Some financial support policies to enhance export capacity for Vietnamese small and medium enterprises

In the commercial sector, it is not more than 10 million yen and not more than 50 workers. In which, micro enterprises are enterprises that employ no more than 10 workers and small enterprises employ from 10 to 100 workers [11].

Nowadays, many countries use the World Bank's classification criteria, micro enterprises employ from 1 to 9 people, small enterprises from 10 to 49 people, medium enterprises from 50 to 299 people, enterprises employing 300 people or more are considered large enterprises [11].

In the ASEAN region, the concept of SMEs is also different. However, in general, Singapore, Malaysia, Indonesia, Thailand, and the Philippines all rely on two basic criteria: the number of employees and total investment capital. Singapore considers enterprises with less than 100 employees and investment capital of less than 1.2 million Singapore dollars. In Malaysia, SMEs are enterprises employing less than 200 employees and investment capital of less than 2.5 million ringgit. As for Indonesia and the Philippines, there is a more detailed classification into medium enterprises, small enterprises, and micro enterprises, in which micro enterprises are often family businesses[11].

The introduction of concepts and criteria for classifying enterprises is of great significance to policy makers. Therefore, Vietnam has gradually had specific regulations in accordance with the development level of the economy and the value measures of each period. In 1998, the Government issued Official Letter No. 681/CP-KTN dated June 20, 1998 on "Strategic orientation and policies for the development of small and medium enterprises". Accordingly, enterprises with registered capital of less than VND 5 billion and/or with less than 200 regular employees are considered small and medium enterprises. The application of one or both of these criteria depends on the specific conditions of each industry, field or locality. By 2001, the criterion: "labor usage level" was changed to comply with international regulations, the maximum capital limit criterion was also changed to comply with the purchasing power of the national currency. According to Decree 90/2001/ND-CP dated November 23, 2001 of the Government on supporting the development of small and medium enterprises: "Small and medium enterprises are independent production and business establishments, registered for business in accordance with current laws, with registered capital not exceeding 10 billion VND or an average annual number of employees not exceeding 300 people" .

On January 13, 2009, the Ministry of Finance issued Circular No. 03/2009/TT-BTC, which mentioned the criteria for determining SMEs as follows: Having a charter capital stated in the Business Registration Certificate or Investment Certificate effective before January 1, 2009 of no more than VND 10 billion; in the case of a newly invested enterprise from January 1, 2009, the charter capital stated in the Business Registration Certificate or the first investment certificate shall not exceed VND 10 billion; or having an average number of employees in the fourth quarter of 2008 of no more than 300, excluding employees with short-term contracts of less than 3 months; in the case of a newly established enterprise from October 1, 2008, the number of employees paid salary and wages for the first month's salary (full 30 days) with revenue shall not exceed 300 people.

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However, this is not really a comprehensive definition of SMEs. Although it has mentioned the two most basic criteria of number of employees and capital scale, the definition would be more complete if it included both revenue and total assets criteria. Because, there is still a reality that enterprises in the trade and service sector have higher revenue but smaller total registered capital than manufacturing enterprises. Another obstacle related to the current definition of SMEs is that the current definition does not include regulations on criteria to divide SMEs into medium-sized enterprises, small enterprises and micro-enterprises, causing difficulties in planning and implementing policies effectively. This is because micro-enterprises have their own characteristics and difficulties, requiring different support from SMEs. Meanwhile, according to the World Bank's classification criteria, micro-enterprises in our country account for more than half of the total number of SMEs.

1.1.2. Characteristics of SMEs

First, SMEs are highly flexible.

With a modest investment, SMEs are easy to start, easy to operate, easy to consume a small volume of products corresponding to its capital volume, easy to change business direction when the owner wants... However, the high flexibility of small businesses does not simply mean the ease of doing business. It only shows the high probability of achieving low-level goals.

It is the flexibility that allows SMEs to be present almost everywhere, in every field, in every sector of the national economy. It is the solution to fill the shortage of product types that large enterprises with mass production methods cannot fully satisfy market demand.

On the other hand, small businesses can easily move their business locations and change their business purposes due to the simplicity of technology and premises for production and business.

Second, SMEs are local.

The volume of products and services that each SME provides is very small compared to the market demand, so it is easy for businesses to consume goods as well as find sources of input factors. In fact, SME are able to adapt to different conditions in local areas. Small and medium-sized businesses are able to exploit local potential resources well. First of all, they can mobilize small amounts of capital from the people to produce goods to serve local life and production. Next, they can mobilize a large number of human resources in localities, especially seasonal idle labor. In addition, SME are distributed widely in all localities due to the diversity of resources that each locality can provide for the production and business of enterprises. However, such scattered distribution also requires policy makers and implementers to ensure standardization of production and business and environmental protection.

Third, SMEs often use simple technology.

This characteristic comes from the scale of capital. Simple technology has the advantage of low investment, can use many workers and mostly unskilled workers, low wage costs for workers, high efficiency of machine use due to their low specialization (the simpler the machine tools, the more they can be used in many stages of production of different types of products). However, this also causes many difficulties for businesses as well as policy makers. That is, low technology level combined with low skill level of workers leads to low labor productivity and high level of waste, so product quality

low level of technology and high level of resource use. Primitive technology also causes environmental pollution, especially in processing industries using chemicals and industries with large amounts of waste.

Fourth, SMEs have relatively low competitiveness.

SMEs usually operate within the local area. Small and local markets put less pressure on businesses. However, on the contrary, SMEs in remote areas are therefore less dynamic. Inertia is a factor that strongly differentiates the SME sector. However, the influence of local factors is only small, the internal factors of the enterprise play a decisive role. It is clear that SMEs have weaknesses in less modern technology, limited skilled workers, limited quantity of products, low quality, limited management skills, and owners often lack qualifications and experience in business. Thus, the level of initiative of enterprises in business is limited.

Fifth, SMEs are vulnerable to economic fluctuations.

This characteristic is a consequence of the scale of factors such as capital, technology, labor level, and management capacity of business owners. SMEs have a fairly high rate of exit from the market, but the rate of new entry is also very large. This wave depends a lot on the development of the economy. Even in developed countries, the fate of SMEs is quite uncertain. This issue poses a problem for planners to always monitor and have corresponding policies to create stable business conditions for the SME sector, which is very sensitive to economic fluctuations.

Sixth, SMEs have a relatively high level of informality.

The ambiguity in business organization easily leads to confusion between household businesses and small businesses, especially micro businesses. The smaller the business, the more likely it is to violate the law, from not registering, not having a clear and stable address, to not ensuring minimum conditions for workers, tax evasion, and other illegal acts. This sector therefore needs attention and support from the Government, reasonable financial and credit support policies, in the right place, at the right time will contribute to positive improvement, solving

Solving difficulties and improving competitiveness for SMEs, one of which is the export sector.

1.1.3. The role of SMEs

Present in all fields, national economic sectors and localities, SMEs prove their indispensable nature in any market economy.

Contribute significantly to the gross domestic product

SMEs contribute significantly to the total output of goods and services of the economy. In Vietnam, 95% of enterprises are small and medium-sized, distributed in almost all localities. Every year, this sector contributes to the economy about 40% of the gross domestic product, 30% of total industrial output, nearly 80% of total retail sales, and over 60% of total freight transport, with revenue accounting for 22.07%, profit accounting for 11.78%, and budget contribution accounting for 17.46%.[3]

Meet diverse market needs

The role of SMEs in satisfying market demand is not only reflected in the percentage of contribution to the total social product. What is more practical for socio-economic welfare is that it satisfies the diverse needs of life and production that large-scale production cannot cover. These are the needs for local services, local goods, small quantities (special, unique), or goods and services of low quality standards suitable for the payment capacity of a part of the population, traditional goods or handicrafts, ... that mass production cannot meet. SMEs are distributed in almost all areas and are capable of providing the local market with goods and services serving production and people's lives, suitable for the tastes and payment capacity of the agents in the region.

Is a complementary business to large business

Large-scale production requires large resources. Large enterprises are therefore often located in economic centers with large markets, convenient transportation and services. Remote rural areas do not have enough factors for large enterprises to operate, but they are places that can provide a part of the factors of production, especially raw materials.

materials for the processing industries. SMEs present in all regions are a necessary complement to large economic centers. Their diversified activities in collecting, processing raw materials, and small transport services will form a network providing intermediate inputs to larger enterprises. Specialization in such input markets helps save social costs. Therefore, even in developed industrial countries, the SME sector still holds an important position in the national economy.

Create more jobs

The number of small and medium enterprises accounts for the majority of the economy, therefore, the total number of jobs created by this sector is also very large. Experience from other countries shows that developing the small and medium enterprise sector is a very effective solution to unemployment. A characteristic of this sector is that it does not require strict skills of workers due to the low quality of the products it supplies to the market, thanks to which it can solve the problem of employment for a large number of workers. In the condition of an underdeveloped economy and limited labor quality, developing labor in this sector proves to be effective.

Mobilizing local potential optimally

Widely distributed in each locality, easy to move to a new location, SMEs have the advantage of finding the most convenient source of input factors. In the geographical conditions of Vietnam, this is extremely meaningful as it helps reduce transportation costs. Considering the raw material supply of Vietnamese processing enterprises, up to 90% of SMEs operating in the processing industry have available raw materials and energy. It is worth noting that this availability decreases with size: micro-enterprises have a satisfaction level of 95% in raw material quantity, 95% in raw material quality, 92% in energy; small enterprises have corresponding indicators of 91%, 90% and 85%; medium enterprises: 90%, 88% and 80%. However, large enterprises' satisfaction index for raw material quantity only reached 58%, for raw material quality only reached 62%, but satisfaction with energy was quite high at 89% [11]. It can be said that in the condition that raw material sources have not been planned into specialized areas to be able to supply in quantity

large, quality meets standards, then organizing business on a medium and small scale is a method that allows taking advantage of local potential.

Contribute to poverty reduction and equitable development among regions

Encouraging and facilitating all people to participate in business not only helps increase income, but also helps them get acquainted with the market mechanism, thereby gradually eliminating social problems caused by poverty. Small and medium-sized businesses are easily accepted in the early stages when capital is small, experience is limited and business relationships are fragile. Distributed widely across localities, SMEs contribute to the transformation of economic structure, especially in agriculture, thereby changing the face of rural areas, remote areas. Operating in most fields and sectors of the national economy, SMEs can meet all needs of production and life right in the locality, although from a certain perspective, the level of satisfaction of consumer needs of products from this area may not be perfect. Thanks to the presence of SMEs, the gap between localities, regions and population classes is increasingly narrowing.

Is the premise to create big businesses

The market is the place to test and evaluate the business performance of each enterprise. After going through that challenge, each enterprise will either stabilize, develop or have to withdraw from the market. However, small enterprises cannot always accumulate to become larger enterprises. Capital concentration is a form known to history as an effective and time-saving method. Association, cooperation, merger, ... between SMEs can quickly form large groups that are strong enough to stand firm in increasingly fierce competition.

SMEs can easily link up with other businesses in many ways. The simplest way is to become a “satellite” for a larger business. This is an effective way to expand the capacity of businesses without increasing investment capital. This method creates production and business complexes based on the division of labor and cooperation between businesses of different sizes. This form of production organization has been applied in many developed countries. On the one hand, it reduces costs due to expanding the size of the business, on the other hand, it avoids risks for businesses.

enterprises due to the independence of each unit participating in satellite-style cooperation. Next, the merger between SMEs is also very effective. This merger can be based on the uniformity of economic and technical sectors, or it can be the coordination between stages of the reproduction process to form multi-industry companies. Thanks to that, the competitiveness of enterprises is increased.

Contribute to accelerating the industrialization and modernization process

Industrialization and modernization are the cause of the entire people. In the process of its operation, small and medium enterprises must always find ways to apply new technology to survive in the conditions of rapid technological progress like today. Breakthrough improvements in technology, new investments or upgrading of enterprise equipment contribute to increasing the total social capital of the economy and thus increasing the production capacity of the economy. In addition, many enterprises also contribute capital to the construction of local infrastructure works in the form of the State and the people working together. This move helps the Government to focus capital on key national projects.

Another very popular form is that when SMEs receive export processing, they also receive technology transfer from foreign customers. Although this method has many limitations such as dependence on foreign customers and having to accept low processing prices, in return, businesses immediately have equipment, sample designs and consumption markets in the context of lack of capital, experience and business relationships. In fact, many businesses have grown and become independent after a period of outsourcing production for foreign countries.

Contribute to increasing export turnover

SMEs have an advantage in developing the production of traditional goods and handicrafts thanks to the organization of small production facilities, scattered in rural areas, where there is seasonal idle labor and manual labor in craft villages. This type of enterprise also exploits the production of non-concentrated export goods by placing orders with households. The form of exporting handicrafts, fine arts, and traditional goods is very popular in international markets.

Some financial support policies to enhance export capacity for Vietnamese small and medium enterprises - 2

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