SMEs hold their nerve

Confidence is down among Vietnam’s SMEs but still high by world standards

HSBC’s biannual global Small Business Confidence Monitor, released last week, reveals that 48 per cent of small and medium-sized enterprises (SMEs) are concerned about dealing in foreign currencies and 49 per cent are worried about a lack of available financing.

The SMEs surveyed also said they needed more information on business expansion, including details on foreign exchange risk and regulations (around 48 per cent of those surveyed) as well as financing options and associated tax implications.

Foreign exchange issues have been a headache for SMEs in Vietnam since these rates became unpredictable in 2010.

These concerns contributed to an eight point drop in the Vietnamese SMEs confidence index. This comes in the wake of two years of growing confidence following the global economic crisis.

The confidence index remains positive at 156, the second highest in the world and well above the global average of 125. This is in line with the economic outlook of all SMEs in Vietnam with the survey showing that 60 per cent believing that the economy will continue to grow over the next six months.

The complexity of international market issues including tax, foreign currency controls, local regulations and legal complexities are further concerns for local SMEs.

A lack of knowledge on taxation and regulations, and a lack of contacts and experience of overseas markets are also worrying these businesses.

In terms of general business, SMEs in Vietnam name inflation (62 per cent of surveyed enterprises), economic conditions (52 per cent) and difficulties in credit access (48 per cent) as their three top concerns. This is also in line with the latest result from the HSBC Emerging Market Index survey, which highlights government policy measures such as monetary policy and stimulus packages as a key role in local economic growth, with 53 per cent of local SMEs believing that these have helped their business significantly.

And a total of 28 per cent of the enterprises surveyed believe that increasing demand from the domestic market would boost economic growth.

“The results of the latest HSBC Global Small Business survey continue to reflect the shift in economic growth from developed markets to emerging markets. Vietnam’s small businesses will benefit from this movement,” said Huynh Buu Quang, head of Commercial Banking, HSBC Bank (Vietnam). 

“I’m glad to see the strong intention to expand business internationally to capture new opportunities but they [SMEs] will also need support to prepare carefully for the expansion, from financing resources to knowledge of international markets, foreign exchange risk and regulations,” Quang added.

Over half of Vietnam’s SMEs have plans to either expand (42 per cent of surveyed enterprises) or continue their existing international activities (9 per cent).

Some 18 per cent of others have plans to go international, while the rest - almost one third at 31 per cent - do not.

When asked about the intention to do business internationally in the next two years, 82 per cent of the international companies surveyed believed that they would expand their business, which is double the global figure.

Some 37 per cent of domestic enterprises have plans to do business internationally.