Technological renovation in Vietnam’s SMEs

1. Technological renovation in Vietnam’s SMEs Ms. Ngo Thi Loan Center for Regional Research and Development Ministry of Science and Technology of Vietnam Negombo- Sri lanka, 2008

2. These contents for presenting Brief outline of small and medium enterprises of Viet Nam Situation of technological renovation in some small and medium industrial enterprises in Viet Nam - Activities of technological renovation - Method of technological renovation - Factors making impact on enterprises’ technological renovation Some policies encouraging technological renovation in Vietnam small and medium enterprises

3. Brief outline of small and medium enterprises of Viet Nam The classification of SMEs in Vietnam: SMES include enterprises having capital less than VND 10 billions (equivalent to USD. 625, 000) and the number of permanent workers is less than 300 • The number of SMEs in Vietnam (on December 31, 2006 ) • According to labor-standard criteria, there are 127,593 SMES, accounted for 97,16% of the total number of Vietnam enterprises • According to enterprises’ capital size there are 114,341 SMES, accounted for 87,07% of the total number of Vietnam enterprises

4. Brief outline of small and medium enterprises of Viet Nam • The contribution of SMEs in Vietnam: • produce about 30% of GDP every year, • make contribution of about 7% to state budget every year • attracted about 77 % of labor force. In average, 700,000 jobs are created every year. • The activity fields of SMEs in Vietnam • In industrial and small-scale industrial areas: account for 17% of total enterprises, produce 31% of the total industrial output • In areas of trade and service: accounts for 55% of total enterprises. They make much more effect than those who do business in industrial area (a worker of trade-service enterprise makes a turnover 5 as much than industrial) • In rural areas: account for 14%, with the number of enterprises reaches 40,500, almost concentrating on 1631 handicraft villages

5. Situation of technological renovation in some small and medium industrial enterprises in Viet Nam • Activities of technological renovation : • Research for implementation: It is an activity that there is only a smallest number of enterprises to carry out among other activities of technological renovation. They carry out implementation research mainly for applicable purpose and for technological operation rather than for technological renovation • To improve existing production rules: To improve production rules (include: renovation of technology, of equipments, of production method, replace (change) raw materials, etc...) is an operation attracting a biggest portion of enterprises to carry out

6. Situation of technological renovation in some small and medium industrial enterprises in Viet Nam • Activities of technological renovation : • Innovate products, design and produce new products :This work is an objective requirement for enterprises, especially for enterprises producing consumer goods (such as cloth, garments, chemical cosmetics, paint, etc...) to diversify products thus to meet customers’ requirement according to the change of surroundings such as environment, weather, fashion, etc... It is the reason the enterprises often carry out this operation. • Apply new process of production: In some companies, the application of new rules of production is often made in the form of expansion of business production rather than renovation of technology.The application of new production process in the form of total replacement of existing equipments, machinery and technological line is rarely used as this requires a very big amount of investment.

7. Situation of technological renovation in some small and medium industrial enterprises in Viet Nam • Method of technological renovation • Enterprises themselves research & design • Cooperate with domestic scientific offices • Cooperate with overseas scientific offices • Reproduce, design after models (reverse engi- neering): mostly used • Buy technology from domestic source • Buy technology from overseas source: mostly used • Joint-venture, associate with domestic enterprises • Joint-venture, associate with foreign enterprises • Hire domestic consultant • Hire foreign consultant

8. Situation of technological renovation in some small and medium industrial enterprises in Viet Nam Factors making impact on enterprises’technological renovation. - factors active in promotion: the most effective factors are enterprises’ internal requirements such as to improve quality, to reduce cost price of goods; increase productivity; to heighten power of competition, etc... Factors relating to outside environment have less impact on promotion, and most of them have no decisive nature to the process of the enterprises’ technological renovation. • factors of main hindrance: shortage of capital, shortage of informatics/market information, shortage of qualified people. In the meanwhile, hindrance effect caused by other factors such law environment, risks in investment, delay in process of application for support in technological renovation is rather limited and has no decisive nature.

9. Some policies encouraging technological renovation in SMEs’s Vietnam - Tax: in the 6 kinds of favored taxes applicable to the science & technology operations, there are 5 kinds relating to investment in technological renovation in enterprises, which are: enterprises’ income tax, value-added tax, export tax, import tax, land tax.. - credit : the government has issued some favorable policies concerning to credit and interest rate supporting to activities of investment in technological renovation by enterprises and organizations of research for execution • Besides, the government has also issued decrees relating to protection of right of ownership of industry, of information and anti-unfair competition, etc.. to make base for market development of science & technology in enterprises.

10. Some policies encouraging technological renovation in SMEs’s Vietnam • Some related legal documents . • Decree 45/1998/ND-CP on technology transfer • Decree 63/CP regulating details of ownership of industry • Decision 1693/1999/QĐ-BKHCNMT on examination of contract of technology transfer • Decree 119/1999/NĐ-CP on encouraging enterprises’ investment in technological renovation • Decree 54/2000/ND-CP on protection of anti-unfair competition rights • Law on value-added tax • Law on enterprises’ income tax

11. General estimation In general the renovation of technology and equipments by small and medium enterprises in Viet Nam is just purchasing new machinery, equipments and learn to know necessary operations to operate them. Most of enterprises have no specialized study thus to master, improve and develop technology … The renovation of technology in companies are passively made, under market’s pressure. Manufacturers only look for modern technology when customers make orders, which need to use such one. Activity of equipments and technological renovation meets with many difficulties and unfavorable conditions such as: enterprises’ awareness of challenges in integration is insufficient, the knowledge of the managers and workers in the companies are low ; shortage of capital for technological renovation; the contents of state-administration of technology are not clear, management is overlapping and short of system method... This is the problem that the government is finding solutions to overcome, thus to promote and make the enterprises’ renovation of technology to become better.

12. Thank you !