Vietnamese small- and medium-sized enterprises (SMEs) faceincreasingly tough challenges because of their weak competitiveness andthe government's ineffective support policies, according to economistNguyen Tri Hieu.
SMEs in the near future would encounter fiercecompetition from foreign-invested businesses, Hieu was quoted as sayingin the Nguoi Lao Dong newspaper.
Vietnam's policies in the pastgave many preferential treatments to FDI enterprises, while theVietnamese private sector received fewer incentives.
"AlthoughFDI capital is important for socio-economic development, domesticenterprises still need support from the State," Hieu said.
FDI enterprises are given priority in tax, land and administrative procedures.
"Vietnamneeds to create more favourable policies and simplify administrativeprocedures for local enterprises to create a fair environment," Hieusaid.
The Mai Lan Joint-Stock Company's KissMe tissue and toilet paper brand, for example, has been making the product for 30 years.
PhamNhu Bach, Chairman and Director of the Mai Lan Co, said the KissMebrand was no longer sold at supermarkets because of severe competitionfrom FDI enterprises.
The paper brand is now distributed in smaller shops and through sales agents.
"Forthree to four years, we have just produced a moderate amount in orderto pay our workers, because the outlet for the brand has become toonarrow," Bach said.
Under Vietnam's World Trade Organisation(WTO) and Free Trade Agreement (FTA) commitments, the paper sector willbe protected for a few years. But the tax on the products would decreaseto zero percent after that time.
Bach said domestic enterprises would then be unable to compete with foreign rivals.
VuTien Loc, Chairman of the Vietnam Chamber of Commerce and Industry,said nearly 70 percent of Vietnamese private enterprises did not makeprofits, although the sector had contributed nearly 50 percent of GDP.
Theprivate sector must be a key driver for the country's economic growth,but the country lacks a sufficient number of medium-sized enterprisesthat can join the global value chain or directly engage with theinternational market, according to Loc.
Domestic businesses thatwant to increase competitiveness must have a large amount of capital torenovate their technologies, Vietnamese economists have said.
TruongChi Thien, Director of the Vinh Thanh Dat Co, said his company wantedto expand instant-egg exports but interest rates on bank loans were toohigh.
Though the poultry egg sector has great potential, he saidinterest rates of 10 percent per year were fixed for the first year of aloan and then fluctuated according to the market.
"When we setup a business plan, we have to calculate input costs, and we do not daretake a risk with the interest rate," he said.
Other countriessuch as Thailand, Indonesia and Malaysia offer interest rates of only 1percent per year for a medium- and long-term loans for local businesses.
Economists have also said that new FTAs would create highlyskilled workers who would move to FDI firms for higher salaries andbetter working environment.-VNA
SMEs in the near future would encounter fiercecompetition from foreign-invested businesses, Hieu was quoted as sayingin the Nguoi Lao Dong newspaper.
Vietnam's policies in the pastgave many preferential treatments to FDI enterprises, while theVietnamese private sector received fewer incentives.
"AlthoughFDI capital is important for socio-economic development, domesticenterprises still need support from the State," Hieu said.
FDI enterprises are given priority in tax, land and administrative procedures.
"Vietnamneeds to create more favourable policies and simplify administrativeprocedures for local enterprises to create a fair environment," Hieusaid.
The Mai Lan Joint-Stock Company's KissMe tissue and toilet paper brand, for example, has been making the product for 30 years.
PhamNhu Bach, Chairman and Director of the Mai Lan Co, said the KissMebrand was no longer sold at supermarkets because of severe competitionfrom FDI enterprises.
The paper brand is now distributed in smaller shops and through sales agents.
"Forthree to four years, we have just produced a moderate amount in orderto pay our workers, because the outlet for the brand has become toonarrow," Bach said.
Under Vietnam's World Trade Organisation(WTO) and Free Trade Agreement (FTA) commitments, the paper sector willbe protected for a few years. But the tax on the products would decreaseto zero percent after that time.
Bach said domestic enterprises would then be unable to compete with foreign rivals.
VuTien Loc, Chairman of the Vietnam Chamber of Commerce and Industry,said nearly 70 percent of Vietnamese private enterprises did not makeprofits, although the sector had contributed nearly 50 percent of GDP.
Theprivate sector must be a key driver for the country's economic growth,but the country lacks a sufficient number of medium-sized enterprisesthat can join the global value chain or directly engage with theinternational market, according to Loc.
Domestic businesses thatwant to increase competitiveness must have a large amount of capital torenovate their technologies, Vietnamese economists have said.
TruongChi Thien, Director of the Vinh Thanh Dat Co, said his company wantedto expand instant-egg exports but interest rates on bank loans were toohigh.
Though the poultry egg sector has great potential, he saidinterest rates of 10 percent per year were fixed for the first year of aloan and then fluctuated according to the market.
"When we setup a business plan, we have to calculate input costs, and we do not daretake a risk with the interest rate," he said.
Other countriessuch as Thailand, Indonesia and Malaysia offer interest rates of only 1percent per year for a medium- and long-term loans for local businesses.
Economists have also said that new FTAs would create highlyskilled workers who would move to FDI firms for higher salaries andbetter working environment.-VNA
