SMEs grapple high inflation, global credit crisis

Hanoi (VNA) - A new programme aims to improve management of small and
medium-sized enterprises (SMEs) across Vietnam.

Launched by the Association of Vietnam's Small and Medium Sized Enterprises,
the programme aims to help SMEs during a time of high inflation when these
enterprises face increasing challenges to remain viable.

The country now has more than 300,000 enterprises, with SMEs accounting for
97 percent. Among these SMEs, enterprises that have capital of less than 1
billion VND (60,600 USD) account for 42 percent, while enterprises that have
capital of more than 10 billion VND (606,600 USD) only account for 13
percent.

Dinh Thi My Loan, former head of the Department of Competitiveness
Management under the Ministry of Industry and Trade, said SMEs with capital
of less than 1 billion VND faced the risk of going bankrupt during the
current high inflation.

Loan said management of Vietnamese SMEs now faced two main challenges:
regulation and strategy. Regulatory efforts have focused on State
enterprises, while developing sound business strategies for SMEs was
difficult as competition from large enterprises was tough to overcome,
especially as some large enterprises had market monopolies. As the domestic
market opened, both foreign enterprises and large domestic enterprises would
affect the viability of many SMEs, said Loan.

Economist Le Dang Doanh, former head of the Central Institute for Economic
Management, said all enterprises faced big challenges due to high inflation
and the international financial crisis.

Fiscal upheaval throughout the global economy would impact Vietnam 's
exports, especially to the US market, which is Vietnam 's largest
market, said Doanh.

However, enterprises may feel a little optimistic as the US financial
crisis also limits American buyers' consumption demands, particularly for
luxury items. This means more US consumers many buy more
competitively-priced products from Vietnam . Enterprises have been urged
to re-analyse their business models and product ranges, re-balance their
spending and try to limit risks by shortening the time it takes for returns
on invested capital.

Business management administration capability could be raised by changes in
management styles as well as improvements to access market information, said
Doanh.

Nguyen Manh Quan, director of the Centre for Enterprise Development and
Consultancy, said SMEs should limit their work to only some stages of
production and distribution of commodities, because of their limited scale,
capital and markets.

Advising Vietnamese enterprises on ways to cope with inflation, Dinh Thi My
Loan said enterprises should make full use of their potentials and company
leaders - while enterprise administrators should endeavour to shift business
strategies from "defence to attack".

In addition, Loan said enterprises should work on forecasting the impacts of
high inflation on all business activities, especially for SMEs.

Loan said the Government should establish a working group that could rapidly
react to help enterprises solve problems caused by inflation. The Government
should also exempt or reduce import tax and enterprise income tax for some
products and industries that faced many difficulties, she said.-Enditem