Vietnam is one of the most densely populated countries in Asia, with 95.5 million residents living in the country, according to the statistics from 2018.

This developing country has been undergoing a lot of changes during the past two decades, including opening its borders for global business. In addition, Vietnam has been moving away from its mostly agrarian economy to become a more market-based and industrial-focused economy. 

Vietnam has been able to improve its income level at a great scale, in part thanks to its population’s cultural inclination for a hard-working character.

Another significant factor that helped Vietnam’s economy revive is the development of entrepreneurship in the country. 

Vietnam’s economic growth: What’s next?

As mentioned above, Vietnam has been transitioning from the traditional and agricultural economy, with an increased focus on foreign investments and global exchange. Today, we know this country as the leading producer and exporter of rice, coffee, rubber, and sea products.

Additionally, this Southeast Asian country is one of the most active countries in the digital industry.

The Vietnamese digital community is dynamically pushed forward by a number of government-led initiatives.

In fact, the Vietnamese government has been working on developing a startup landscape, which also contributed to the fast growth of fintech startups in the country.

Also Read: How Vietnam is accelerating fintech growth

Despite its steady growth of more than six per cent from 2011, Vietnam still needs to explore more areas of development to maintain this pace.

Until now, the country’s growth has been mostly driven by its high-scale manufacturing activities. Looking further, Vietnam’s government would need to find alternative sources of fueling its economy.

One of these sources appears to lie in the small business sector of Vietnam – specifically, in its micro, small and medium enterprises (MSMEs) that are dominant in the country (93.7 per cent of the total enterprise).

While the MSMEs are perceived as the next kick-off of the Vietnamese economy, there are a lot of challenges standing in the way. 

The biggest part of the obstacles for MSMEs in Vietnam is related to innovation. Small businesses in Vietnam are limited to very small markets and are not able to expand their operations to a wider audience. 

The missing piece here is the innovation since only with advanced products and services Vietnamese MSMEs will be able to stay relevant and keep up with the competition.

In addition to that, MSMEs need to embrace innovations to be able to improve their services and products, along with business operations and other areas of their business. 

This means that the Vietnamese government needs to foster innovation in the MSME industry to maintain its economic growth.

MSMEs receive support from the Vietnamese government

MSMEs have been playing a major role in the Vietnamese economy for a long time now. According to the latest data, MSMEs account for 40 per cent of GDP and 50 per cent of employment in Vietnam. 

Also read: Startups bag a total of US$14M investments at Techfest Vietnam

Yet, despite the prevailing influence, small businesses are still facing issues, including limited access to finance, market access, and aggressive competition. To aid this business sector’s participants, Vietnamese officials introduced a new law that established a number of support measures for SMEs across the country.

As a part of the legislation, Vietnamese SMEs are able to receive support in the form of incentives, land rental preferences, credit access, and human resource aid.

The law serves as the foundation for the government support in the research and development area for MSMEs. It also helps SMEs to create and nurture a creative economy in the country. 

Other initiatives

Other ways the government is supporting the ecosystem is by hosting events. TechFest Vietnam, one of the most innovative events in the country focused on a startup community, is organised by the Ministry of Science and Technology in cooperation with other Government Ministries and socio-political organisations in Vietnam. 

The event presents a significant opportunity for innovative startups to share their knowledge and experience and create a network of connections. In addition, startups are able to spread the word about their work and reach thousands of attendees, including potential customers, experts, investors, and media.  

Such initiatives, especially when promoted by the government, is a big step in making Vietnam the next startup hub in SEA. In this case, the government seems to be taking a leaf out of Singapore’s startup ecosystem, particularly in terms of their involvement.

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Image Credit: NGO TUNG

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