Lessons Learned from Japan's SME Development Policy for Vietnam

The driving force for the rapid development of the Japanese economy during the period of high economic growth was primarily domestic demand. Japan increased domestic investment to promote domestic production to satisfy domestic consumption and export needs. The rapid development of the Japanese economy was the result of great contributions from small and medium-sized enterprises. These companies adapted very quickly to changes in the market, promptly changing their production structure to suit the world market. Vietnam has just transitioned to a market economy. In the early stages of transition, the economy was mainly in the hands of state-owned enterprises. However, the State has now begun to pay attention to the role of SMEs and has appropriate development policies.

Contributing to the rapid development of the Japanese economy is also the savings of the people. Japan's savings are among the largest in the world. The Bank of Japan has mobilized the idle capital of the people well to lend to businesses to develop and expand production, accelerate exports and earn foreign currency. Therefore, in addition to foreign loans, Japan still mainly uses capital sources originating from within the country. Meanwhile, Vietnam has not yet been able to mobilize all idle capital sources from the people and still has to mainly rely on aid loans and investment capital from outside to develop production. This is also a common feature of Southeast Asian countries, and the lessons learned from Southeast Asian countries after the currency crisis are also very useful for us to learn.

The level of science and technology now and 30 years ago are completely different. Japan has rapidly developed its economy thanks to strong private investment, in newly created factories and equipment, and investment in new manufacturing industries at that time such as electronics. It can be said that the Japanese economy has developed strongly because of the strong development of applied industries and Japan has enhanced the reputation of the products of those industries in the international market through foreign trade and export of those products. So what is the current situation in Vietnam? Vietnam's current export products are products in the agricultural and industrial sectors.

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Forestry and seafood, light industry and mainly in the form of processing. So is Vietnam capable of achieving growth like Japan?

One factor that supported Japan’s economic growth during its high growth period was its abundant labor force. This is very similar to Vietnam in the current period. Like Vietnam, Japan also has a large number of young people joining the labor force every year, and there are also many agricultural citizens moving from the countryside to find work in industry and services in big cities. But the truth is that compared to the Vietnamese, it can be said that the Japanese work harder and more meticulously. They are diligent and quietly work their hearts out, not only for themselves, but also for their families, for their companies… In particular, they strive for the growth of the company they are attached to for life through the lifelong employment system.

Thus, besides the similarities, Vietnam and Japan also have many differences that Vietnam needs to pay attention to in the process of learning from experience in supporting SMEs. On the one hand, Vietnam has more advantages such as abundant natural resources, support from many organizations and countries in the world. On the other hand, SMEs in Vietnam today face more difficulties such as the immature market economy, vestiges of a subsidy period still exist, the problem of raw materials and environmental pollution is becoming increasingly severe, policies on SMEs are not really adequate, support is not effective, and the potential of SMEs has not been fully exploited. Furthermore, Japan has now become an economic powerhouse in the world, ranking second in the world in terms of GNP of 3926.7 billion dollars in 1995 and per capita income ranking third in the world, 40,940 dollars[18.23], 100 times higher than the income of Vietnamese people. Therefore, when learning from Japan's experiences, Vietnam also needs to pay attention to the issue of resources and practical capabilities in order to effectively implement policies.

II. LESSONS LEARNED FROM JAPAN'S SME DEVELOPMENT POLICY FOR VIETNAM

From the process of formation and development of Japan's SME development policies, we can see many valuable lessons that Vietnam can apply.

1. Deep understanding of the role of SMEs in the economy

Since the country emerged from the war, Japan has considered SMEs as an effective tool for economic reconstruction. From the traditional handicraft industries of more than 500 different regions, Japanese SMEs have successfully carried out “initial accumulation” for the country’s industrialization process; creating a premise for high and stable growth of the Japanese economy for a long period later. It is no coincidence that in Japan, types of SME Laws appeared very early and were continuously supplemented and perfected. Also in Japan, financial and banking institutions providing comprehensive support for SMEs appeared earlier than in the economic history of other countries. These agencies form a complete, reliable “social system” and are a solid foundation for the development of SMEs. Although there are times when the Japanese government has not truly appreciated the power of SMEs for the economy, in general, the Japanese government has always recognized the importance of SMEs and has therefore had appropriate policies and support measures.

This shows that early and correct awareness of the role of SMEs in the economy is the first factor contributing to increasing the proportion of SMEs in the economy.

Especially in the current open and integrated conditions, awareness and direction of SME development activities have become a strategic task of the national economy. This is one of the basic factors, creating the foundation for building a legal system and macro-regulatory policies, creating a favorable basis for identifying external favorable opportunities for SMEs when planning and implementing competitive strategies.

2. Create a favorable environment for SME operations

In Japan, SMEs operate in a very favorable environment.

The legal environment for SMEs has been formed very early. General regulations related to SMEs or regulations specifically for SMEs have been issued. This creates clear directions and certain frameworks within which SMEs can easily operate and develop.

In addition, the Japanese government always tries to create a favorable business environment for the development of SMEs. In the period when the gap between large enterprises and SMEs is very large, large enterprises have many unfair measures against SMEs. Therefore, the government has had policies to ensure equal rights for SMEs in the Anti-Monopoly Law, the Law on Payment of Subcontracting Costs... Moreover, although all acts of hindering fair competition are strictly prohibited and handled under the Anti-Monopoly Law, the Japanese Private Anti-Monopoly Law also accepts some exceptions. One of them is accepting the existence and operation of manufacturing corporations established from SMEs in accordance with the Law on Small and Medium Enterprises. Or when the economy is in difficulty, the government also issued the Law on Guaranteeing Orders from the Government, the Law on Encouraging Subcontracting.

Recently, business support measures have changed to suit the actual situation. That is, organizing trade fairs, trading centers to increase opportunities to introduce products, trade opportunities, find business partners... Enterprises can also search for partners through the "match net" network, especially the website: www.matchnet.zenkyo.or.jp . In addition, there is also the promotion of investment activities abroad.

This is very important for the development of SMEs.

In Vietnam today, although the operating environment for SMEs is much more favorable than before. The legal framework for business, finance, currency, credit, trade, and labor has been greatly improved with the introduction and amendment of the Enterprise Law (2005), Investment Law (2005), State Bank Law and Credit Institutions Law 2003, Labor Code... The system of mechanisms and policies of the State basically does not discriminate between economic sectors. In addition, there are a number of legal regulations specifically for SMEs such as Official Letter No. 681/CP-KTN dated June 26, 1998 of the Government Office on strategic orientation.

SME development strategy and policy, Decree 90/2001/ND-CP dated November 23, 2001 of the Government on supporting the development of small and medium enterprises. However, in practical activities, the private economic sector still faces more difficulties than other types of enterprises.

The major obstacle to the development of SMEs today is the unsynchronized and incomplete legal environment; many regulations are incomplete, unclear, inconsistent or complicated, overlapping, leading to confusion among enforcement agencies and businesses in complying with the law.

Although state agencies have created conditions for businesses to participate in giving opinions on various documents and policies, the results are generally limited, only limited to reference level, not yet regulated. Some opinions and proposals from businesses have not been accepted, many difficulties for businesses have not been fundamentally and thoroughly resolved.

The bias in treatment of large enterprises and SMEs by many levels of executive agencies is also a factor that negatively impacts the business environment. The policies of the Party and the State all demonstrate equality between economic sectors, however, there are still many discriminations between large enterprises and SMEs. Especially in the implementation of policies and the performance of official duties by some state officials, such as in the fields of bank loans, access to preferential policies of the Government, land lease, receiving information about export markets, in training and fostering workers, etc.

The socio-psychological environment also has a great influence on the production and business activities of SMEs. However, the socio-psychological environment in Vietnam today still has many disadvantages for SMEs. There are still many prejudices and inferiority complexes against SMEs, and the role of SMEs in the economy is not properly recognized. The concept of SMEs is also associated with negative aspects such as counterfeiting, tax evasion, trade fraud, etc. This leads to a mentality of prejudice and discrimination against SMEs among a significant number of officials at all levels of the Party, State and among the people.

Thus, although the legal environment, business environment, and socio-psychological environment have improved, in practical activities, the SME sector

still face many difficulties. This has a significant impact on the mobilization of resources and potential of SMEs for investment in production and business development. Therefore, it is necessary to have a correct understanding and improve the operating environment for SMEs.

3. Support SMEs to promote internal strength and improve competitiveness

When studying the formation and development of Japan's SME development policies, we can see a clear trend of change. In the post-war period, SMEs faced many difficulties, the gap in wages, productivity... between SMEs and large enterprises was quite large. The Japanese government considered SMEs to be the weak point of the economy, needing support to shorten the gap with large enterprises. However, when the domestic and world economic situation changed a lot, especially since the economy began to decline, and measures had to be taken to adjust the economic structure, Japan realized the true meaning and role of SMEs. Therefore, SME development policies have shifted to support measures to enhance internal capacity, maximize internal strength, and enhance the competitiveness of SMEs. The image that the Japanese government wants for SMEs in the 21st century is that of self-reliant enterprises. This is completely consistent with the general trend of the world. Because no matter how favorable the objective conditions are, the ability of SMEs to survive and develop is determined by internal factors.

The internal capacity of the enterprise is improved on the basis of improving the level of business administration (including human resources, finance, and technology), the skill level of workers, the level of equipment and technology, the level of readiness to meet the demand for materials and supplies for production, and marketing capacity. The essence of the requirement for improving the internal capacity of the enterprise is associated with improving productivity, quality, and efficiency, reducing relative costs, and producing to meet the needs and tastes of customers.

This can be clearly seen through the policies that the Japanese government has implemented.

3.1. A rich system of capital support measures

The Japanese government has taken many measures to support capital for SMEs. Through this, SMEs can increase their capital directly as well as indirectly. Because only when they have capital, SMEs will have enough capacity to compete.

SMEs can increase their capital indirectly through programs of three state-owned financial institutions: Japan Small Business Finance Corporation (JFS), National Finance Corporation (NLFC), and Shoko Chukin Bank (SCB). In addition, the government has also provided credit support to SMEs through the credit guarantee and credit insurance system, and venture capital funds. However, currently, in addition to state-owned credit institutions, the role of private credit institutions is increasingly being enhanced. The proportion of capital lent to SMEs by these institutions accounts for more than 90% of the total loan capital.

SMEs can also raise capital directly through the sale of shares with the help of the SME Advisory and Investment Guarantee Corporation.

Vietnam now has many policies to help SMEs get better bank loans. Such as eliminating discrimination between economic sectors, creating an equal competitive environment (the Law on the State Bank and the Law on Credit Institutions in 2003 eliminated priority and preferential loans for state-owned enterprises and cooperatives). The Government creates conditions for some SME entities to borrow capital from credit institutions without having to secure assets. (Resolution No. 02/2003/NQ-CP dated January 17, 2003 of the Government stipulates loans of up to 30 million VND for farm owners; up to 50 million VND for enterprises producing and trading aquatic breeds; up to 100 million VND for cooperatives providing services of supplying materials, plants, and breeds for agricultural, forestry, fishery, and salt production; up to 500 million VND for cooperatives producing export goods and doing traditional jobs). In addition, the law also creates a competitive environment in the field of credit and banking services, liberalizing interest rates... In addition to traditional forms of lending, the State Bank has issued mechanisms on other forms of credit granting such as guarantees, financial leasing, discounting export documents, discounting and rediscounting valuable papers,

factoring…Therefore, it has created conditions for businesses to access capital more easily, forming and developing the financial market.

However, there are still some problems that hinder enterprises in the credit institution or related institutions such as: the slow issuance of land use right certificates limits the ability to mortgage bank loans; the asset evaluation system is underdeveloped and not based on the market; notarization procedures and registration of secured transactions are still cumbersome. The implementation of the institution on the Credit Guarantee Fund for SMEs according to Decree No. 90/2001/ND-CP is still slow. Up to now, only 2 localities have established this fund, Tay Ninh and Tra Vinh[4.119].

Direct capital through stock issuance is also just in its infancy, and not many SMEs are capable of listing on the stock market.

3.2. Support to promote the improvement of technical and information technology skills

Technological level plays an important role in improving productivity, product quality, and competitiveness of SMEs. Especially when the industrialization process is taking place more and more strongly, SMEs need to improve their technology. Right from the high growth stage, the Japanese government has begun to take measures to improve the technological level of SMEs. Currently, with the development of technology worldwide, Japan's policies to support technology have changed a lot.

Technical development assistance: Capital support for activities to purchase high-tech equipment, produce products with high added value. When purchasing such equipment, businesses will receive tax breaks. The government will establish organizations to lease equipment at low or no interest rates.

Support for research and development activities : For research and development activities, the Japanese government also has many measures to promote them, such as supporting capital to encourage development and application.

Encourage cooperation between research institutes, universities, government agencies and enterprises in research and application of scientific and technological achievements.

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