Domestic private sector SMEs in Vietnam: growth, contribution to the economy and issues in the current global crisis

This paper examines the growth of domestic private sector small and medium enterprises (SMEs) in Vietnam's transition economy. In particular, emphasis is placed upon an examination and comparison of their growth during two time periods. The first period focuses upon that of the 1990s after the introduction of the Company Law and Private Enterprise Law in 1990 and 1991 respectively. Enterprise registrations were slow during this period due to ongoing regulatory and environmental barriers. The second period, occurring with the introduction of the Enterprise Law in 2000 until the present, saw a strong increase in the registration of new SMEs as a result of easier entry regulations. The removal of important regulatory barriers under the new law represented a significant business innovation that strengthened and streamlined the business registration process. In addition, social and administrative attitudes have been improved in favour of the private sector contributing to its strong growth, resulting in improved economic and social outcomes for the country. The paper also discusses the contemporary role and significance of SMEs in the economy and society of Vietnam, emphasising that of furthering economic growth, expanding employment opportunities, tackling regional income inequalities and poverty, empowering disadvantaged groups, and further integrating the country into the global economy. A key section of the paper is devoted to a discussion of the impact of the global economic and financial crisis on the country's SMEs. This section highlights the roles that Vietnamese SMEs can play in mitigating the impacts of the crisis on economic well-being, especially to the most vulnerable groups. It also identifies effective policy responses to further minimise these potential adverse effects