SME Landscape Vietnam

Executive Summary

Small and medium enterprises (SMEs) form the backbone of Vietnam’s economy, comprising 97% of all enterprises and employing 60% of the workforce. The sector is characterized by high dynamism, increasing digitalization, and ongoing integration into global supply chains.

Definition and Scope

Classification Criteria (Vietnamese Standards)

• Micro: <10 employees, <20 billion VND ($800K) capital
• Small: 10-49 employees, 20-100 billion VND capital
• Medium: 50-199 employees, 100-300 billion VND capital

Quantitative Overview

• Total SMEs: 800,000+ registered enterprises
• Contribution to GDP: 40-45%
• Employment: 60% of non-agricultural workforce
• Export value: 25-30% of total exports

Sectoral Distribution

By Industry

1. Wholesale and retail: 35-40%
2. Manufacturing: 20-25%
3. Construction: 10-12%
4. Agriculture and fishing: 8-10%
5. Transportation and logistics: 7-9%
6. Accommodation and food: 6-8%
7. Technology and services: 5-7%

Regional Concentration

• Red River Delta (Hanoi region): 25-30%
• Southeast (HCMC region): 35-40%
• Central Coast: 12-15%
• Mekong Delta: 10-12%
• Northern Midlands/Mountains: 8-10%
• Central Highlands: 3-5%

Ownership Structure

By Ownership Type

• Domestic private: 95-97%
• Foreign-invested: 2-3%
• State-owned: 1-2%

Legal Form

• Household businesses: 5+ million (micro-scale)
• Limited liability companies: 60% of SMEs
• Joint stock companies: 15% of SMEs
• Partnerships/cooperatives: 10% of SMEs

Digital Adoption

E-commerce Participation

• Online sales: 30-35% of SMEs
• E-commerce platforms: 200,000+ active sellers
• Social commerce: 40-45% using Facebook, Zalo
• Own websites: 15-20% with e-commerce capability

Digital Tools Usage

• Accounting software: 40-45% adoption
• POS systems: 25-30% (retail, F&B)
• CRM systems: 10-15% adoption
• Cloud services: 20-25% using SaaS
• Digital marketing: 50-60% active

Barriers to Digitalization

• Cost: 45% cite as primary barrier
• Skills: 35% lack technical expertise
• Relevance: 20% don’t see value
• Security: 15% concerned about data

Access to Finance

Financing Sources

• Internal funds/retained earnings: 60-70%
• Bank loans: 20-25%
• Family/friends: 10-15%
• Alternative finance: 3-5%

Credit Gap

• Unmet demand: $15-20 billion estimated
• SMEs with bank loans: 25-30%
• Loan rejection rate: 30-40%
• Average loan size: $20,000-50,000

Alternative Financing

• P2P lending: Emerging, limited regulation
• Supply chain finance: Growing with e-commerce
• Fintech lending: 8-10 million SME borrowers
• Crowdfunding: Limited legal framework

Government Support Programs

• Credit guarantee funds: Partial guarantee schemes
• Interest rate subsidies: Targeted sectors
• Venture capital: Limited SME-focused funds
• Grants: Innovation, export promotion

Sector-Specific Characteristics

Manufacturing SMEs

• Concentration: Textiles, footwear, furniture
• Supply chain role: Subcontractors, component suppliers
• Export orientation: 40-50% export
• Technology level: Mostly labor-intensive

Retail SMEs

• Format: Traditional markets, convenience stores
• Digital adoption: Accelerating post-COVID
• Competition: Large format retail, e-commerce
• Location: High-rent urban areas challenge

Technology SMEs

• Sub-sectors: Software, IT services, startups
• Location: Ho Chi Minh City, Hanoi clusters
• Funding: VC, angel investment growing
• Talent: Skills shortage, competition with MNCs

Agriculture SMEs

• Processing: Value-addition focus
• Export: Fruit, seafood, coffee processors
• Certification: Organic, fair trade adoption
• Finance: Seasonal working capital needs

Export-Oriented SMEs

Export Participation

• Direct exporters: 15-20% of SMEs
• Indirect exporters: 20-25% (supply chain)
• Export value: $70-80 billion annually

Key Markets

• United States: 25-30%
• China: 15-20%
• EU: 12-15%
• Japan: 10-12%
• Korea: 8-10%

Export Support

• Trade promotion agencies: Provincial, national
• Exhibitions: Canton Fair, regional trade shows
• E-commerce cross-border: Growing channel
• FTAs: EVFTA, CPTPP utilization increasing

Challenges and Constraints

Operational Challenges

• Regulatory compliance: Complex procedures
• Tax administration: Bureaucratic burden
• Land access: High costs, limited availability
• Infrastructure: Power, logistics costs

Human Resources

• Skilled labor shortage: Technical, managerial
• Wage pressure: Rising labor costs
• Retention: Competition with larger firms
• Training: Limited internal capacity

Market Access

• Branding: Limited marketing budgets
• Distribution: Dependent on intermediaries
• Standards: Certification costs
• Intellectual property: Weak protection

Government Policy and Support

Regulatory Environment

• Enterprise Law: Simplified registration
• Investment Law: Foreign ownership rules
• Tax policy: SME incentives, VAT thresholds
• Labor regulations: Compliance requirements

Support Institutions

• Vietnam Chamber of Commerce (VCCI): Advocacy
• Provincial Business Associations: Local support
• SMB Development Fund: Limited reach
• Technology incubators: Growing ecosystem

Digital Transformation Programs

• National Digital Transformation: SME component
• E-commerce training: Government-sponsored
• Technology vouchers: Subsidized software
• Digital platforms: Made-in-Vietnam solutions

Future Outlook

Growth Projections

• SME formation: 100,000+ new enterprises annually
• Digital adoption: 70%+ with online presence by 2028
• Formalization: Household businesses converting
• Productivity: Automation, technology adoption

Emerging Trends

• Circular economy: Sustainable practices
• Industry 4.0: Smart manufacturing pilots
• Servitization: Manufacturing + services
• Platform integration: SME aggregators

Sources

• General Statistics Office of Vietnam
• Ministry of Planning and Investment SME Reports
• Vietnam Chamber of Commerce and Industry (VCCI)
• World Bank SME Finance Report Vietnam
• IFC SME Banking Study
• ADB SME Development Reports
• Vietnam E-commerce Association SME Surveys