On September 24, the US Agency for International Development (USAID) launched the “Linkages for Small and Medium Enterprises” (USAID LinkSME) project, aiming to promote local SMEs’ reform and capacity to participate in manufacturing supply chains.

Overview of the launching ceremony

“While the FDI in Vietnam has reached historic levels, the spillover benefits to Vietnam’s domestic economy have been dampened by the limited supply chain linkages of SMEs,” said Ron Ashkin, director of the project at the launching ceremony.

Ashkin said the project aims to address this gap by strengthening the capabilities of the intermediary organizations in Vietnam, such as business associations, export development centers, and SME promotion agencies, in order to facilitate the supplier – buyer relationship between Vietnamese SMEs and lead firms located in Vietnam. It also targets expanding Vietnamese SMEs’ capacity to participate in manufacturing supply chains.

“USAID LinkSME will enhance the business enabling environment by institutionalizing key reforms and strengthening the legal and regulatory framework for SME growth across the nation,” added Ashkin.

According to Ashkin, Vietnam’s SMEs account for 98% of total enterprises, 63% of employment and 45% of the GDP. However, there are only 1,800 SMEs in supporting industries across all sectors.

Ashkin estimated the current growth potential for Vietnam through strengthening supply chains at US$58 billion, so the key issue would be whether Vietnamese SMEs could “grasp this opportunity”.

In 2018, the FDI to Vietnam reached US$35 billion, up 69% year-on-year through June 2019. Additionally, the FDI sector is dominating Vietnam’s exports, making up 70% of its turnover, Ashkin said, adding they tend to co-locate with their foreign suppliers.
 
Mai Tien Dung, minister and chairman of the Government Office, added with the strong foundation from the LinkSME project, Vietnam would continue to pursuing the reform process.

“The government is committed to ensuring the success of the project, helping the development of SMEs and improving efficiency in administrative reform,” Dung added.

Dung said the government has taken drastic measures to smooth the business environment and establish e-government model for greater transparency, while considering the people and enterprises the main beneficiaries.

Vietnam’s final chance for prosperity

Minister of Planning and Investment Nguyen Chi Dung stressed the importance of the project, especially with enterprises being Vietnam’s main driving force for growth.
 
“The country is at a historical turning point, as the development strategy in the 2011 – 2020 is coming to an end,” Dung said.

“As Vietnam takes a leap to a new era, this is the final chance for the country to realize its goal of industrialization and modernization,” Dung stressed.  

Dung said if Vietnam could not take the advantage of the demographic dividend, Vietnam would face huge challenges from a population which is expected to start getting old in 2030 – 2035.

Dung pointed to some challenges to the country’s SMEs, including limited capital accumulation and technologies, small scale, and inefficient corporate governance.

More importantly, Vietnam’s enterprises, and SMEs in particularly, have weak linkages among each other, and also with the FDI sector.

“The lack of connectivity among different business groups in an economy would lead to inefficient mobilization of resources, causing negative impact on the goal of sustainable development.”
 
Sharing Vietnamese government’s desire for prosperity, US Ambassador to Vietnam Daniel Kritenbrink said the US goal is to support a “strong and independent Vietnam.”

“We are honored to be Vietnam’s partner in development and determined to invest in the country’s success,” Kritenbrink added.

Kritenbrink considered the business community a backbone of Vietnam’s growth, and the LinkSME project would help local enterprises connect with global economy.

“Strengthening the linkages of SME enhances Vietnam’s journey to self-reliance and a inclusive market-driven-”private sector-led growth.”

“I strongly believe the Vietnamese economy will prosper and equally is the Vietnam – US comprehensive partnership,” Kritenbrink concluded.