Reading 1: Framework Conditions for Small Enterprise Development in Vietnam
This study is based on the available literature as well as on discussions with local experts and afields survey on small enterprises conducted by the authors in December 94. The surveycomprised 86 small-scale enterprises in Hanoi and Ho Chi Minh City. Two branches werecovered, the one was woodworking (furniture making, doors, stairs, etc…the other was metalbuilding (bars, window and door frames, etc.). This average number of workers – including theowner as well as family-workers - in the firms interviewed was 11.3. Enterpreneurs wereinterviewed according to a standardized questionnaire. Selection of enterprises took place atrandom by the two interview teams, each consisting of one Vietnamese and one German. Theimpression of the authors was that entrepreneurs answered frankly and without hesitation to thequestions. Due to sample size and method, the survey is not representative, but gives a valuableinsight especially into urban, manufacturing small-scale enterprises. It will assess frameworkconditions of small business in Vietnam, identify most significant problem areas of the sector andgive recommendations for possible improvements.The study starts with a short review on Vietnamese economic policies and an introduction on therole of small-scale enterprises in the country. The major chapter of the study deals with possibleexternal constraints for small enterprises. Areas covered by respective sections are: financing,registration and public administration, taxation, business infrastructure, foreign trade, businesslinkages with public sector, public promotion, and assistance, and interest representation. Thestudy will conclude with some recommendations regarding policy measures and activities for animprovement of small business development in Vietnam.
Short Review on Vietnamese Economic Policies
With a per capital income of around US $ 200 Vietnam is one of the poorest countries of theworld. It is populated with 70 million people, mainly engaged in agriculture, which contributes onethird of GDP and accounts for two thirds of employment. Population is concentrated in the Red-river delta in the North with the capital Hanoi and in the Mekong delta in the South with thecountry’s biggest city and commercial center Ho Chi Minh City. Despite of the country’s lowincome, most social indicators like infant mortality, life expectancy and literacy rate are quitegood. Large regional imbalance exits with regard to basic industrial endowments. Compared tothe North, the South has a bigger capital stock in manufacturing, larger entrepreneurial tradition,better infrastructure and easier access to capital from overseas Vietnamese.From the mid-nineteenth’s century on, Vietnam was under French rule. Following the war againstFrance, the country was divided into two parts in 1954. While the South adopted a capitalisteconomic policy highly influenced by the US Americans. The Democratic Republic of Vietnam inthe North adopted a development strategy following the Soviet model. A central planning systemwas introduced including a promotion of heavy industry and collectivization of all economicsectors. Following reunification in 1976, the South economy was integrated with the economicsystem of the North. Vietnam was largely isolated from the Western world, with the Eastern bloccountries as major trading partners and sources of financial and other assistance.Due to unsatisfying results of economic growth, the 6
Party Congress introduced a major changeof Vietnamese economic policy in 1986. The reform measures, known under the name “doi moi”,striver for a more market-oriented development strategy and the establishment of a “multi-sector economy”. Measures started with a return to a family farming based on long-term leases.Agricultural production reacted with a strong increase in output and Vietnam, which was a riceimporter before, became one of the largest rice exporting nations. Further important reformmeasures included a price reform removing virtually all price controls, a devaluation and