Solutions to promote export activities of Vietnamese small and medium enterprises in the integration period

FOREIGN TRADE UNIVERSITY

FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS MAJOR IN FOREIGN ECONOMICS



GRADUATION THESIS

Topic:

SOLUTIONS TO PROMOTE EXPORT ACTIVITIES OF VIETNAMESE SMALL AND MEDIUM ENTERPRISES IN THE INTEGRATION PERIOD

Instructor: MSc. Pham Thi Hong Yen Class: French 1 - K42 - KTNT

Student: Nguyen Thi Huyen Trang

HANOI, November 2007

PREFACE

I. Necessity of the topic

Actively and proactively integrating into the international economy has been considered a strategic orientation for Vietnam in the process of economic development, industrialization and modernization. The success of Vietnam's integration process depends mainly on the integration capacity of enterprises, of which more than 90% are SMEs.

With remarkable growth in both quantity and quality, a wide range of activities in all regions of the country, participating in most areas of the economy, especially the manufacturing, processing, retail and service sectors, SMEs have increasingly contributed to the growth and social stability, contributing to the economic restructuring. However, to date, the contribution of SMEs to export turnover is still limited. Of the 207,034 SMEs (from 2000 to the end of 2006), only 29,000 SMEs participate in export, accounting for 29% of the total export turnover of the country.

Especially in the current context, when Vietnam has become the 150th member of the WTO - a "big playground" with many opportunities but also many challenges, especially for SMEs, when the starting point is still low. Accordingly, providing solutions for SMEs to maximize benefits and minimize negative impacts, thereby improving competitiveness in integration, promoting export activities becomes necessary and urgent issues, requiring accurate and timely analysis to have appropriate solutions.

II. Research purpose

1. Clarify the theoretical and practical basis of SMEs and the role of SMEs in the economy.

2. Assessing the export status of SMEs in the integration period.

3. Proposing solutions to promote export activities of Vietnamese SMEs

III. Research objects and scope

1. Research object

The research object of the thesis is the export activities of SMEs in the context of integration.

2. Scope of research

The thesis only focuses on Vietnamese SMEs and does not mention foreign SMEs operating in Vietnam.

IV. Research methods

To achieve the set objectives and clarify the contents of the thesis, the author will use a combination of methods such as qualitative and quantitative analysis, logical reasoning methods and interpretation in the analysis process.

The author also flexibly uses general comparison methods and methods of analyzing published statistical data to draw conclusions, evaluate or propose basic solutions and viewpoints on promoting export activities of SMEs in the context of integration.

V. Structure of the thesis

In addition to the introduction and conclusion, the thesis consists of 3 chapters:

Chapter I: Overview of SMEs and the role of SMEs in the economy Chapter II: Assessment of the current status of SME export activities

in the integration period

Chapter III: Solutions to promote export activities of small and medium enterprises in the integration period

During the implementation process, due to limited time and research level, this thesis will inevitably have shortcomings. I hope to receive sympathy and constructive comments from teachers and friends to make this topic more successful.

I would like to express my sincere thanks to my teacher - MSc. Pham Thi Hong Yen for her dedicated help and guidance in completing this graduation thesis.

Hanoi, November 9, 2007

Student: Nguyen Thi Huyen Trang Class: French 1 - K42 KTNT

CHAPTER I‌‌

OVERVIEW OF SMES AND THE ROLE OF SMES IN THE ECONOMY

I. CONCEPTS AND CRITERIA FOR DETERMINING SMALL AND MEDIUM ENTERPRISES

1. Concept and criteria for determining SMEs in some regions and countries in the world

1.1. Concept

Small and medium enterprises (SMEs) are understood as enterprises of modest scale with a certain number of employees and assets. Currently, there is no unified concept of SMEs in the world. The concepts of micro-enterprises, small enterprises, and medium-sized enterprises are flexibly set by countries, suitable to the economic reality of that country and can change over time.

1.2. Criteria

In general, countries often use two common groups of criteria for classification: qualitative criteria and quantitative criteria.

Qualitative criteria group : Based on basic criteria such as management apparatus, decision-making mechanism, financial operations, business organization form, level of specialization, etc. These criteria have the advantage of reflecting the true nature of the problem but are often difficult to determine in practice. Therefore, they are only used as a basis for reference and are rarely used for classification.

Quantitative criteria group : Often used criteria such as the number of regular and irregular employees in the enterprise, asset or capital value, revenue or profit. Of which, capital and number of employees are the most commonly used criteria to determine SMEs.

Here is how SMEs are defined in some countries and regions around the world:

1.2.1. EU area

The most popular concept of SMEs in the EU today is the concept introduced by the European Commission in 1996, revised in June 2003, which is mandatory in the system of development funds, research and development programs of the EU. Accordingly, based on the number of employees and annual revenue or total assets, SMEs are divided into three types:

- Medium-sized enterprises: employ less than 250 people. Annual turnover is less than 50 billion euros or total annual assets are less than 43 billion euros.

- Small business: employs from 10 to 49 people. Annual turnover or assets do not exceed 10 billion euros.

- Microenterprises: employ less than 10 people. Annual turnover or total assets do not exceed 2 billion euros.

Table 1 : Criteria for identifying SMEs in the EU region

Classification criteria

Medium Enterprise	Small business	Micro Enterprise
Number of employees (people)	< 250	10 – 49	< 10
Revenue/year (billion euros)	< 50	< 10	< 2
Total assets/year (billion euros)	< 43	< 10	< 2

Maybe you are interested!

Source: http://europa.eu.int/comm/enterprise/enterprise_policy/sme_definition/index_en.htm

The above distinction is not really accurate because it does not distinguish between enterprises in different sectors while the reality is that the economic characteristics of the sector often play a decisive role in determining the size of the enterprise. Therefore, in the EU, there are still different concepts and criteria for determining SMEs in addition to the concepts and criteria set forth by the European Commission.

1.2.2. ASEAN region

In ASEAN countries, the concept of SMEs is not yet unified, but in general, Singapore, Malaysia, Indonesia, Thailand, and the Philippines all rely on two basic criteria to classify enterprises as small, medium, or large, which are the number of employees and total investment capital.

Singapore defines SMEs as those with less than 100 employees and capital investment of less than S$1.2 million. In Malaysia, SMEs are those with less than 200 employees and capital investment of less than RM2.5 million. In Indonesia, Thailand and the Philippines, there is a more detailed classification into medium enterprises, small enterprises and micro enterprises, of which micro enterprises are often family businesses.

Thus, the concept of SMEs in some ASEAN countries is still different, at the same time this distinction is only relative and mainly based on the number of employees and capital scale. Therefore, the way of determining SMEs in some ASEAN countries also has some disadvantages like the classification in the EU region, that is, it does not consider the economic characteristics of the industry.

1.2.3. America

In the US , where when mentioned, people immediately think of powerful economic groups, the role of SMEs is also highly valued. The classification of SMEs also takes into account the differences between industries. In addition to quantitative criteria such as: profit with annual growth rate below

150,000 USD in all manufacturing, service or trade sectors or labor standards. SMEs are also classified by specific sectors as follows:

- Manufacturing enterprise: 500 employees

- Non-manufacturing enterprise: Revenue of 5 million USD

The US SME Law also has some additional qualitative criteria such as: an SME is an independent enterprise, not in a dominant position in the industry it is involved in. According to the US concept, SMEs are not subsidiaries or satellite enterprises of large companies. This is quite different from SMEs in Japan, where subsidiaries or satellite enterprises of large companies still have the same privileges as SMEs.

2. Concept and criteria for identifying SMEs in Vietnam

In Vietnam, the concept of SMEs is only relative and is adjusted to suit each stage of development of the country's economy.

2.1. About the concept

The first legal document of our country officially mentioning SMEs is Official Letter No. 681/CP-KTN issued on June 20, 1998 by the Government Office. Accordingly, SMEs are defined as enterprises with charter capital of less than 5 billion VND and an average annual number of employees of less than 200 people.

Table 2: Classification of Vietnamese SMEs

Business type

Number of employees (people)	Business capital (billion VND)
Big	> 200	> 5
Fit	50 – 199	1 – 5
Small	< 50	< 1

Source: Official dispatch No. 681/CP-KTN issued on June 20, 1998 However, the classification in this concept has not clarified the characteristics.

depends on the industry of the SME. The nature of the industry will determine the classification of enterprises by size. For example, in the stone mining industry, a factory with 300 workers is still classified as a SME, while an automated electronics factory employing 50 workers is not a small-scale enterprise because the investment capital is high, which can be up to 5 million USD.

Over time, the development of the country's economy requires new regulations on SMEs. Since the Enterprise Law was applied on