The Small and Medium Enterprise Survey in Vietnam

Introduction
Economic reforms have transformed Vietnams economy, and small and medium-sized
enterprises (SMEs) form a large share of an emerging competitive landscape.
Understanding how these firms are created, expand, or fail is essential to formulating
evidence-based, pro-growth and pro-poor economic policy. Because these challenges are
common across many emerging economies, these data are relevant both domestically and
to the larger community of developing country policy makers. The SME survey pursued
by UNU-WIDER in collaboration with the University of Copenhagen and a range of
Vietnamese government agencies and research bodies is the only survey instrument in
Vietnam tracking these firms over time. Generating a rich longitudinal and cross-sectional
dataset has impacted national policy and generated visible, relevant research on the
constraints facing SMEs and opportunities for future growth. These studies have found a
wide audience amongst both Vietnamese and international researchers through
descriptive reports, national press and television coverage, and academic in-depth studies
published in peer-reviewed journals.

Study objectives
SMEs are central to the structural transformation of the Vietnamese economy. The private
sector in Vietnam continues to grow and evolve, accounting for increasing shares of
economic output and employment. It is therefore vital to understand the constraints facing
SMEs and the potential of these enterprises. In this context, the existence of information
about enterprises which have been tracked since the beginning of the 1990s, and which
could be revisited in future years, provides a unique research opportunity with clear
policy relevance.
The surveys main research questions can be broadly classified as:

What are the situations under which businesses are created and under what conditions
cause firms to leave the sample, through bankruptcy, purchase by another firm, etc.?
Answering this question gives policy makers unique insight into both the cross section
(how things look today) and intuition about the direction of change over time (how

things have evolved and where things are going). Most importantly, it allows policy
makers to understand factors driving both firm creation and firm closure.

What constraints do existing firms face in their daily operations which prevent them
from growing into larger firms, both in terms of total capital and total workforce?

How does the evolution of SMEs in Vietnam affect employee welfare? The firm is not
the primary end-goal of economic development, rather the individual is. The SME
surveys recognise this by generating a large amount of data regarding contracts,
wages, employment patterns, job tenure, and related statistics.

Methodology
The SME survey is conducted every two years, over 2,500 enterprises across ten
provinces are surveyed on each occasion, a large proportion of these being repeats from
previous years. The population of non-state manufacturing enterprises in the ten selected
provinces is based on two data sources from the General Statistics Office of Vietnam
(GSO): The Establishment Census from 2002 (GSO 2004) and the Industrial Survey
2004-2006 (GSO 2007).
This information is combined with data on enterprises registered under the enterprise law
at the province level from the (separate) national industrial survey. This provides
additional information on private firms, collectives, partnerships, private limited
enterprises and joint stock enterprises. Joint ventures are excluded from the sample due to
the high degree of government and foreign involvement (often opaque) in the ownership
structures of these firms.
While results from the 2011 survey are presently being compiled, 2009 is the most recent
survey round for which a final report has been published and disseminated.

Key findings
A selection of key research messages based on the motivating questions listed earlier
includes:

The business environment for SMEs has worsened since 2007, as the number of
firms facing significant constraints has increased. Access to credit remains the most
serious problem, although improvements are observed in this area. Falls in product
demand are, for the first time, cited as a serious business constraint. This might be a
result of the general slowdown experienced in economic activity.

Firms are increasingly moving into the formal sector. Almost one quarter of the firms
not formally registered in 2007 had obtained a business registration license (and a tax
code) by 2009. However, there is little evidence of any employment growth or
survival probability differences between registered and informal firms.

Over time, there has been a decrease in the labour force share of regular workers, and
a corresponding rise in the proportion of casual workers, especially in small and urban

firms. Women are making up a growing proportion of the workforce, and the share of
unpaid workers has fallen slightly over time. Since contracts are important in terms of
ensuring the provision of social benefits, the generally low incidence of formally
established work relations is a potential cause for concern and should be addressed
through appropriate policies.

Average individual wages vary considerably by occupational category, and wages are
higher for men than for women across all occupations. With regard to the
empowerment of workers, those employed in rural and larger firms benefit relatively
more from firm gains through a higher wage share of value added.

The main obstacle to introducing a new product is lack of capital. Furthermore, the
observed fall in new technology usage seems to be caused by the decline in innovation
rates. Capital utilization rates are on average relatively high and smaller enterprises
are close to full capacity utilization.

Almost 40 percent of the enterprises can be considered credit constrained. This

number increased only slightly over the 2007-09 period. More credit-constrained
firms are located in rural areas and household enterprises located in the rural areas are
more likely to be credit constrained. On average, joint stock companies were the most
credit-constrained ownership type in 2009. Between 2007 and 2009, three out of every
four enterprises borrowed from informal credit sources.

For a large proportion, though not all, of SMEs, manufacturing activities are
impacting negatively on the external environment in which they operate. At the same
time, very few enterprises appear to have any real knowledge of the environmental
legal framework governing their relationship with the natural environment.
Correspondingly, compliance is weak with worrying potential consequences for the
natural environment.

Research uptake
The SME surveys are relevant to a wide community of stakeholders in the donor and
domestic policy communities. Research bodies within Vietnam capitalize on this by
actively promoting research findings through workshops, national press, television
coverage, and dissemination of in-depth studies based and descriptive reports.
For each of the completed surveys (2005, 2007, 2009), an initial draft descriptive report
was prepared to summarize the data collected and ensure the dataset is clean and
consistent with existing data; for example, for those firms that were studied in a previous
year. In each case, this report has been prepared with input from both international
researchers and their counterparts in Vietnam, particularly researchers from the Central
Institute of Economic Management (CIEM). An advanced draft of the report is presented
at a formal workshop to a larger community of representatives from line ministries and
researchers. These workshops are typically chaired by the president of CIEM with
discussants drawn from other government bodies and academia.
Following this, a final version of the descriptive report is produced and formally
launched, including a series of presentations to policy makers and donor representatives

about key findings and policy recommendations. These events are typically large and
attract senior advisers and researchers from a range of government bodiesincluding,
within the Ministry of Planning and Investment, representatives of the Department for
Enterprise & Development (DED)who are tasked with developing national-level SME
policy. These workshops have generated national-level television coverage and press. A
partial list of translated headlines is indicative (below); see goo.gl/wMWXy for full list
(in Vietnamese) of newspaper articles produced regarding the most recent report.
The datasets are a public good that are shared with other government bodies. In
particular, DED use the cleaned dataset and descriptive report to combine the SME data
with a national business census undertaken by Vietnams Government Statistics Office
(GSO), which forms the basis of DEDs research and policy proposals. Moreover, some
15 Vietnamese PhD students have used the data in their studies for degrees at universities
in Europe, the USA, and Australia.
In addition to promoting policy-relevant research findings through workshops,
researchers benefit from working on in-depth studies (typically two or three such papers
are produced per survey round) on research themes with topical relevance to Vietnamese
economic policy (see Research Output below). Original research findings are published,
wherever possible, both as UNU-WIDER working papers and in international journals to
ensure visibility of the survey data to the international community and promote crossborder learning in SME policy and analysis.

Selected media coverage

34.2 Percent of the Enterprises Surveyed Use Informal Payments as Smooth Fees
Vietnamese Business Environment Significantly Improved
Capital: Difficulties Facing Vietnams SMEs
SME Continues to Meet Obstacles in Obtaining Credit
Vietnam News: Lack of Credit Hampers SMEs

Research papers

Firm-Level Corruption in Vietnam WP/2012/16

John Rand, Finn Tarp
The union wage gap among Vietnamese SMEs
Nina Torm
Do Recruitment Ties Affect Wages? An Analysis using Matched Employer: Employee Data
from Vietnam
Anna Folke Larsen, John Rand and Nina Torm
The Informal Sector Wage Gap among Vietnamese Micro firms
Nina Torm, John Rand
The Benefits of Formalization: Evidence from Vietnamese Manufacturing SMEs
John Rand, Nina Torm

Does Gender Influence Fringe Benefits Provision? Evidence from Vietnamese SMEs
John Rand, Finn Tarp
Enterprise Growth and Survival in Vietnam: Does Government Support Matter?
Henrik Hansen, John Rand, Finn Tarp
SME Access to Credit
John Rand, Finn Tarp, Tran Tien Cuong, Thanh Nguyen Tam
Characteristics of the Vietnamese Business Environment: Evidence from a Survey in 2005
Joint study team
Characteristics of the Vietnamese Business Environment: Evidence from a Survey in 2007
Joint study team
Characteristics of the Vietnamese Business Environment: Evidence from a Survey in 2009
Joint study team