Arbitrator Trương Thanh Đức: Law on SMEs not wholly feasible

Trương Thanh Đức, an arbitrator from the Vietnam International Arbitration Centre (VIAC)

How do you evaluate the meaning of the Law on Supporting Small and Medium Enterprises?

Businesses, especially small and medium enterprises (SMEs), play an important role in the national economy. This is a firm foundation for creating jobs and ensuring stability for macroeconomic development.

Big and foreign enterprises that want to effectively operate have to lean on small and medium enterprises. Thus, the law on Supporting Small and Medium Enterprises is already behind compared to the international integration process. However, better late than never.

The urgent task now is to set up a clear legal corridor to better support the SMEs.

Do you think the law meets the requirements of supporting enterprises?

First of all, the law should redefine small and medium enterprises. In the draft, the definition did not clearly distinguish between small businesses, even micro enterprises, and medium ones.

For example, under the draft law definition, a medium enterprise is a business having an annual turnover of less than VNĐ3 billion (US$136,000) and 300 employees. But given the scale of Việt Nam’s economy, such a business is considered a big enterprises. So, putting that kind of businesses in the same group with small and micro enterprises is not fair.  

Time for private businesses to have “greater voices” Now that Việt Nam emphasises the importance of the private business sector, there is a chance for ...

he criterion should be based on capital and employment scales. Besides, enterprises should be classified into three groups of micro, small and medium. And production fields should be grouped in three sectors of agriculture, forestry and fishery; industry and construction; and trade and services.

The small and micro businesses should be given special preferential treatment.

Do you think the assistance proscribed by the law is sufficient?

The important question is how and what to support.

In my opinion, the draft law should detail the assistance measures, including support in finance, land for production workshops, advanced technology application, and market expansion.

One of the most important factors for business survival and development is capital. However, in the draft law, the article on preferential loans is not feasible.

The regulation only makes sense if soft loans are under State policies or the State budget. Asking the banks to give cut-rate interest loans put them on the spot. Banks must base loans or credits on borrowers’ risk evaluation, capital reimbursement ability, mortgage assets and business projects.

It can not give preferential treatment to enterprises that would negatively affect its “health”.    

Therefore, the law should clarify the assistance from by the State budget or other sources and instruct enterprises how to access it.

Another important point which is not mentioned in the draft is legal assistance. At present, most small enterprises can not afford to hire legal experts.  

In my opinion, there are many unfeasible and useless articles.

Notably, the law should not contradict Việt Nam’s commitments to free trade agreements in order to avoid anti-subsidy lawsuits.