Challenges ahead for SMEs to avoid being left behind

09:53 | 30/03/2020 Society

(VEN) - Vietnamese small and medium-sized enterprises (SMEs) need to strengthen connectivity between domestic and foreign-invested enterprises, improve high quality workforce training and expand cooperation opportunities in order to avoid being left out of global supply chains.

challenges ahead for smes to avoid being left behind
Many mechanical engineering enterprises have innovated technologies and found foreign partners in order to join supply chains

Human resources limitations

Le Manh Hung, Director General of the Enterprise Development Agency under the Ministry of Planning and Investment, said currently, there are about 750,000 enterprises operating nationwide, of which the SMEs play a leading role, contributing about 42 percent of Vietnam’s gross domestic product (GDP) and creating more than 50 percent of the country’s jobs. However, they are facing many challenges, including limited capabilities, human resources and connectivity with global supply chains.

Few Vietnamese SMEs can serve as suppliers for companies with foreign direct investment (FDI) due to backward technologies, low capacity, lack of highly-skilled workers and of experience. Instead, FDI enterprises use foreign suppliers with which they are familiar.

Marva Corley-Coulibaly, Chief of the Globalization, Competitiveness and Labor Standards Unit of the International Labor Organization said participating in the global supply chain benefits labor markets of developing countries by creating more jobs, increasing wages, and reducing poverty. However, it poses many challenges including distribution of benefits, work conditions, long working hours, violations of occupational safety, and men-women salary gaps. To address this problem, developing countries need to adjust policies on wages, while ensuring adequate means of production to avoid being left out of the supply chain.

Japanese, American support

In 2008, the Vietnamese government proposed to the Japanese government a technical cooperation project to promote the implementation of the Law on Support for SMEs and the development of support industries. The project enables SMEs to improve their production and business capabilities, thereby strengthening links with Japanese enterprises and FDI enterprises in general and gradually engaging in regional and global value chains.

In addition, the Japan International Cooperation Agency (JICA) is implementing the Industrial Development and Human Resources Development Program. Its priority is to support improvement of technical and managerial capacity of supporting industry SMEs in the strategic sectors highlighted under Vietnam’s Industrialization Strategy. Ron Ashkin, Project Director on Linkages for SMEs in Vietnam (LinkSME) sponsored by the US Agency for International Development (USAID), said the 2018-2023 project aims to facilitate supplier-buyer relationships in order to expand Vietnamese SMEs’ capacity to participate in global supply chains.

Director of the Toan Thang Electrical Mechanical Engineering Company Le Anh Vu, who has been a supplier for FDI companies for many years, said Vietnamese businesses need to learn each customer’s specific requirements in terms of product quality, quantity, time, costs and service standards as well as procurement procedures of FDI companies.

Thanh Thanh