News

Recommendations for specific, long-term support for small and micro enterprises

Summary

In a document sent to the Economic Committee of the National Assembly on mechanisms and policies to remove difficulties and promote production and business development amid the Covid-19 pandemic, the Chamber of Commerce and Vietnam Industry (VCCI) emphasised the need to pay more attention to small and micro enterprises due to their weak resilience.

Updated on : 01-10-2021

Bearing the strongest impact

According to the Ministry of Planning and Investment, there are some 870,000 operating businesses, of which more than 96% are medium, small, and micro units. This business community's contribution to total output and job creation is substantial.

According to the criteria of the World Bank Group, micro enterprises are units with less than 10 employees; small enterprises are units with 10 to less than 200 employees and capital of less than VND20 billion. In Vietnam, small firms are those with 10 to 20 employees and micro enterprises are less than 10 people.

According to a survey from the VCCI and the World Bank (WB) in Vietnam in March 2021, micro-enterprises and small businesses were most affected by the Covid-19 pandemic. Of which, 87.7% of private micro-enterprises are mostly/completely negatively affected. Micro, small and medium-sized private companies have a higher average revenue reduction than large-scale units. They had the highest proportion of laid off workers in the total number of employees, both in private and foreign direct investment (FDI) firms. Specifically, small-scale private enterprises had to lay off some 40% of the workforce. For small-scale FDI enterprises, this figure was 22%.

In particular, the fourth wave of the pandemic has caused concerns about the serious decrease in the value of related transport, logistics and export chains nationwide due to the wide spread of production linkages. Therefore, the Ministry of Planning and Investment said in the first half of the year, an average of 11,700 businesses withdrew from the market every month, mainly small units.

On the difficulties of micro-enterprises, Vu Van Sang, Director of BCM Vietnam Business Management Co., Ltd. said the small and micro business sector was being impacted the most. Most of them have lost revenue due to reduced consumer demand and stagnation of production and business activities. Small and micro-enterprises finances were meager, but it was also affected by cash flow imbalances, increasing outstanding debts from customers. Due to small size, it is difficult for them to access loans from banks.

According to To Hoai Nam, General Secretary of the Vietnam Association of Small and Medium Enterprises, small and micro enterprises face difficulties due to the closure of large suppliers and production chains, reduced orders, and delayed production progress. Furthermore, they have little capital, while the pandemic has increasing many costs like purchasing raw materials, medical equipment, and techniques, which has weighed heavily on the financial capacity of small and micro units.

Support to sustain and stay strong

According to incomplete statistics of the VCCI, by the end of July 2021, ministries, sectors, and provincial governments had issued or submitted to competent authorities for promulgation about 100 documents on support policies for businesses on finance, credit, and social security. Small and micro-enterprises have enjoyed policies on exemption and reduction of some taxes, fees, land rents, as well as credit support programmes with 0% interest to pay their employees' salaries.

Additionally, many support programmes for small and micro enterprises have been, are, and will be implemented. Banks have also reserved many loan packages with preferential interest rates for these units. The Ministry of Planning and Investment is also studying to recommend a number of supporting policies for businesses, especially small and medium-sized units, to help them survive during the pandemic.

However, providing support policies and incentives for many small and micro enterprises is difficult. According to experts and businesses, some policies have many rigid conditions and requirements with unreasonable and unfair terms between businesses, which prevent them from approaching these policies. Some State agencies have not provided information and guidance for businesses to access support packages.

Therefore, businesses want more specific support policies with a longer extension time. For example, for credit policies, to easily access capital, banking and finance expert Nguyen Tri Hieu said it is necessary to set up a credit complex with a scale of about VND300 trillion to support small and medium enterprises and business households affected by the Covid-19 pandemic. This credit complex comes with credit guarantee funds to help businesses access capital. Small and micro-enterprises also said that the tax reduction helped them have more accumulation to recover, but pressure on compliance costs needed to reduce to focus on restoring production and business.