Small business sidelined in Vietnam's export boom: Swiss study

By Ngan Anh, TN News

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Together with sugar cane, motorbikes and plastic products, rice is the commodity with low export potential. Photo credit: Le Hoang Vu Together with sugar cane, motorbikes and plastic products, rice is the commodity with low export potential. Photo credit: Le Hoang Vu
Small and medium-sized enterprises (SMEs) will find it hard to participate in international trade activities if trade support services aren't improved to help them increase their competitiveness, according to delegates attending a national workshop on the country's export potential.
Trade promotion agencies should strengthen their support for SMEs by developing their marketing strategies and access to good information, Miroslav Delaporte, country representative of Switzerland's State Secretariat for Economic Affairs said during the workshop on Wednesday.
Due to their limited understanding of foreign markets and international trade issues, local SMEs have exercised limited participation in international trade, according to findings presented at the workshop. The assessment was jointly-prepared by Switzerland's Federal Department of Economic Affairs and Vietnam's Trade Promotion Department.
Local enterprises with limited market research skills have sought information from trade promotion agencies that either lack the capacity to help them or offer market information that is outdated or copied from unverified sources.
Despite rapid export growth in recent years, the ratio of export business is falling at domestically-owned firms, according to the report. FDI enterprises contributed to 61.4 percent of the total export revenues in 2013. However, most of these businesses are engaged in providing outsourced labor using imported raw materials and are less connected to domestic enterprises.
In other words, FDI enterprises strongly invest in Vietnam solely to exploit the country's low labor costs. Vietnam will not achieve sustainable development by relying solely on the FDI sector, the report warned.
Miroslav Delaporte urged Vietnam to create clear policies that support SMEs in playing a larger role in boosting Vietnam’s exports.
The report said that Vietnam’s exports now rely principally on raw products that offer little added-value, and require a lot of resources and labor.
“Experience in other developing countries demonstrates the difficulties in achieving sustainable volume growth if the focus of export is limited to a small range of products, especially raw ones,” said the report.
The report said products with high export potential include coffee, rubber, pepper, ceramic products, catfish and cassava, while those with medium export potential include vegetables and fruit, tea, cashew nuts, and textile products.
Due to its favorable climate, Vietnam is one of the world's biggest coffee producers. However, the product remains of low-quality due to poor processing and harvesting technology. Up to 90 percent of Vietnam’s coffee is exported as a cheap raw material. For these reasons, she said, Vietnam should invest in improving the processing capacity at local firms to increase the products’ added-value.
Along with sugar cane, motorbikes and plastic products, rice is the commodity with lowest export potential, the report found.
Explaining the reason for the assessment, Nguyen Thi Thu Hang, senior technical consultant to the program, said rice export values haven't kept time with Vietnam's booming volume in recent years. Prompting the government to accelerate its shift toward crops that could bring bigger profits and sustainability.
In addition, the world currently enjoys an abundant supply of rice due to the rise of many new producers and exporters. This could pose many difficulties to Vietnam in boosting its shipments of the commodity in the coming years, she said.
Vietnam reaped export revenues of $83.5 billion between January and July--up 14.1 percent over the same period last year, according to the General Statistics Office.

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