VietNamNet Bridge – As of the end of October, nearly 834,400 enterprises have legally registered to do business in Vietnam and 96% of them are ‘mom and pops’ says the Ministry of Planning and Investment (MIP).

So called ‘mom and pop’ is a colloquial English term for small, independent, family-owned business, which usually have a single location that often occupies a physically small space.

Mr. Bui Quang, Minister of the MIP, appreciates the sweat and tears these small family businesses put into what they do— often working early mornings and late nights for little earnings.

However, he says it’s time to realign these small businesses into a supply chain model where instead of acting in their own self-interest to maximize profits, they form an alliance and pull in the same direction to deliver goods and services quickly and cost-effectively.

Vietnam lags behind most other nations in the world in terms of infrastructure development, supply chain development and development of a national business development policy, Quang says.

In particular, he says the number of private firms in the supply chain in Vietnam does not match with the population and economic scale. Furthermore, there is lack of medium to large-sized enterprises that can compete at the national and international level he says.

Thus, the Vietnamese Government is making it a top priority to developing these ‘mom and pop’ businesses into larger medium-sized enterprises and aligning them into supply chains.

In the process of regional and global integration this will put these supply chains on a better footing to compete in the new integrated marketplaces.  Now it is virtually impossible for these small and super small firms to join the global economic chain.

If the private business sector and SMEs develop in effective supply chains, they will generate millions of high quality good paying jobs, raising the social welfare of the nation.

According to statistics from the Asian Development Bank (ADB), the private sector accounts for just 10% of the total export value of the nation. Most foreign invested enterprises (FIEs) currently have to import raw materials and then export products.

Tomoyyuki Kimura, ADB country director in Vietnam says the Vietnam Government should focus on goals such as choosing products that domestic private firms can supply materials for the export industry.

Kimura says first and foremost, all regulations and law enforcement must be transparent and consistent. Second, SMEs should be provided with assistance to access capital.

Moreover, the Government needs to establish training centres and institutes for directors, managers so that the future managers are skilful and experienced enough to join the international market, Kimura states.

For his part, Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) echoes Quang’s views, saying the Vietnam government needs to devise proper strategies to develop the private sector supply chains.

Small businesses need to be transformed into medium-and large-sized enterprises, which are strong enough to be competitive with foreign enterprises in the region and world markets, Loc says.

Together with administration reform, it is also very important for the country to accelerate restructuring the State organisation apparatus to shift public services to the private sector.

Furthermore, judicial reform is a vitally important task. Enterprises must formulate long-term business strategies. In addition, legal and institutional reforms must ensure that investors perform in a safe environment with legitimate rights, Loc said.

Economic experts in near unanimity say institutional reform and creating favourable environment for businesses is not enough. Vietnam must devise proper policies to develop larger scale supply chains in the private sector to fulfil its quest for sustainability and say goodbye to ‘mom and pops’.

VOV/VNN