Nationwide, nearly 42,630 businesses have temporarily suspended operations.

CEL Consulting, a supply chain management and logistics consulting firm in Southeast Asia, has just released a study stating that Vietnam is one of the fastest growing countries in Asia, and is expected to continue to grow rapidly in the future. However, businesses must overcome the existing “barrier” of challenges.In the first 7 months of the year, nearly 42,630 businesses nationwide temporarily suspended operations.

Motorcycle production at KymCo Company. Photo: TH

According to CEL Consulting, by the end of 2015, Vietnam had more than 600,000 small and medium enterprises, contributing 40% of GDP. Although considered an important part of Vietnam's economic apparatus, these small and medium enterprises still have limitations in competitiveness when compared to multinational corporations. This makes it difficult for many Vietnamese enterprises to face pressure from foreign competitors, and is also a barrier limiting the ability to develop and the stature of enterprises in the long term.

According to Mr. Pieter Pennings, CEL Consulting expert, in charge of the Competitiveness Development Consulting Support Program for Small and Medium Enterprises in Vietnam, in the first 7 months of 2016, the whole country had nearly 42,630 enterprises temporarily suspending business operations and completing bankruptcy procedures out of a total of 64,000 newly established enterprises. Although in the past 7 months, 16,700 enterprises have returned to operation, but according to calculations, every day in Vietnam there are 200 enterprises temporarily suspending operations.

Faced with the above situation, what are the biggest difficulties of small and medium enterprises? Mr. Pieter Pennings said that the difficulties that Vietnamese enterprises have encountered in recent times include:

Difficulty in accessing loans, although the Government has implemented capital support programs for small and medium enterprises, not all enterprises can benefit from these programs. The main reasons include the lack of legal capacity needed to carry out complicated loan procedures, obstacles in mortgage assets, interest rates and lack of capital for production and business.

In addition to loans, small and medium enterprises also face difficulties in accessing and implementing production technologies, providing services and managing business operations. In addition to the lack of capital to access the above technologies, small and medium enterprises also lack expertise and experts or human resources with appropriate knowledge to select and implement technology. There are many cases where enterprises have capital to invest in technology, but choose inappropriate technology or implement it ineffectively, causing obstacles in the process of use and implementation later.

Low production and business efficiency and high inventories are also major difficulties. Many small and medium-sized enterprises still lack the capacity to grasp the market, understand the market in a comprehensive way and develop plans to cope with difficult fluctuating scenarios. This leads to reduced production, slow operations, and the inability to sell manufactured goods, leading to accumulated inventories and increased costs. For industries with low localization rates and dependence on imported raw materials, enterprises also face difficulties in forecasting revenue and planning to integrate business and operations in line with fluctuations in the market and the world economy.

Management capacity, legal knowledge as well as the scarcity of highly skilled human resources are also factors that make it difficult for small and medium enterprises to compete and survive, as well as make necessary changes.

In addition to the above factors, one of the less mentioned difficulties of SMEs is the ability to access knowledge consulting resources and solutions for improving operations and building strategies, which are considered "services of the rich". The reality shows that supply chain management is now gradually attracting more attention from multinational enterprises and even state-owned enterprises. Almost every enterprise can find opportunities to improve in many aspects of the supply chain and can achieve immediate efficiency in terms of performance, cost and profit. However, currently, access to knowledge sources about supply chains and supply chain strategies is still limited for SMEs.

Even with the TPP Agreement, small and medium enterprises will not be able to enjoy the benefits easily. Although the TPP is considered beneficial for the Vietnamese economy on a macro level, small and medium enterprises will face obstacles with many requirements of the Agreement, such as the requirement to store transaction history, manage documents of origin for at least 5 years, as well as requirements on supply chain management and logistics.

According to HQ Online