Small and medium business speaks up in Vietnam

New social forces emerging from market reforms are penetrating the formal agenda of Vietnam’s one-party regime. In particular, beyond the corporatist state structure, private entrepreneurs have engaged more actively in organised business groups, and these groups are helping to voice the concerns of these entrepreneurs. The policy environment is more open, though still technocratic as entrenched alliances persist between the state and state enterprises. New governance practices have emerged within the state — enhancing the way policies are deliberated and implemented.

The private sector, mostly small and medium enterprises (SMEs), has developed under the Enterprise Law. Enacted in 2000, it is considered a policy milestone of Vietnam’s modernisation agenda. These enterprises have contributed almost 40 per cent to national GDP and become vital to creating jobs, addressing poverty and diversifying the economy. They are the most dynamic and vulnerable within the private sector when the Vietnamese economy is trailing on a rocky road.

So, the Vietnamese government has introduced a range of legislation to shore up the private sector’s economic success — growing from a surge in foreign funds, technical assistance and investment. Decree 56/2009/ND-CP, on supporting the development of SMEs, defined the status of SMEs for the first time. It outlined and relegated support programs to a range of state and non-state agencies.

There are political connections among emerging private businesses at the local level — though less so in foreign companies — and the issue at stake is the nature of interactive mechanisms between the state and private business, either formally through institutional means or informally through personalised networks. Business associations now act as intermediaries. They represent small and medium business beyond the state corporatist structures in Vietnam. Such representation reinforces a new dialogue between the state and non-state business sector.

The Vietnam Association of Small and Medium Enterprises (VINASME) was founded in 2005 on a voluntary basis to represent SMEs nationwide. It is linked to the Ministry of Planning and Investment but business members elect the officials who direct it — they are not sanctioned by state institutions. The main functions of VINASME are to encourage business members’ mutual support and communicate their opinions to the state departments, while keeping members informed of government policies, and participating in policy consultations in support of SMEs.

The association frequently organises joint conferences, forums and dialogues with participation from state and business representatives and foreign counterparts. Common issues being discussed include access to loans and credit, customs and taxation, the need for human resource training and the responsiveness of government policies in supporting business. VINASME has also formulated new programs in technological innovation and actively encouraged coordination within the SMEs sectors to boost economic and social sustainability.

Institutional openness extended to associations from outside corporatist structures is giving way to constructive policy debates that potentially enhances their deliberative influence. VINASME drafted 11 documents, between March 2012 and April 2013, evaluating and proposing changes to decisions and policy drafts of relegated national ministries — responding to ministerial calls for policy evaluations. VINASME has also developed contractual partnerships with financial institutions and external organisations in order to boost its efficiency and reputation.

This follows the Ministry of Trade and Industry, in liaison with VINASME, implementing the Operational Cooperative Program to facilitate the support of SMEs in 2008. In 2011, a program of inter-sectoral legal assistance, joined by business associations, the Ministry of Justice and local ministerial agencies, came into place to enhance business competitiveness and help resolve legal disputes.

It is worth stressing that VINASME’s recognition of SMEs as its core beneficiaries — which could hardly be seen in state corporatist organisations — signals an important step to push these sectoral interests onto the formal agenda and channel resources into assisting their business activities. Still, business associations account to both business members and the government. This is more in attempts to address functional issues related to governing than in the creation of new mechanisms for democratic voices from the private sector.

In other words, their representation is one that improves the existing pattern of decision making — without bolstering the level of participation in the deliberation and implementation process. For example, following VINASME’s suggestions to revise the governmental scheme for a SMEs credit guarantee fund in 2013, amendments were made to provide clearer designation of the rights and responsibilities of SMEs as the guaranteed, and the fund managers as the guarantors. Yet a vital proposal to list VINASME as one of the key stakeholders responsible for policy execution and progress was not included in the latest decision.

Though claiming to be autonomous, embedding new intermediary channels in the state apparatus is essential in practice. Still, these channels have allowed for more state–business interaction that belongs to a new space of governance in Vietnam, as the state is adapting to and incorporating private interests.

Tu Phuong Nguyen is a Research Scholar at the Indo-Pacific Governance Research Centre, University of Adelaide.