New law to give wings to SMEs

October 19, 2016 | 13:00

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Small and medium-sized enterprises (SMEs) will receive numerous essential support policies relating to tax, accessing bank credit and funds, human resources and training, and administrative reforms, among others, to help them develop.

These policies form the backbone of the draft Law on Supporting Small and Medium-Sized Enterprises, which was discussed at the conference themed “The Draft Law on Supporting Small and Medium-Sized Enterprises,” organised by the Ministry of Planning and Investment (MPI) and the US Agency for International Development (USAID) in Hanoi today.

According to the contents of the draft legislation, state agencies will have to carry out administrative reforms to reduce time and costs to complete procedure for SMEs. They are also prohibited from issuing business conditions which are disadvantageous or detrimental to SMEs.

To facilitate access to capital, commercial banks will be directed to create favourable conditions for SMEs via providing loans at interest and terms suitable to the size and need of SMEs, with simple procedures. In addition, the government and donors will build SME development funds to support SMEs in terms of capital in general, especially innovative business start-ups, as well as build a system of local funds to act as credit guarantor for SMEs.

Regarding tax incentives, SMEs and micro-enterprises will receive much-needed cuts, by 3 and 5 per cent, respectively, from the current 20 per cent, respectively. In addition, provincial people’s committees will use their own funds to pay part of the interest on loans taken out by SMEs and micro-enterprises and provide other means of financial support for SMEs depending on their budget conditions.

In addition, SMEs will either be exempted or see a reduction in land lease fees as well as receive other incentives when they build manufacturing facilities in industrial zones.

These support policies in the draft law received general agreement as well as further suggestions from experts and associations.

Nguyen Mai - Chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE)

In my opinion, the draft law has met the basic demands of SMEs, however, the government should focus on supporting small and micro-sized enterprises because they have weak financial capacity.

In addition, the lawmakers should add specific tax policies and credit incentives for small and micro-sized enterprises. In reality, it is difficult for these enterprises to access capital from banks or funds because they do not have much land to mortgage. It would be desirable for the government to loosen mortgage conditions for such enterprises.

Furthermore, lawmakers should build particular tax incentives for small and micro-sized enterprises. Accordingly, these enterprises should enjoy lower corporate income and value added tax rates, compare to medium and large-sized enterprises.

Finally, the government should deal more fairly with large-scale foreign and small and micro-sized domestic enterprises. Notably, while large-scale foreign enterprises receive numerous incentives when they invest in Vietnam, domestic enterprises, especially small and micro-sized enterprises, receive few incentives to develop. Supplying incentives for large-scale foreign enterprises to promote socioeconomic development matches state policy, however, small and micro-sized enterprises could become a major power contributing to the country’s development if they also received similar support.

Ho Sy Hung - Director of the Department of Business Development under the MPI

If the law is approved, it will contribute to reaching the target of one million Vietnamese enterprises by 2020.

In addition, the law will create opportunities for large-scale enterprises, as well as international and domestic organisations to establish funds and provide financial support for SMEs. We determined that the lion’s share of financial power supporting SMEs will come from large-scale enterprises as well as international and domestic organisations, while the state’s budget will be relegated to a sub-role.

Once approved, the Law on Supporting Small and Medium-Sized Enterprises will be the first official piece of legislation taking a comprehensive approach to SMEs. It is part of the government’s efforts to promote business development and double the number of firms to one million by 2020.

The Ministry of Planning and Investment will submit the draft legislation to the government to be discussed at the second meeting of the 14th National Assembly.

SMEs account for 97 per cent of businesses in Vietnam, contributing more than 40 per cent to the gross domestic product (GDP) and generate 52 per cent of all jobs.

By By Kim Oanh

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