Ho Chi Minh City, September 29, 2010
UPS Asia Business Monitor Survey Shows Vietnamese SMEs Believe They are Key to Vietnam's Economic Future; Optimistic about Own Business Prospects
For the first time ever in 2010, Vietnam participated in the annual UPS Asia Business Monitor (ABM), which surveys small-to-medium enterprise (SME) decision makers across Asia Pacific on the business sentiments and factors that drive SME success. In its sixth year, the ABM research findings have been an indispensable resource for Asia Pacific SMEs in understanding the challenges that drive their competitiveness.
The UPS ABM 2010 interviewed 1,350 SME decision makers from 13 key markets across Asia Pacific: Vietnam, along with Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand.
"Vietnam is delighted that it is part of this year's ABM survey. Since 2005, this award-winning study has provided valuable insights into SMEs' competitiveness and current business issues, as well as growth opportunities that are perceived by SMEs in the region," said Jeff Mclean, general manager of UPS Vietnam. "The Vietnam survey results will greatly assist us on how to better support the needs of Vietnamese SMEs as they compete in the global market since 86 percent of local SME leaders think SMEs are critical to the future of Vietnam's economy," added Mclean.
Optimistic on Region's Growth and Vietnam SME Prospects
Vietnamese SMEs are optimistic that the Asia Pacific economy will continue to grow. Only nine percent of Vietnamese SMEs expect a decline in the regional economy. Fifty-nine percent anticipate growth, while another 32 percent expect the economy to remain the same.
In addition, Vietnam is the second most optimistic market in the region about their business success in 2010 as 72 percent believe their companies will perform better in 2010.
Although 9 in 10 Vietnamese SMEs are very much focused on conducting business within Asia Pacific, they expect trade volume to increase in other regions as well. Eighty-one percent anticipate Vietnam's trade within the Asia Pacific region will grow this year while trade activities with North America will increase by 61 percent and European trade will expand by 60 percent.
Global trading has helped Vietnam become a rapidly emerging market and this was confirmed by 58 percent of local SMEs who said that global trade had a more positive impact on their business growth and has opened business opportunities for them.
But despite the prevailing positive growth sentiment, Vietnam seems to be the least optimistic regarding workforce projection in the region. An overwhelming 61 percent of Vietnamese SMEs surveyed intend to reduce their workforce, while none of them plan to increase their workforce.
Building and Construction, IT and Tourism key growth industries in 2010
As Vietnam accelerates its economic growth and continues to invest in its infrastructure, the building and construction industry will continue to boom and more than half of Vietnamese SMEs (53 percent) believe that this sector continues to be the country's key growth industry this year followed by IT (36 percent) and leisure and tourism (28 percent) (see Appendix 8). When asked which industries will be the key economic pillars over the next three to five years, building and construction was still the top choice for Vietnamese SMEs with 53 percent followed by agriculture, forestry and fishing (29 percent), leisure and tourism (29 percent) and IT (26 percent).
Costs a key business concern for Vietnamese SMEs
Although the Vietnamese economy is expected to grow this year, local entrepreneurs still encounter challenges and about 7 of 10 Vietnamese SMEs say that their top business concern is costs. The second biggest concern is interest rate hikes (46 percent) while competition (40 percent) is the third biggest concern.
Government policies needed to enhance Vietnamese SMEs' competitiveness
As Vietnam continues to open its doors to foreign investments, local SMEs have been confronting various difficulties as they compete with these international companies. Forty-one percent of Vietnamese SMEs have called for the government to continue to push SME programs with low interest rate offerings as many banks still charge SMEs with rates above 14 percent a year. Meanwhile, 23 percent say they need support funds to upgrade their technology and equipment and 19 percent want the government to promote the Vietnamese brands.
Of those who have encountered problems in financing business, 45 percent pointed out bureaucracy and red tape in processing applications, followed by lack of institutions willing to lend to small businesses (25 percent). Some 30 percent of Vietnamese SMEs said that they have no difficulties in financing their business.
To maintain the competitiveness of Vietnamese SMEs, they recognised that more work needs to be done in terms of government support, transportation infrastructure and legal framework (see Appendix 13). Regarding Vietnam SME's perception of their own competitiveness, 31 percent said that "better service or quality" is the key competitive advantage they have when competing with big corporations followed by "forming partnerships/associations" (29 percent) and "offering better prices" (17 percent).
"ABM 2010 has clearly revealed that Vietnam SME leaders need government support for them to grow and develop, and truly put Vietnamese brands on the regional as well as global map for years to come," said McLean.
Supply chain management important for Vietnamese SMEs
One important trend that the ABM survey uncovered is the importance of supply chain management for SMEs. Cost savings is the number one reason for Vietnamese SMEs to pursue a supply chain management strategy (31 percent). In addition to cost savings, 28 percent of local SMEs view supply chain management as a method for quality assurance.
When asked about what changes are needed in supply chain practices to support future growth, 31 percent of Vietnamese SMEs responded that they will just focus simply on reducing transportation and distribution costs while 21 percent said that they will shift their supply chain operations closer to final destination.
"As a global logistics leader and business partners of SMEs, UPS in Vietnam is a convenient single source of leading supply chain solutions and innovative technology for Vietnamese SMEs. We are in a unique position to serve as the conduit for them to grow their export business globally by connecting them to more than 220 countries and territories," said Mclean.
About "UPS Asia Business Monitor" Survey