plan, gives ASMED the responsibility of drafting the SME Development Strategy.
In the first part of his presentation the DG presented recent major activities in supporting the SME sector; two major steps, since the last Partnership meeting in May 2004, were the promulgation of Government Decree 109/2004/ND-CP on business registration and Decree 125/2004/ND-CP on Implementing the Enterprise Law. The meeting of the SME Promotion Council under the chairmanship of the Minister of MPI, the PM’s approval of the Human Resources Training Support Programme (HRTSP) for SMEs and the development of three Technical Assistance Centres (TACs) in Hanoi, Da Nang and Ho Chi Minh City, were also crucial steps undertaken in recent months. Mr Phuc then called for targeted donor’s assistance in the HRTSP and TACs.
In the second part of the presentation, the Government’s current priorities were outlined: with the overall target of reaching 500,000 enterprises by 2010, ASMED places on top of its agenda the task of producing by March 2005 a first draft of the SME Development Strategy, to be included in SEDP 2006-2020.
The DG informed the Partnership members of MPI’s decision to seek the support of the UNIDO-executed project (see below for the intervention of the CTA) to prepare a draft strategy while counting on valuable contributions from other donors along the process.
The second priority of ASMED is related to Business registration: the DG stressed the urgent need to extend to the whole country the coverage of the National Business Information System, currently reaching out 10 provinces only. The third priority of ASMED is in the promotion of the three Technical Assistance Centres.
After mentioning the three projects under implementation (ADB, EU, UNIDO) and under preparation (Danida, GTZ), the concluding remarks were addressed to donors’ coordination: the need to further develop an efficient cooperation mechanism between ASMED and donors is required in order to use more effectively SME target ODA.
- Mr Fukahori, Head of Economic Division of the Embassy of Japan, referred to the Vietnam-Japan Joint Initiative signed December 4, 2003 as a historical event: among the 44 items of the underlying Action Plan, the first one is about SMEs and supporting industries. The Embassy of Japan through Mr Fukahori reiterated the determination of the Japanese Government to continue their assistance in this sector.
With regard to direct investment, Mr Fukahori informed the SME Partnership of the signing ceremony of the Vietnam-Japan investment agreement that will come into force on 19 December 2004. Finally, Mr Fukahori said that JBIC is preparing a large SME support loan, in addition to the substantial share of JBIC’s JPY 2 billion contribution to the PRSC that includes SME sector as a supporting target.
Mr Kohata, Chief Technical Advisor of the JICA project aimed at supporting the three TACS, complemented the intervention of the Japanese Embassy; in his intervention, Mr Kohata distinguished general activities of the JICA programme touching on issues such as technology and production system, and specific aspects relating to SME modernization and competitiveness analyses on a sector-by-sector basis.
He also referred to the mutual exchange with the UNIDO CTA, as a valid example of cooperation on the ground.
- While noting the growing attendance of the Partnership Meeting, Mr Scholtès, UNIDO Representative in Vietnam , stressed the need to maximize its impact to get down to concrete actions on the ground. The conclusions of focussed working groups such as the SME Partnership must feed into the Consultative Group mechanism. The donor community at the mid-term CG meeting in Vinh (June 2004) called for a closer alignment of donor programmes to the Vietnamese Government’s very own planning process. Thus the formulation of the SME Strategy to be part of the SEDP 2006-2010 should make use of the SME Partnership forum to mobilize donors behind the definition of the Government’s strategy, and rally their support to its execution.
Mr Scholtès also informed the Partnership that donors had expressed concern at the the possible ambiguity between SME and private sector development. To the extent that the two domains of SMEs and private sector enterprises vastly overlap, Mr Scholtès responded that private sector was implicit in the scope of the SME Partnership, but submitted nonetheless to a vote a possible modification of the title “SME Partnership” to “Partnership for SME Promotion and Private Sector Development”. As the audience overwhelmingly favoured the new title, the co-chairs agreed to record the proposal for change in the official proceedings of the meeting, and to submit it thereby to the appreciation of the leadership of the Consultative Group.
Keynote address
- In his keynote address, Mr Luetkenhorst, Director of the SME Branch at UNIDO Headquarters, delivered a stimulating presentation on “Economic development, the role of SMEs and the rationale for donor support—some reflections on recent trends and best practices”.
Mr Luetkenhorst quoted recent empirical research challenging the role of SMEs in economic growth and poverty reduction, and listed in response the key contributions of SMEs to economic development and enterprise and industrial system level, and in the pursuit of broader societal objectives.
He referred to the recent UN Report “Unleashing Entrepreneurship” (known as the Martin-Zedillo report) to highlight the justification for Government and donor support to the promotion of SMEs: SMEs face relatively greater difficulties complying with the regulatory environment, they are fraught by a range of market failures particularly at the level of information, and they are instrumental in ensuring the cohesion of the economic and social fabric, a critical public good.
Mr Luetkenhorst then proceeded with recommendations on the design of donor programme in support of the SME sector: the necessity to link together financial assistance and business development services, the promotion of linkages at horizontal (SME clusters) and vertical (global value chains) levels, and the importance of a proactive engagement of the private sector through “commercially embedded BDS”.
Ms Carlier, Head of the Private Sector Development unit at the World Bank mission in Vietnam, intervened to stress the role the Bank plays in the promotion of the SME sector in Vietnam which does not materialize through institutional support, but is nonetheless effective by fostering a level playing field and a conducive regulatory framework.
Presentation of donors programmes
- Representatives from the EC delegation in Hanoi presented: (i) the Asia Invest Programme, which targets PSD in general and specifically SME development with the aim to build business partnership between EU and Asian companies; (ii) PSSP-Private Sector Support Programme whose financing agreement was signed in October and is expecting technical expert to be on the ground in January 2005; (iii) a brief overview of the SME Development Fund which will be implemented in the next four years, together with the counterpart agency the Development Assistance Fund, and is endowed with a budget of €20 million.
 Speaking on behalf of the German Development Cooperation (EoG, KfW), Ms Kuesel, GTZ provided an update of the progress of their SME Promotion Programme and new initiatives developed along the way: the project has been approved by the German Ministry, and is now under consideration by the Vietnamese Government. The four strongly integrated components, which are closely linked with other instruments of the German Development cooperation, are: (i) SME Policy and enabling environment for business, (ii) local economic development, (iii) competitiveness of selected value chains and sectors, and (iv) advanced technical services.
Under the first component, new initiatives for a better investment climate for private sector were carried out with reference to the new Enterprise Law and Common Investment Law; as for the second component, GTZ has conducted a number of sensitization workshops on local economic development; within the component of value chain, a new initiative with the private partners is ongoing in aquaculture, developing strategic alliance with private partners.
- Ms Trang, MPDF took the floor to solicit the assistance of the Partnership group and its members to produce an assessment of gaps and overlaps amongst donors’ programmes in the field of PSD, following a request to that effect by their governing board. MPDF has just completed a similar activity in Cambodia, where they found that over 20 donors were implementing or had recently completed a staggering 135 projects aimed in one way or another at the development f the private sector.
 Ms Tas, Chief Technical Advisor of the ASMED-UNIDO initiative “Assistance to establish the national and provincial SME support infrastructure” reported on the recently completed inception phase of the project co-funded by Italy and Finland.
As per assessment made in the inception phase, the expected results are to assist in enhancing the capacity of ASMED to emerge as a strong SME advocate, to assist the SME Promotion Council to better undertake its role as inter-ministerial, multi-sectoral advisor to the PM, and to improve the capacity of ASMED in conducting SME-related research.
The project will assist the local authorities to operate the provincial gateways in a total of five municipalities and provinces, including Hanoi, Haiphong and HCMC. Information flows will be encouraged in two directions: information produced by the Government and the private sector will be best disseminated from the ASMED to the provinces and vice versa; a communication programme is a final expected result.
As the project was launched very recently (August 2004), an overview of the planned activities for Year One was made: the emphasis will be on supporting the development of the SME strategy, and on policy advice for the business registration system.
As a good example of cooperation between donors, Ms Tas announced a joined work plan with the European Commission on the Business Registration system; the partnership with JICA was also shown as a good example to be replicated in other initiatives.
Finally, Ms Tas also stressed the role of the SME Partnership to share information amongst donors on local initiatives: with programmes under way in as many as 28 provinces at present, there is much to learn by ASMED and donors alike.
- On October 28, the ADB’s SDPL was signed for a total value of $100 million in two phases of US$60 million (2004-2006) and a second sub-programme of US$40 thereafter. In addition, the Governments of Italy, France (AFD) and Germany (KfW will co-finance a US$1.4 million technical assistance component.
SDPL will focus on three main areas: (i) the policy and regulatory environment (including the business information network), (ii) access to key resources (including finance and land), and (iii) enhancing the dissemination of technical standards (support to MOST to the preparation of an ordinance on the subject, the development of online databases of technical standards and the separation of the commercial and the regulatory functions of the General Directorate for Standards).
As far as the first component is concerned, a close coordination with UNIDO in the effort to expand the business information system is necessary.
- The USAID-funded Vietnam Competitiveness Initiative is now implemented with ASMED. The project focuses on: (i) cluster initiatives in selected sectors (fruit, house decoration etc — in this respect it is important to share experience with GTZ current initiative; (ii) competitiveness in value chains, and (iii) policies for an SME enabling environment.
The project has already produced a number of studies on enterprise law, investment incentives (with emphasis on the corporate income tax regime), a case-study on the competitiveness of the telecoms industry, and the development of a provincial competitiveness index.
Other comments
GTZ welcomed the initiative of MPDF to draw a systematic overview of donor support in the field of SME promotion and private sector development with a view to identifying possible gaps and overlaps. GTZ also stresses the need for greater donor coordination at local level.
Final remarks:
In his concluding remarks on behalf of the co-chairs of the SME Partnership, Mr Scholtès noted with appreciation the rapidly expanding resources available to the SME sector: financial resources such as the Government’s recent appropriation of VND 119 billion for human resource development, the EC’s SME Development Fund and Asia Invest window, the ADB’s SDPL and JBIC’s forthcoming sector loan, but also research on the investment climate, regulatory framework, competitiveness, access to land, capital and technology etc.
However, Mr Scholtès noted the relatively low involvement of donors—at least judging from the sequence of presentations at the Partnership meeting —in critical areas of human resources development and the strengthening of central and local capacities.
UNIDO welcomed in conclusion the initiative of MPDF to map donors programmes in the SME/PSD arena, and indicated that this ought to be done against the backdrop of the Government’s vision in the contribution of the sector to socio-economic growth in Vietnam, as encapsulated in the forthcoming SME Development Strategy.
The full text of the presentations will be shortly available at www.business.gov.vn
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On 19 November, a vibrant gathering of the SME Partnership Group was held at Melia Hotel, drawing an attendance of over 70 including representatives from multi- and bi-lateral donors as well as from International Non Governmental Organisations. Delegations from Governmental bodies were also in attendance (see the full list attached).
