The United States Agency for International Development (USAID) has introduced a $22.1-million project to connect Vietnam’s small- and medium-sized enterprises (SMEs) with foreign partners, in order to improve their capacity to join global value chains. SMEs in Vietnam account for a staggering 98% of all enterprises and create 63% of the nation’s jobs. These enterprises contribute 45% of the country’s gross domestic product. However, foreign direct investment (FDI) sector makes up 70% of export revenue, yet only 21% of Vietnam’s SMEs have joined supply chains for foreign enterprises. Speaking on Friday at the Business Matching Day, as part of the Vietnam Private Sector Economic Forum 2019 in Hanoi, Ron Ashkin, director of the USAID’s Linkages for SME project, pointed out the causes of poor connectivity between the two corporate sectors. Ashkin said that local firms employ outdated technologies, have low labor productivity, and suffer a lack of working experience with their foreign counterparts, according to the Vietnam News Agency. Also, their management systems are not fully standardized and their access to finance remains low. He introduced the multimillion-dollar project, whose aim is to improve and expand supplier and buyer relationships among Vietnamese and foreign firms. This project will raise productivity and increase Vietnam’s capacity to supply products to larger companies, both inside and outside Vietnam. Foreign firms will reap the benefits of increased efficiencies from added local sourcing. The project will help Vietnamese entrepreneurs up and down the value chain pursue new opportunities and provide new jobs for their communities. The project is also expected to improve the local business environment by lowering costs for multinationals located in Vietnam to source locally, while representing a huge opportunity to increase regional competition, grow Vietnam’s SME sector and build its middle class, the major consumers of American products. In February this year, a team from the project conducted pre-evaluation visits to two Vietnamese SMEs in HCMC. Both companies manufacture high-precision machining parts used in metal grinding and drilling. The visits covered the first stage in a two-stage supplier evaluation process. This first stage was a pre-evaluation to assess the SME’s capabilities and potential, prior to introducing them to two foreign firms with operations in Vietnam: Penflex, a manufacturer of flexible metal hoses, and RCH, an Italian company providing solutions for overall store management. If the SMEs pass the first stage and are chosen by foreign firms as potential suppliers, the team will conduct a second, deeper evaluation to develop a plan aimed at helping the SMEs meet the foreign firms’ requirements. (Thesaigontimes May 4)
