The U.S Launches Project to Help Improve Vietnamese SMEs Supply Chain Linkages

9:33:28 AM | 25/9/2019

The United States Agency for International Development (USAID), the Office of the Vietnamese Government, and the Ministry of Planning and Investment on September 24 launched the USAID Linkages for Small and Medium Enterprises (USAID LinkSME) project.

The event was attended by U.S. Ambassador to Vietnam Daniel J. Kritenbrink, Minister and Chairman of the Government Office Mr. Mai Tien Dung, Minister of Planning and Investment Mr. Nguyen Chi Dung, USAID/Vietnam Mission Director Michael Greene, as well as representatives from ministries, local government agencies, business associations, Vietnamese small and medium enterprises, foreign firms, international organizations, and the media.

The five-year, US$22.1 million USAID LinkSME project will work with the Office of the Vietnamese Government and the Ministry of Planning and Investment to strengthen the SME supply chain linkage ecosystem, and improve business associations’ and trade groups’ capacity to support SME business development. Linking SMEs with lead firms will advance the Indo-Pacific vision of improved trade and competitiveness and support USAID/Vietnam’s objective of expanding inclusive, market-driven, private sector-led growth.

While foreign direct investment (FDI) in Vietnam has reached historic levels, the spillover benefits to Vietnam’s domestic economy have been dampened by the limited supply chain linkages of Vietnamese small and medium enterprises (SMEs). SMEs account for 98% of Vietnam’s total enterprises, however, there are only 1,800 SMEs in supporting industries across all sectors.

Mr. Nguyen Chi Dung, Minister of Planning and Investment, noted that USAID LinkSME plays an important role for the private sector and SMEs. The private sector’s contributions to Vietnam’s GDP, to job creation and to the State budget are huge, however, the sector is facing a shortage of linkages with each other, and limited capacities in investment attraction, technology adoption, and accesses to markets and information. Therefore, LinkSME will help partly solve the above challenges thanks to the project’s right purposes and efforts for the development of the private sector, added Mr. Dung.

According to Mr. Daniel J. Kritenbrink, Ambassador of the U.S to Vietnam, SMEs play an important role in the economy’s future, in GDP growth, and in creating jobs, but few SMEs have been connected to the global supply chains. So, the U.S commits to cooperate with Vietnam to help SMEs adapt to the global economy, he said.

Mr. Ron Ashkin, USAID LinkSME Project Director, showed Vietnam’s challenges in connecting SMEs to supply chains. FDI firms currently dominate Vietnam’s exports with 70% of the total export turnover, and mainly lead firms have been able to co-locate with their foreign suppliers. Meanwhile, there are poor quantity and quality of linkages between Vietnamese SMEs and lead firms because of low technology adoption, low productivity, lack of experience with lead firms, inadequate standardization, shortage of skilled staff and management, language barriers, limited access to finance, low reliability, and others. He expected that the new LinkSME project can address this challenge.

USAID LinkSME analysis quantifies current growth potential for Vietnam through strengthening supply chains at US$58 billion.

Nam Pham