The Role of the State in Providing Services to Support the Development of SMEs

volunteer to serve as partners of the Small Business Administration to assist in the performance of its duties. The Council's recommendations are purely advisory in nature and its members are required to communicate them directly to officials of the Small Business Administration. The Japan SME Policy Council is composed of representatives of business associations (the Japan Chamber of Commerce and Industry, the National Federation of Small Business Associations, local branches of the Chamber of Commerce and Industry, and other business associations); government support organizations (the Japan Small Business Finance Corporation, the Small Business Guarantee Corporation, the Japan Small Business Support Corporation); university professors, and business owners.

1.4.4.2. About the system of implementing support for SMEs

In developed countries, governments have generally avoided the establishment of large-scale public institutions to support SMEs. Most government support is provided through private organizations, business associations, consulting organizations, universities or research institutes. The role of the government is often focused on providing resources and promoting the activities of support organizations rather than being the direct implementer or provider of SME support services. In contrast, in some developing countries such as India, the government has established several large-scale, specialized organizations to directly implement SME support programs.

In the 70s and 80s, international organizations such as UNDP, UNIDO, ILO supported developing countries such as Egypt, Sri Lanka, Singapore, Thailand, etc. to pursue the “Indian model” as presented above in building state agencies focused on developing and implementing large-scale SME support programs nationwide. However, the effectiveness of this model did not achieve the desired results in terms of: impact, reach to businesses and effectiveness of support programs. Based on the above analysis, many opinions believe that state agencies should abandon the function of providing direct services, focusing mainly on the tasks of promoting, supporting, monitoring and managing the quality of services. However, opinions on the method of supporting businesses among state agencies are also very different.

The failures of the old approach led many governments in the late 20th century to conclude that an effective support system could not be achieved by the efforts of state-owned organizations alone. An effective support system requires close cooperation of resources from all organizations, not only from the private sector, business associations, industrial chambers of commerce; technical centers, universities, research institutes and even the efforts of large enterprises. This approach is seen in most developed countries (UK, USA, Germany ...) and is now also popular and successful in many Asian countries such as Korea, Japan, Taiwan ... Obviously, this approach supports more SMEs, with more abundant resources. At the same time, support activities are implemented on a market basis (not subsidy) and therefore, support will be more sustainable. In many countries, the state only plays the role of "midwife" with initial investment activities (incubator models, establishment of centers, funds) and then gradually transfers them to the private sector. Experience shows that experts and staff of private organizations often have a lot of business experience and are often capable of providing practical and effective support to SMEs. Transferring some support services to private organizations is the basis for dividing responsibilities and effective cooperation between the private sector and the government in jointly supporting small businesses. The gradual transfer of the function of implementing support for SMEs to the private sector helps to limit the bureaucracy of a state organization, while reducing the burden on local authorities and increasing the effectiveness of support in terms of costs and results. A typical example of this approach is the public-private partnership model in Germany (PPP – public private partnership) [42. p.21], in which the state only invests in infrastructure for support facilities and does not participate in management. The management and operation of those SME support facilities are carried out by representative organizations of the private sector.

1.4.4.3. The role of the State in providing services to support the development of SMEs

In developing or transition countries, there is still a tendency for the state (both central and local) to make efforts to create a number of service providers for enterprises – that is, state-owned establishments that provide services to enterprises. These establishments mostly operate under a subsidized mechanism, run by public companies.

State management and operation. Operating financial resources are often taken from the state budget or funding from foreign donors. There is a view that these facilities can hardly operate effectively for various reasons. In many countries, the model of state service centers to serve SMEs after a number of years of operation has been dissolved due to their inability to survive on their own or privatized in the hope of operating more effectively. In some developing countries, there is a view that the state needs to play an active role in the early stages of development. In supporting SMEs, this implies that the state must create its own support service facilities to support local businesses to enhance their competitiveness, helping businesses survive and develop in a context of regionalization and globalization that is increasingly becoming a common development trend. This view seems to ignore all calculations about the effectiveness of business support, and what those who follow this view often pursue is national prestige in the international market: people try to support businesses so that they can produce and manufacture products that have “value” from the government’s point of view, regardless of pure economic efficiency. When those products are successfully produced, meaning that the industry has a foothold in the domestic market, then people begin to support them to expand to regional and world markets. An objective factor supporting this view is the underdevelopment of private service providers in developing countries. Many opinions say that business development services are difficult work, requiring high qualifications. Meanwhile, in a developing economy, such high qualifications are very limited. That is, the supply side of the market for these services is very limited. That is why it is believed that the state needs to create service providers to serve businesses.

In contrast to the deep interventionist view of developing country governments, most market economists believe that in intervening in the business development service market, the state (government) should only play the role of a facilitator. That is, the government should only stop at building capacity for private suppliers instead of establishing state-owned supply organizations with bureaucrats and non-market-based operations of those organizations.

CONCLUSION OF CHAPTER 1

The evolution of theoretical schools on the role of the State in the market economy has been continuous for more than two centuries. Lessons from the past have helped economists today affirm that a modern market economy must be a mixed economy, in which the self-regulating mechanism of the market and the active regulation of the State are two factors that need to be maintained and strengthened at reasonable levels in the practical conditions of each economy.

Despite its important roles in the socio-economic development of each country, such as creating many jobs; contributing to the transformation of the economic structure towards dynamism and efficiency; contributing significantly to economic growth; contributing to the improvement of the market economy institution, the SME sector always faces serious difficulties and limitations such as lack of capital; weak management skills, unskilled labor force; outdated technology; the ability to access markets and business connections often encounter many difficulties... In order for SMEs to best promote their contributions to the economy and effectively participate in solving social problems, the experience of other countries has shown that the State needs to have appropriate intervention to support the development of this important business sector through (i) Developing a favorable business environment for enterprises; (ii) Performing well the function of structural adjustment, creating many business opportunities and investment motivation for SMEs; (iii) Implement programs to support SMEs to overcome internal difficulties to develop and (iv) Build a system of organizations and agencies to support SMEs suitable to the conditions of each country.

CHAPTER 2

CURRENT STATE OF THE ROLE OF THE STATE IN DEVELOPING SMALL AND MEDIUM ENTERPRISES IN VIETNAM

2.1. CURRENT STATE OF SMALL AND MEDIUM ENTERPRISE DEVELOPMENT IN VIETNAM

2.1.1. Development process of Vietnam's SME sector

2.1.1.1. SME sector before innovation

In the highly centralized planned economy of our country before 1989, in terms of capital scale, most enterprises existed on a small scale, but in terms of labor, most were considered large-scale enterprises. All legal regulations, policy mechanisms, and economic structures were built with the aim of pursuing a state-planned economy in the direction of industrialization focusing on large-scale production. Therefore, economic policies at that time all hindered the emergence and development of small and medium-sized private enterprises. At that time, only one type of SME was recognized by law, which was cooperatives. Non-state-owned businesses had very few opportunities to develop, not only because of the laws and policies of the state, but also because the popular perception of society was a huge barrier to this economic sector.

In terms of labor division, the human resource training policy mainly oriented towards providing human resources for state administrative agencies and large-scale state-owned enterprises is also an important reason limiting the birth and development of SMEs. The vast majority of excellent students strive to work in state agencies without any desire to build their own business or work for a private enterprise.

In terms of social attitudes, in the eyes of government officials as well as the people, small business people are always considered a backward group of people with a tendency to be private traders, that is, a type of harmful object to society that needs to be eliminated.

2.1.1.2. Current status of SMEs from after renovation to 2000

Based on a more correct and complete understanding of socialism and the path to socialism in Vietnam, the 6th Party Congress in December 1986 set out a comprehensive national renovation policy to more effectively carry out the construction of socialism. The Congress put forward new concepts on the path and methods of building socialism in the transitional period, on the economic structure, acknowledged the objective existence of commodity production and the market, strongly criticized the centralized, bureaucratic, subsidized mechanism and affirmed a complete shift to business accounting. The Party Congress advocated the development of a multi-sector economy with appropriate business forms; attaching importance to combining individual, collective and social interests. The 6th Central Conference of the 6th Session in March 1989 took this a step further, putting forward the viewpoint of developing a planned commodity economy with many components moving towards socialism, considering the multi-component economic policy as an issue of long-term strategic significance, with the law of moving from small-scale production to socialism.

In 1987, the first Law on Foreign Investment in Vietnam was issued, followed by a series of legal documents directly regulating the business activities of enterprises such as: Law on Companies, Law on Private Enterprises 1990,... But the most important is the 1992 Constitution, this is the constitution that marks the period of strong and comprehensive innovation of our country. With the affirmation: "The State develops a multi-sector commodity economy, following the market mechanism, with State management, following the socialist orientation... promoting all potentials of economic sectors: national economy, individual economy, State capitalist economy, private economy... citizens have the right to freely do business according to the law..." [24], the 1992 Constitution laid the basis and legal foundation for the birth of the current business law system. One of the core contents of the legal system on enterprises in the renovation period is business liberalization. In addition to the birth of the Law on Enterprises (1990), the Law on Private Enterprises (1990), the Law on Domestic Investment Promotion (1994), the sub-law documents regulating and guiding the implementation of the fields of tax, finance, credit, land, labor, training, etc. were issued together, creating a favorable environment for economic organizations to invest in business. Along with the "unleashing" of the private economic sector, the more open and transparent legal system

on enterprises has contributed to a strong growth in the number of private enterprises, the vast majority of which are SMEs. From an economy with two main entities, state-owned enterprises and cooperatives, a business sector previously mainly contributed by about 12,000 state-owned enterprises, after more than a decade has become a diverse business community, existing under many different legal forms. By the end of 1999, in addition to 3,700 state-owned enterprises, over 4,200 enterprises with foreign investment capital, there was also a growing non-state business community with about 35,000 enterprises including: cooperatives, private enterprises, limited liability companies, partnerships and joint stock companies with a diverse mix of private, state, foreign and collective ownership forms ( Table 2.1 ).

Table 2.1: Number of SMEs by ownership form as of December 31, 1999

Total	Large enterprise	SMEs	% of SMEs in total DN
State-owned enterprise	5759	3,263	2,496	43.3
Non-state enterprise	35004	1,571	33,433	95.5
Enterprises with foreign investment capital	1525	1,149	376	24.6%

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• Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015 zt2i3t4l5ee zt2a3gsnon-credit services, joint stock commercial bank zt2a3ge zc2o3n4t5e6n7ts At that time, the Branch had to set aside a provision for credit risks, which reduced the Branch's income. Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015 Unit: Billion VND 140 120 100 80 60 40 20 0 63.3 80.34 89.29 110.08 131.99 2011 2012 2013 2014 2015 Profit before tax (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) However, through chart 2.2, it can be seen that BIDV Tien Giang's profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project "Restructuring the system of credit institutions in the period 2011-2015" approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: "Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services". 2.2. Current status of non-credit service development at BIDV Tien Giang. 2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times. Along with the development of the Head Office, BIDV Tien Giang's products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,... 2.2.1.1. Payment services: In accordance with the Prime Minister's Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers' cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc. Chart 2.3. Net income from payment services in the period 2011-2015 Unit: Million VND 6000 5000 4000 3000 2000 1000 0 3922 4065 4720 5084 5324 2011 2012 2013 2014 2015 Net income from payment services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment. 2.2.1.2. Treasury services: BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giang's treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17]. Chart 2.4. Net income from treasury services in the period 2011-2015 Unit: Million VND 350 300 250 200 150 100 50 0 105 122 309 289 279 2011 2012 2013 2014 2015 Net income from treasury services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services. 2.2.1.3. Guarantee and trade finance services: BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance. Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015 Unit: Million VND 14000 12000 10000 8000 6000 4000 2000 0 5193 5695 2742 3420 8889 3992 11604 12206 5143 5312 2011 2012 2013 2014 2015 Net income from guarantee services Net income from Trade Finance (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Through chart 2.5, we can see that BIDV Tien Giang's income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giang's corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area. are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future. 2.2.1.4. Card and POS services: As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services. In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system. Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments. Chart 2.6. Net income from card services in the period 2011-2015 Unit: Million VND 3500 3000 2500 2000 1500 1000 500 0 687 1023 1547 2267 3104 2011 2012 2013 2014 2015 Net income from card services (Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24]) Through chart 2.6, it can be seen that BIDV Tien Giang's card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25]. Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area. Unit: Machine STT Bank name Number of ATMs Cumulative number of ATM cards POS machine 1 BIDV Tien Giang 23 97,095 22 2 BIDV My Tho 7 21,325 0 3 Agribank Tien Giang 29 115,743 77 4 Vietinbank Tien Giang 16 100,052 54 5 Dong A Tien Giang 26 97,536 11 6 Sacombank Tien Giang 24 88,513 27 7 Vietcombank Tien Giang 15 61,607 96 8 Vietinbank - Tay Tien Giang Branch 6 46,042 38 (Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21]) Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6). div.maincontent .content_head3 { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: bold; text-decoration: none; font-size: 14pt; } div.maincontent .p { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; margin:0pt; } div.maincontent p { color: black; font-family:"Times New Roman", serif; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; margin:0pt; } div.maincontent .s1 { color: black; font-family:"Courier New", monospace; font-style: normal; font-weight: normal; text-decoration: none; font-size: 14pt; } div.maincontent .s2 { color: black; font-family:"Times New Roman", serif; font-style: italic; font-weight: normal; 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• Current Status of State Mechanisms and Policies for Business Development Services
• The role of the state in Vietnam's international economic integration - 3
• Impact of promotional forms on the business activities of Mobifone mobile telecommunications services of VNPT Posts and Telecommunications Group - 17
• Some Factors Affecting the Quality of Short-Term Loan Services for Business Customers of Commercial Banks

Source: General Statistics Office, [27].

It can be said that in the 90s of the last century, the SME sector was formed and had its first steps of development. Although the State did not have specific policies and support measures for this business sector, the SME sector has benefited from the policy of opening the economy and policies to encourage the development of a multi-sector economy of the Party and the State.

2.1.1.3. Development process of the SME sector from 2000 to present

The biggest change in the SME sector since 2000 has been the significant and stable increase in the number of newly registered SMEs in Vietnam. From 2001 to the end of 2010, the country had nearly 510 thousand newly established enterprises, of which 98% were SMEs with a registered capital of 1,533 trillion VND [10]. In 2001, on average, 964 people had one established enterprise, but by 2010, it was estimated that every 176 people had one registered enterprise. However, compared to the socio-economic development goals and the goals of the economies

APEC economies strive to achieve 1 enterprise per 20 people, and compared to other countries in the region, this rate is still very low.

Table 2.2: Some average indicators of Vietnamese enterprises

(as of year end)

Year

2001	2002	2003	2004	2005	2006	2007	2008
1. Enterprises of all sectors
Average number of employees	76	74	72	63	55	51	47	40
Average capital (billion VND)	24	23	24	24	24	26	31	31
Net revenue/1 labor (million VND)	238	260	281	303	356	409	483	651
Return on capital (%)	3.8	4.3	4.5	4.9	4.4	4.9	4.7	3.3
Return on Sales (%)	5.0	5.1	5.4	6.0	5.2	6.1	6.2	4.0
2. State-owned enterprises
Average number of employees	395	421	467	490	499	513	505	497
Average capital (billion VND)	153	167	210	265	354	475	616	768
Net revenue/1 labor (million VND)	228	275	300	323	421	525	640	825
Return on capital (%)	2.5	2.9	2.8	3.2	3.2	3.5	3.6	2.8
Return on Sales (%)	4.2	4.2	4.2	5.3	5.4	6.2	6.8	5.1
3. Non-state enterprises
Average number of employees	30	31	32	29	28	27	27	24
Average capital (billion VND)	4	4	5	6	7	8	12	14
Net revenue/1 labor (million VND)	206	214	237	260	289	339	427	634
Return on capital (%)	2.3	2.3	2.1	1.6	1.5	2.0	2.6	1.3
Return on Sales (%)	1.3	1.5	1.5	1.3	1.2	1.7	2.8	1.2
4. Foreign invested enterprises
Average number of employees	243	299	326	331	330	343	340	325
Average capital (billion VND)	133	134	140	142	143	155	172	193
Net revenue/1 labor (million VND)	368	327	341	365	411	420	450	543
Return on capital (%)	8.7	10.0	11.6	13.0	11.3	13.2	11.7	10
Return on Sales (%)	13.0	13.6	14.6	15.4	11.8	14.2	13	11

Source : General Statistics Office, [28].

According to the survey data on the business situation in 2005-2007 of the General Statistics Office, the non-state enterprise sector (excluding business households), mainly small and medium enterprises, is still the fastest growing sector, with labor accounting for 50.13%, capital accounting for 28.92%, revenue accounting for 22.07%, and profit accounting for 10.6%.