Vietnamese Small- and Medium-sized Enterprises

Categories: EconomicsVietnam

According to the statistics of Ministry of Justice, within the past few years Vietnam has recorded a significant growth of Small- Medium sized enterprises, which made up 97% of the total enterprises in Vietnam. SMEs is playing an important role in promoting Vietnam economy by bringing huge benefits such as creating more jobs, enhancing income for employees, reduce poverty as well as encourage the growth of large enterprises including industrial industry. Especially, SMEs have created over half millions of jobs which are occupied over 51% of the labor force and contribute 40% of the total GDP and 33% of total budget revenue.

Apparently, the quantity of SMEs has increased to approximately 100,000 enterprises in 2016, driven mostly by the government reform. Notwithstanding, Vietnamese SMEs still are facing a lot of challenges and obstacles. And the statistics have been proved that the quantity of SMEs have bankrupted in year 2014 set a new record with over 67800 enterprises, namely as difficulty in capital financing, problem in management structure, quality of resources including raw material and human resource as well.

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Furthermore, Vietnamese SMEs have difficulties in technology which is modernize their equipment, finding and distribute their product to new markets worldwide. At the 2017 APEC Small and Medium Enterprises’ Meeting in Vietnam, Mr Tran Van Phat – the CEO of the Robot Company said that “Vietnamese enterprises need to participate more in economic forum, we need to prepare for the intrusion of foreign economies and expand economic relations to seize opportunities to enhance our growth”. It becomes very important for many countries including Vietnam to urge their SMEs to participate in global logistics supply chains because it is believed that this sector is crucial to international trade to gain more profit in international markets.

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As of 2017, just 21 percent of Vietnamese SMEs are engaged with global supply chains with much lower than Thailand, Malaysia which is 30 percent and 40 percent respectively. Hinge on integrating to global supply chain such as procurement, manufacturing, promoting sales will allow enterprise be able to control competition, minimize risks and production costs which accounting for 20 percent higher than others neighbor countries like Thailand and China.

However, both global and Vietnamese SMEs still have to struggle from many difficulties. According to European SME annual report, in Europe, the quantity of SMEs decreased 0.9%. In Vietnam, the quantity of SMEs went to bankruptcy in year 2014 set a new record with over 67800 enterprises (According to the Report of construction process of the Interim Valuation Report on implementation of SME Developing Plan – period of 2011-2015).

Apparently, both global and Vietnamese SMEs are facing the same difficulties in capital financing, not able to adopt the new technology into their production enhance productivity. However, for Vietnam particularly, are dealing with the problems in management structure, quality of all resources including human sector as well as low competitiveness in international market to attract both customer and investors. Furthermore, according to To Hoai Nam, 2014 stated that “Due to the lack of fully fulfillment of Social Insurance, Health Insurance policies for the employees, working quality in SMEs gradually depreciated; as the result, SMEs fall back into disadvantage positioning in recent economy”. As seen that Vietnamese is lacking of CSR activities in and outside the organization to strengthen their position in the international market to attract more investor and become long term supplier for Western Brand names.

Due to the crucial role of SMEs, forcing both Vietnam government and SMEs to really focus on developing and overcoming difficulties to enhance the current economy. And Corporate Social Responsibility is one the solution that Vietnamese government should impose more supporting policies to encourage SMEs to launch CSR as strategic plan to positioning into global supply chain.

CSR PERCEPTION BY SMEs

In general, Vietnamese Small- and Medium-sized enterprises count on economic and legal goals as their understanding of CSR Practice, and also cultural and political issues are two main elements to influence CSR perception in developing countries (Idemudia,2011). Instead, in context of an emerging economy, Vietnamese SMEs perceived social responsibilities as same as others enterprise in developed countries which means that the Pyramid of CSR model by Carroll is found more related in Vietnam context in order of priority: legal, economic, ethical, and philanthropic responsibilities. From this respective, government regulations, market requirement, customer demand as well as company itself are viewed as key drivers to launch CSR by Vietnamese SMEs. In contrast, philanthropic responsibility is most reflected as social responsibilities of an enterprises but it is less concerned by SMEs. Similarly, ethical responsibilities are also not done by most of SMEs because they cannot see the benefits outweigh the cost to practice CSR.

Basically, the motivation for practicing Corporate Social Responsibility by Vietnamese Small- Medium-sized Enterprise is categorized into two factors: mostly from external pressures and internal motives. Firstly, for external pressures such as government, investors, stakeholders, even the expectation of local communities and as well as due to customer-driven obligations. It is clear that when it comes to selling products or export product to high-value markets in European, North American and Japan, those markets requires a very strictly regulations to all their partners who want to supply product to their countries. Western Partners do not only ask for cheap production in supplier countries but also increasingly request suppliers to respect social and environmental standards by complying with code of conducts. Therefore, enterprises in country of origin have to make huge effort to adapt and adopt voluntary standards that are specifically required by certain markets. For example, enterprises have supplied product that used directly natural resources such as seafood, agriculture sector have to pay more attention on environmental protection standards. Meanwhile, enterprise that using intensive labor forces such as footwear, garment would concern more on human sector such as labor rights, working environment safety, health insurance, employee compensation.

Secondly, for Internal Motives, SMEs launch social responsibilities usually because of high local competition; they do more social charity in order to enhance their brand name awareness of consumers, also achieve efficiency gains, and improve their competitive level in the market.

Furthermore, Vietnam Economy in which Foreign Direct Investment account for a significant portion and almost of SMEs are subcontractors always follow regulations and standard that are being set by buyers on international markets.

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Vietnamese Small- and Medium-sized Enterprises. (2021, Sep 20). Retrieved from https://studymoose.com/vietnamese-small-and-medium-sized-enterprises-essay

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