Buoyed by a determined political leadership and its forward-thinking policy framework, Vietnam’s enterprises have earned the country the reputation as a leading exporter globally. Today, Vietnam is the top exporter in the ASEAN region. While its export turnover of USD282-bn in 2020 contributed 82% of the country’s GDP, the manufacturing powerhouse has tremendous potential to further boost its exports.
The next phase of export growth is tipped to come from the country’s SME sector that already accounts for one-third of the exports and can grow aggressively if the constraints the sector faces are suitably addressed. Besides factors like limited availability of trained manpower and technology, one of the key constraints for the country’s SME sector is the restricted access to debt and lack of innovative financing solutions. With SMEs constituting 97% of the country’s enterprises, empowering them will give tremendous boost to the country’s export and economic growth. Asean Business Partners is working closely with global financial agencies to offer innovative financial solutions and enable Vietnam’s SME sector.
BANKING FOR BUSINESS
The State Bank of Vietnam (SBV) closely monitors and regulates the availability of foreign debt among domestic borrowers. The Circular 02 by SBV, issued in 2021, clearly sets the stipulations on implementation of foreign currency (FX) transactions vis-à-vis their effect on the FX market of credit institutions authorized to engage in FX activities. SBV’s recently released draft circular which would replace Circular No. 12/2014 is designed to also tighten control of offshore loan borrowing which has been rapidly increasing in recent years, with respect to sectors considered to be potential bubbles such as share-backed financings and M&A in the real estate sector. While this regulation aims to insulate the country’s business from vagaries of forex debt, it also restricts the availability of finance to key sectors.
STRATEGIC FINANCE TO STIMULATE GROWTH
To foster growth opportunities in Vietnam’s SME sector, the need of the hour is to offer direct access to capital to exporters through innovative financial solutions. Export finance can be made available in various forms such as loans, guarantees, insurance and factoring, while strengthening risk management and controlling costs due to currency fluctuations, political instability or solvency of overseas buyers.
ASEAN Business Partners (ABP) is leading the charge in working with global financial firms to improve access to credit for SMEs. We are in discussions with multinational institutions to provide a suitable export finance platform to the SME sector and enable its exporters to thrive. Vietnam’s leading news website, Doanh Nghiep Vietnam, has featured ABP’s role as a frontrunner in SME finance with dominance in multi-disciplinary market penetration.
PROACTIVE GOVERNANCE
Conscious about the SME exporters’ need for timely access to capital to drive growth, the government recognizes the need for foreign funding. Mr. Le Toan Thang, Deputy Director of the National Innovation Startup Support Centre has stressed that Vietnamese SMEs in particular are in dire need of trade and export financing through innovative platforms that have been applied internationally. On its part, the government is taking focused initiatives to boost the country’s exports, signing three important FTAs, including EVFTA (EU-Vietnam FTA), RCEP (The Regional Comprehensive Economic Partnership) and UKVFTA (UK-Vietnam FTA) in as many years. With 15 FTAs having taken effect, Vietnam has an open economy with trade relations with over 230 markets. In the wake of this conducive ecosystem, short-term financing with reasonable interest rates and off-balance sheet accounting can be a boon for exporters. With stability of working capital, rightful involvement from the government and support from private organisations, Vietnam is set to maintain the upward trend in exports.
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