7. Business Development Services in Viet Nam
This chapter describes and assesses the current institutional arrangements for providing business development services (BDS) to start-ups and small and medium enterprises (SMEs) in Viet Nam, the support services offered, and the approaches taken to meet their needs. The main aim of BDS is to enhance the competitiveness of SMEs by strengthening their managerial skills and, consequently, their ability to compete in domestic or international markets. The Agency for Enterprise Development (AED) is charged with BDS promotion in Viet Nam, notably through the three Assistance Centres for SMEs (known as TACs), which are located in the three main cities of Ha Noi, Da Nang, and Ho Chi Minh City. The TACs play an important role for SME development and should be strengthened, notably by facilitating access to their services by SMEs located in distanced locations. Going forward, it would also be important to further stimulate the rise of a private market for BDS, for example by helping SMEs cover the costs of private sector consultancy services, as well as to develop mechanisms to co-ordinate the effective delivery of quality BDS across central ministries/agencies, provincial authorities, business associations, and private providers. In parallel, it will also be key to ensure the good quality of the private sector BDS being subsidised by taxpayer’s or donor’s resources.
“Business development services” (BDS) refer to services, such as advice, training, consultancy and mentoring, aimed at upgrading the managerial skills and business practices of SME managers (see Box 7.1). There is good evidence that BDS does improve SME performance through productivity growth and access to new markets (Piza et al., 2016[1]; Cravo and Piza, 2019[2]).
Information, advisory, consultancy and mentoring programmes can support entrepreneurs and small business owners on all aspects of starting and operating a business through various phases of their development. BDS may be delivered through public agencies or through private or not-for-profit organisations, either in generic form or on a customised basis; it may be delivered through physical centres, via telephone, or online; it may be offered as free-standing services or integrated into other programmes; and it can be offered on a no-fee basis to the client, at a government-subsidised rate, or on a full user-pay basis (OECD, 2020[3]).
In recent years, the demand for BDS among Vietnamese SMEs has surged alongside the greater integration of Vietnamese firms into the global economy. Although Vietnamese business owners have shown a preference for solving internal issues by themselves (Edwards and Phan, 2013[4]), the process of certification, which remains important to firms wishing to engage in global supply chains, has fuelled demand for outside sourcing of BDS. However, at present, local access is still limited and many SME are unaware of BDS providers or not fully cognisant of the value of this service. The prevalence of BDS providers, including private BDS, in central cities, may fuel urban SME development, but also exacerbates regional disparities.
Business development services can be broadly defined as “…services that improve the performance of the enterprise, its access to markets, and its ability to compete (…)”. It includes a wide array of business services, both strategic and operational that may include training, consultancy and advisory services, marketing assistance, information, technology development, technology transfer, and business linkages promotion. “Operational services are those needed for day-to-day operations, such as information and communications, management of accounts and tax records, and compliance with labour laws and other regulations.... Strategic services can help the enterprise to identify and service markets, design products, set up facilities, and seek financing” (The Committee of Donor Agencies for Small Enterprise Development, 2001, pp. 1-11[5]).
The 2017 SME Support Law and the Decrees, Directives, and Circulars issued to guide its implementation place a priority on establishing mechanisms to meet the BDS needs of SMEs. This includes directives for training in entrepreneurship and business administration for start-ups and SMEs (and creating demand for this through subsidisation of the training costs); establishment of a network of consultants and consultancy services to provide subsidised BDS to SMEs; and development of a national website to serve as an integrated access point for SMEs to obtain information relevant to their operations.
This section briefly describes the main providers of BDS support to SMEs in Viet Nam. Government institutions such as the Agency for Enterprise Development (AED) and the Assistance Centres for SMEs, commonly known as TACs (from the previous name of Technical Assistance Centres) serve as the focal points to co-ordinate SME policies related to BDS. In addition, there are about 20 SME support centres under the provincial People’s Committees or Departments of Planning and Investment (DPIs). National business associations advise and support member enterprises through information, training and consultancy activities. Private sector BDS organisations play a more limited role.
Central government BDS support
The Agency for Enterprise Development (AED) is responsible for key BDS components
The AED, under the Ministry of Planning and Investment (MPI), is responsible for overseeing the implementation of the SME Support Law, co-ordinating with central ministries and People’s Committees on SME support issues, and monitoring the development of SME support programmes. The AED also aims to facilitate the development of a BDS market for SMEs and manages direct BDS support through the three Assistance Centres for SMEs (TACs), which are located in the three main cities of Ha Noi (North), Da Nang (Centre) and Ho Chi Minh City (South).
In accordance with the SME Support Law, the AED is tasked with building and maintaining a National SME Support Portal (www.business.gov.vn). The portal’s function is to serve as the “first port of call” for entrepreneurs and SMEs seeking knowledge on matters essential to the operation of their businesses and up-to-date information on the available support services. In OECD countries, an online SME information portal is an important tool for assisting interested entrepreneurs and SMEs, regardless of location, with access to practical information and guidance and links to sources of assistance from public and private institutions. Online support can offer basic business advice to firms in a lower cost manner than traditional face-to-face formats. This opens up the possibility to expand the reach of business information and advisory services to a large number of SMEs (OECD, 2018[6]).
Viet Nam’s National SME Support Portal is a work-in-progress and not yet the “hub” for all relevant information to SMEs envisaged by the SME Support Law. The AED is in the process of developing an online system to match SMEs with a database of “approved” consultants to provide subsidised services; updating the existing online database of agencies and organisations supporting SMEs; and incorporating a business linkages database to facilitate connections between local suppliers and leading industrial firms operating in Viet Nam. Provincial authorities also help maintain the National SME Support Portal by providing information on events in their locality, although linkages with other portals hosted by cities and provinces would add value for SMEs searching for broad-based and inclusive information.
The “health check diagnostic” is a strong feature of the National SME Support Portal
One of the strong features of the National SME Support Portal is a “business health check” diagnostic tool, which has proven to be effective in prompting small business managers to make changes (Cowling and Oakley, 2009[7]). This easy-to-use tool enables SMEs to self-assess their internal capabilities in 10 key areas (e.g. marketing, leadership, personnel, financial management and work productivity) and identify the areas of the business most in need of attention. A traditional (non-digital) health check involves meetings with an external adviser who can clarify any questions SME managers may have, interpret results of the assessment, probe for further information, and direct SME managers to the appropriate resources to help with remedial actions. A digital self-assessment diagnostic tool does not incorporate this face-to-face interaction with an advisor, which could be a limitation. To address this issue in Viet Nam, the AED is implementing a pilot project, in partnership with a private business coaching firm, to test how a coaching service might work with the online business health check. During the pilot, an SME manager completing the self-assessment can schedule a one-hour (online) appointment with a Business Coaching Expert to discuss the results and receive advice and direction. This service should add significant value to the diagnostic experience, with close monitoring of the outcome by the AED.
The Assistance Centres for SMEs (TACs), which are the primary source of public BDS, could be strengthened
The TACs are the main public providers of BDS to SMEs. From their central locations, they purport to serve the northern, central and southern provinces of the country. The consultancy services are often incorporated as a component in the delivery of specific SME support programmes that target cohorts of SMEs. An example is the Productivity Improvement Programme (PIP), which emphasises the implementation of the structured Kaizen 5S system to boost operational efficiency in business enterprises.1 TACs also provide on-site technical management training for a small number of companies, often contracting with external experts to deliver the training.
E-Academy is the Turkish Government’s entrepreneurship training platform. It was launched in August 2019 by the SME Development Organisation of Turkey (KOSGEB). The E-Academy Platform includes lecture videos, interactive course content, and exam modules. The training is accompanied by access to the online KOSGEB Entrepreneurship Handbook, which outlines and explains the 16 modules spread over two levels of training. The Traditional Entrepreneurship Training includes 8 modules covering the basics of planning and starting a new business in traditional sectors. The Advanced Entrepreneurship Training includes 8 modules covering issues such as innovation management, intellectual property rights, and management of growth processes and strategies that are tailored to innovative and technology-based enterprises.
Factors of success
The E-Academy Platform makes practical entrepreneurship training more conveniently available to interested potential entrepreneurs and SMEs in all regions of the country, without the space, scheduling and costs constraints of the traditional site-specific, classroom-based training format.
Learners receive a certificate upon completion of the training courses, which may be a prerequisite for admission to some of KOSGEB’s SME Support Programmes.
Relevance to Viet Nam
The TAC E-Learning platform could be enhanced by developing a similar series of more comprehensive and interactive training modules. This would be compatible with the emphasis of the SME Support Law on the provision of training on entrepreneurship and business administration, including online access. The more fully-developed training modules could be directed to SMEs as an initial follow-up step in addressing weaknesses identified in their diagnostic health check self-assessment.
Source of further information
KOSGEB e-Akademi distance training system; https://en.kosgeb.gov.tr/site/tr/genel/destekdetay/7210/entrepreneurship-training/
The Ha Noi TAC has innovated with expanding its reach to a broader base of SMEs by developing an online E-learning system.2 This seeks to make expert knowledge accessible to SMEs that would likely not meet the criteria for participation in the TAC’s main BDS programmes. The learning platform includes short lectures and “talks” on problems and solutions related to sales, marketing, finance and leadership skills, among others, that can be accessed from a learner’s smartphone. As a next step, to take further advantage of the online learning technology it has developed, the TAC could consider adding more comprehensive, interactive course content, along the lines of Turkey’s E-Academy Platform (see Box 7.2).
In addition to the TACs, other central ministries and agencies implement SME support programmes that involve training, advisory and consultancy services to “targeted” SMEs, such as SMEs in supporting industries or “science and technology enterprises” (STEs). For example, the Supporting Industry Enterprise Development Centre (SIDEC) provides consulting and training related to ISO quality management and control systems; VIETRADE has a general consultation desk for exporting companies; and the National Agency for Technology Entrepreneurship and Commercialisation (NATEC) operates a Training and Support Centre for technology-based companies.
Each of the state-level institutions functions separately, with very little inter-institutional co-ordination or cross-fertilisation. The government should seek to achieve a greater level of inter-institutional co-ordination in the area of SME support and, specifically, in the provision of BDS to avoid possible duplications and inefficiencies in the use of public resources (see further discussion in later section of the chapter).
Provincial-level BDS support
Provincial government support for BDS could benefit from central government assistance
Viet Nam has a partially devolved system for supporting SMEs that allows provincial People’s Committees to establish their own SME support mechanisms (as per the SME Support Law). The AED draft report on the implementation of the SME Support Law after two years (issued in March 2020) reported that 50 of the 63 provinces had programmes to support SMEs. Provincial Departments of Planning and Investment (DPIs) have each assigned a “focal point for SME development assistance”, but in general local branches of government are at an early stage in developing SME support programmes and services.
Devolving business support to the sub-governmental level has merit, particularly with respect to local knowledge of resident SMEs, but also poses challenges. The main potential weakness is a lack of local competence in developing an SME support plan and business development programmes (Thuy, 2017[8]). The MPI has organised capacity training for local officials to improve the quality and effectiveness of local SME support activity; even so, a number of provinces still do not have a plan for local SME support.
Many localities implement programmes of training and retraining of human resources, which are in high demand by SMEs at the local level. Local governments also provide free consultancy services to household businesses on administrative taxation procedures and accounting regulations in an effort to encourage their formalisation (as per the SME Support Law).
Forms of business assistance are offered through various provincial-level offices, such as Investment Promotion Centres, Trade Promotion Centres, and Business Registration Offices, but fewer than 20 provinces have established “designated” centres for SME support, advice, and enterprise development assistance.3 The SME Support Centre at the Ha Noi DPI is one of the best examples.4 The SME Support Centres co-ordinate little with each other, and have few opportunities to exchange experience and good practices. In this regard, the TACs, on behalf of the AED, could assume a more strategic role in overseeing the development of BDS in their respective regions. They could become a “hub” for BDS expertise by providing training courses and professional guidance on SME support for provincial leaders and staff. Support for capacity building and expertise-sharing relative to SME assistance is clearly needed and would strengthen the BDS delivery capacity of provincial entities, ideally leading to a more consistent set of BDS offers and programmes.
Business associations and BDS
Business associations play a key role in provision of BDS
The major business associations are actively engaged in providing BDS support to their member enterprises. The Viet Nam Chamber of Commerce and Industry (VCCI) disseminates information about various SME support programmes and delivers training programmes, often carried out in partnership with other institutions (e.g. the ILO Start and Improve Your Business/SYIB course). A number of VCCI branch locations operate their own SME Promotion Centres (SMEPCs). In particular, the SMEPC in Ho Chi Minh City delivers support to SMEs in the six neighbouring provinces. This includes training, consultancy, information, trade promotion, and events (e.g. workshops, seminars, conferences). Training courses and other services help SMEs improve their business planning, management, marketing and export skills; strengthen linkages with value chains; learn about 5S, lean production, and acquiring quality standards; and expand their domestic and foreign markets. A small number of courses are also targeted to household businesses, mainly covering tax compliance and record-keeping (which are subsidised by the state in accordance with regulations of the SME Support Law).
The Ha Noi SME Association serves SMEs through its two business support centres. The Legal Counselling Centre offers training courses in conjunction with legal partners and provides direct advice to SMEs on legal issues. The Trade Promotion Centre offers training courses to SME managers and facilitates trade connections with Vietnamese embassies. The Association also offers short courses on entrepreneurship; delivers customised courses and on-site training to specific SMEs on a request basis; consults with start-ups, business incubators and investors; and organises Business Forums to advise SMEs on IT solutions and the application of Industry 4.0 technologies to enhance business competitiveness.
The Viet Nam Association for Supporting Industries (VASI), an important partner of the MPI, the Ministry of Industry and Trade (MOIT) and the Ministry of Science and Technology (MOST), provides training, general consultation services, and hands-on management support to improve the capacity of its member firms as suppliers in global value chains. It also facilitates business-matching with domestic buyers and exporters.
The Viet Nam Association of SMEs (VINASME) provides some counselling and support to SMEs on production and business practices to improve competitiveness. It trains about 5 000 firms a year; the most popular courses being basic training on business administration and compliance with new regulations. Given that VINASME is the largest business association in the country (over 60 000 members), its role in BDS provision appears to somewhat limited.
Private-sector BDS
The private BDS market is relatively modest but recent SME policy measures could help stimulate the offer
The private consultancy industry in Viet Nam is still small and plays a modest role in Viet Nam’s SME landscape. There are three kinds of private consultancies in the country: 1) large, multinational consulting firms that serve mainly foreign enterprises and joint venture companies; 2) small consulting firms with up to three consultants; and 3) individual freelance consultants (JICA, 2019[9]). Most of the consultancy firms specialise in certain areas, such as 5S, lean production, accounting/taxation or marketing. The selection of firms which could provide comprehensive management consulting services is limited.
Few local SMEs can afford, or are willing to pay, the expensive consulting fees of the large consulting firms (USD 500-1 500/day) or the local consulting firms (USD 350-1 000/day). Even the smaller Vietnamese consulting firms have not been wholly successful in tapping into the local SME market (JICA, 2019[9]). As well, the majority of private consultancy firms are located in the central cities, namely, Ha Noi, Ho Chi Minh City and Da Nang. From these bases, they may in principle extend their services throughout the northern, southern, and central provinces, although there is evidence that the use of BDS diminishes with distance from the location where it is delivered and that small companies in peripheral regions are less likely to be aware of the existing BDS offer.
Market failures in the provision of private BDS to SMEs (i.e. availability, accessibility, cost) justify government intervention (OECD, 2020[3]). Policy measures may include making consultation services available in public institutions, such as through the SME support centres, or stimulating demand for private BDS through the use of subsidised consultancy programmes. As a general rule, public provision of BDS should not have a crowding-out effect on private providers.
In this regard, the Vietnamese government is implementing a national policy to create a private sector market for BDS. The SME Support Law mandated the establishment of a network of consultants and consultancy services to provide subsidised BDS to SMEs. The AED’s Circular (No. 06/2019) on the operation of the consultancy network was issued in mid-2019 and steps are underway to establish and populate the network. Broad circulation of the call for applications will create awareness of this opportunity among private BDS providers and should stimulate a market response. Being approved as a network member will bring new business from the SME sector through the government’s BDS subsidy programme and provide an incentive for the private BDS providers to participate.5 Going forward, the AED should monitor the private sector take-up and implement remedial actions, as necessary, to attract a larger number of firms, with diverse competencies, and from all parts of the country (not only the three major cities).
The framework for future development and improvement of the BDS system in Viet Nam should address three major issues: 1) designing a low-cost scheme reaching a wide range of SMEs; 2) assuring the quality of consultants, advisors and service delivery, and 3) implementing a mechanism to foster co-ordination of the existing BDS providers.
Designing a low-cost scheme reaching a wide range of SMEs
It is important to develop a low-cost mechanism for reaching out to the mass of SMEs and to target policy where the market fails, i.e. the underserved markets. There are two prongs to this approach. First, there is a need to develop a lower cost service that can be rolled-out to many more SMEs. SME web portals with online diagnostic tools, interactive training materials, and “virtual” advisors are an increasingly popular “low cost, high reach” approach of governments in OECD countries. In Viet Nam, the National SME Support Portal could be further enhanced to become the “go-to” hub for all information, knowledge, guidance and resources necessary for entrepreneurs and SMEs. The AED should seek to achieve this by, for example:
Expanding information and guidance to SMEs on starting and growing a business;
Integrating content and tools adding value from websites of other Vietnamese organisations, such as the Ha Noi TAC E-learning tool;
Enriching the learning opportunities for entrepreneurs by developing interactive training modules, similar to Turkey’s E-Academy;
Animating the online database of approved consultants, specifying their expertise and matching it with the existing offer of subsidised consultancy services;
Adding a virtual “question and answer” window for entrepreneurs to ask their questions and receive a response within a short period of time.
Reaching underserved BDS markets in Viet Nam’s peripheral regions is an ongoing challenge. Peripheral areas are less attractive locations for BDS providers because they are not only harder to reach, but they also have lower firm density and a higher proportion of firms in less productive sectors than cities (Johansson and Klaesson, 2011[10]). Consequently, BDS markets in these regions are less likely to be self-supporting. Given these factors, fully-funded or subsidised BDS schemes are critically important. Experience from BDS actors in large cities, such as the Ha Noi SME Association, is valuable to SMEs in less central areas, especially in transferring capabilities and providing ring-fenced (financially separated and protected) funds for BDS. The National SME Support Portal is part of the solution to supporting SMEs in non-urban areas, assuming Internet access. Other options to consider to reach into these markets are partnering with local SME associations, making use of virtual counselling or coaching sessions, and operating a Mobile BDS Clinic that travels to remote locations on a periodic schedule (see Kazakhstan example in Box 7.3).
Second, an emphasis on cost-recovery from BDS programmes aimed at SMEs would reduce net costs. Evidence from experimental studies shows that beneficiaries pay more attention to advice that costs them personally (Gino, 2008[11]). A voucher scheme would largely fit in the cost-recovery approach. Vouchers enable firms to apply the subsidy as a one-off taster for a business support service, realise its value and be more willing to pay full costs thereafter. Thus, the BDS development framework should include adoption of a voucher scheme to cover a portion of the cost of acquiring a BDS service.
Kazakhstan’s Ministry of National Economy operates a “single window” network of Entrepreneurship Support Centres (ESCs) in partnership with offices of the National Chamber of Entrepreneurs. To address the needs of SMEs in rural villages, the government of Kazakhstan has created Mobile Entrepreneur Support Centres as an integral component of the ESCs. These mobile units make regularly scheduled visits to rural areas to provide initial advice and information to aspiring and existing entrepreneurs, and disseminate information and handouts on government assistance programmes.
Source: OECD (2018[12]) SME and Entrepreneurship Policy in Kazakhstan 2018, OECD Publishing, Paris.
Assuring the quality of consultants, advisors and service delivery
The Government guidelines for implementing a national consultancy system state the basic criteria to be applied in accepting individual consultants and consultancy firms into the network of consultants. Individual consultants must have professional qualifications, experience, and level of education appropriate to meet the needs of SMEs (based on evidence provided in curriculum vitae, training certificates and experience records). Consultancy firms must submit their experience record, résumés of staff consultants and establishment licence. Focal point units in the government manage, supervise and evaluate the operation of the network of consultants in their respective branches, including an annual review of the performance of the network.
However, additional efforts may be required to assure quality in the actual service delivery. This could include the administration of SME client surveys on the quality of work delivered and the overall relationship with the assigned consultant. While it may still be too early for the AED to identify any capacity or quality issues in the consultancy network, the Agency’s officials should be anticipating approaches to addressing these kinds of issues. The experience from Poland illustrates an approach to ensuring the quality of BDS providers and services nationwide (see Box 7.4).
Description of approach
The Polish Agency for Enterprise Development (PARP) is responsible for running the National SME Services Network (KSU), a national umbrella for service providers. The network gathers over 200 member organisations providing state co-financed BDS to SMEs and entrepreneurs: non-governmental organisations, regional development agencies, chambers of commerce and industry, employers’ organisations, crafts associations, technology centres, business incubators, credit guarantee funds, loan funds, foundations, and small consulting firms. PARP is the co-ordinating body for the functioning of the KSU support centres, setting the rules for the accreditation of institutions and consultants providing services to enterprises. It also provides technical and capacity building support to KSU network organisations; conducts performance assessments to test the quality of services provided by KSU centres; and provides training for KSU consultants to ensure adequate quality of services.
Factors of success
The KSU network has succeeded in upgrading the quality and uniformity of standards of publicly-funded BDS services in Poland. The method of accreditation of institutions and professionals providing services to enterprises is one of the factors behind this success. All business support organisations belonging to the network must meet the standards and quality criteria for accreditation as a PARP support provider. All members must demonstrate they have the technical and financial capacity to adequately provide advisory, training, and information or financial services to start-ups, microenterprises, and SMEs; have a quality assurance system in place; and act in accordance with professional ethics standards. Consultants providing business development advice under PARP-supported schemes must also be individually accredited. Over 1 400 consultants have been accredited to work in the KSU system.
Obstacles and responses
Monitoring the quality of BDS provision requires a systematic approach. PARP monitors the activities of business support providers by collecting data on the number of clients served, the percentage of start-ups versus existing SMEs supported, and the nature of the service provided. This information helps in identifying imbalances in the allocation of services and possible adjustments. PARP also undertakes client satisfaction surveys to assess the quality of services provided by the KSU centres, as well as research on the demand for and supply of business support services. This provides important insights on how to customise and improve services to better meet client needs.
Relevance to Viet Nam
The PARP experience provides a model for Viet Nam to design a quality system for BDS providers under the requirements of a national consultancy system. This includes establishing the foundational framework for upgrading the quality of business support services through a system of accreditation, quality monitoring, and capacity building.
Sources: Polish Agency for Enterprise Development, https://en.parp.gov.pl/; OECD (2010[13]) Poland Key Issues and Policies, OECD Studies on SMEs and Entrepreneurship, OECD, Paris.
On the other hand, there is already a great deal of variability in the capacity and competence of officials working in public agencies and SME support centres (or equivalents) to deliver BDS support. In many OECD countries, governments will provide training and capacity building to public sector employees engaged in providing services to SMEs. This might include training in comprehensive care methodologies, counselling techniques, or other approaches to ensure a standard level of consistency and quality in service provision. For example, in the Philippines, all business counsellors and staff employed in the Negosyo Centres must undergo the Small Business Counselling Course training that covers modules on business diagnostics strategic marketing, operations management, and investment promotion. Business facilitation training is also delivered to regional staff.
No organisation in Viet Nam has been assigned responsibility for training or building capacity of consulting/advisory service providers, while at the same time, very few public service providers have capability in comprehensive diagnosis of the weakness of an enterprise and its underlying cause (JICA, 2019[9]). To address this gap, the AED, in co-operation with the TACs, should examine the issue of consistency and quality of service delivery in the provincial-level SME support centres, and elaborate a strategy to build the competence and capacity of frontline staff delivering BDS programmes to meet minimum quality standards.
Ultimately, Viet Nam could implement a qualification or accreditation system for BDS consultants/advisors in both the public and private sectors.
Building a co-ordinated system for existing BDS providers
In its oversight role, the AED links national, regional (TACs) and provincial efforts in developing business support. However, SME support and delivery of various BDS is dispersed across many Vietnamese organisations, including government, non-governmental and private sector actors, and lacking an established mechanism to promote co-ordination.
To address this issue, the MPI and the AED have partnered with the Japan International Cooperation Agency (JICA) on a pilot project in Ha Noi and Ho Chi Minh City to build a network of the varied BDS organisations and consultants as the foundation for a comprehensive SME support system (JICA, 2019[9]). The aim of the pilot was to improve information-sharing and effective delivery of BDS to SMEs. Lessons learned from the pilot revealed two important issues. Firstly, there are advantages to creating a network of BDS providers in a province and clarifying the roles and functions of each one. Essential to this process is an initial mapping of the public and private suppliers and their service offerings.6 Secondly, it is necessary to standardise the quality of BDS consultation services. This can be achieved through training courses geared to strengthening the diagnostic, advisory and counselling capacity of members of the network. In addition, network members require orientation on use of a referral system to direct SME clients to the BDS provider(s) with the required expertise to solve their management challenges.
The MPI and the AED should build on the experience and lessons learned of the JICA pilots to launch BDS co-ordination projects in other provinces of Viet Nam. The experience of Thailand in implementing a similar project to build an integrated network of BDS providers may provide useful lessons for Viet Nam (see Box 7.5).
Description of approach
Thailand implemented the Regional Integrated SME Promotion (RISMEP) project as a partnership between the Thai Department of Industrial Promotion (DIP) and the Japan International Cooperation Agency (JICA). The objective was to build an integrated and “collaborative” network of BDS-providing organisations and professionals to deliver quality business advisory and consultancy services to SMEs in a more effective and efficient manner. The RISMEP project was initially implemented by the DIP Industry Promotion Centres (IPCs) in 11 provinces and later extended to other areas of the country. By 2019, 22 provinces were participating.
Factors of success
To produce a more horizontal, integrated approach to servicing the BDS needs of start-ups and SMEs, networks of Business Development Service Provider (BDSP) were formed in each province. Network members included the one-stop consultation counters, government offices, SME support organisations, independent consultants, financial institutions, chambers of commerce and industry, the Federation of Thai Industries, SME associations, and university lecturers. Information on the BDS-providing organisations and professionals (BDSPs) and their services was integrated into an organised list (database). This database was an essential tool to aid the process of selecting the appropriate support services (and providers) to meet the SME client’s needs. The effective implementation of the collaborative referral system required all network members to be knowledgeable about all specialties and support programmes available throughout the network.
All network members were trained in the RISMEP approach and provided with a Compendium of Collaborative Support Models that included more than 20 modules dealing with various kinds of counselling and BDS issues. The use of the Japanese-developed Shindan “awakening tool” (simple diagnostic tool) aided the BSDP members to diagnose the client’s needs and do proper referral to a network member.
The project was able to address the major factors impeding the usage of BDS by SMEs identified at the beginning of the pilot phase (JICA/UNICO, 2018[14]). The project’s impact evaluation concluded that establishing a formal network among BDS providers in RISMEP provinces reduced the major supply-side constraints to the take-up of BDS services (by reducing the cost of search), resulting in increased demand for BDS services, particularly on technical and marketing issues (Suzuki and Igei, 2017[15]). Relative to control group provinces, RISMEP provinces experienced a greater increase in the number of assisted SMEs and referrals to other BDS providers. The BDSPs in the RISMEP networks expanded the availability of their services to SMEs by having websites and accepting online consultations, thus improving their overall BDS practices.
Based on the success of the project, in 2019, the Thai Government announced budget funding for the continuation and expansion of the RISMEP mechanism with the goal to establish it in all 76 provinces by 2023.
Relevance to Viet Nam
Viet Nam would benefit from a more co-ordinated approach to BDS delivery across the country. A project similar to the Thailand RISMEP mechanism could address this need. The responsibility for spearheading the initiative could lie with the AED. The TACs could assume responsibility for working with the People’s Committees and SME support centres at the provincial level to develop and build the capacity of a network of accredited BDS providing organisations.
Sources: JICA/UNICO (2018[14]), “The Study on the Strengthening Mechanisms for the Regional SME Promotion and Consultancy Service Quality Development in the Kingdom of Thailand”, Japan International Cooperation Agency and Department of Industrial Promotion, Ministry of Industry; JICA/UNICO International Cooperation (2018), “Regional Integrated SME Promotion (RISMEP) in the Kingdom of Thailand”, Work Completion Report, Japan International Cooperation Agency; Suzuki and Igei (2017[15]), “Can Efficient Provision of Business Development Services Bring Better Results for SMEs? Evidence from a Networking Project in Thailand”, JICA Research Institute, Tokyo.
Implementation of a monitoring and evaluation approach is essential to a well-functioning BDS system. As noted in Chapter 4, the Vietnamese government appears to be adequate on monitoring the progress of programme implementation, but less advanced in the conduct of formal evaluations to assess the impact of programme interventions on recipient firms. Applied to BDS, the purpose of monitoring activity is to track the take-up of BDS offers, the types of services being offered and received, and the level of satisfaction with the service. The purpose of an evaluation of BDS is to assess its value to SMEs and estimate the causal impact of particular BDS services on SME performance outcomes.
A monitoring survey of the BDS markets in Viet Nam would enable an assessment of supply and demand
A key monitoring question is whether the supply of BDS is meeting the demand. In order to provide top-quality business support to entrepreneurs and SMEs, it is necessary to systematically and regularly analyse the demand side of the market for these services. This can be done by examining the level of awareness entrepreneurs and SMEs have of the availability of support services; their needs with respect to the content and delivery methods of support services; their level of participation (take-up) in recent time periods (from public versus private sources); and their general attitude towards the use of BDS.
In Viet Nam, the AED could work with the General Department of Statistics or an independent research organisation to update its knowledge on the demand side of BDS and the penetration rate among all SMEs. This would involve carrying out a representative survey of the SME population to determine the take-up of existing BDS; the reasons why SMEs have not availed of public BDS support; the desired BDS of the two cohorts of survey respondents (those who have and who have not used BDS services); and their level of satisfaction with the BDS provision. The results of such a demand survey could produce factual evidence of gaps in meeting some specific BDS needs of SMEs, given the current supply offers, or difficulties in reaching certain segments of the SME population. For example, a BDS market with strong supply but weak demand suggests the need for raising the level of awareness or incentivising demand by introducing a voucher scheme (Sala, Landoni and Verganti, 2016[16]). On the other hand, a BDS market with strong demand and weak supply requires efforts to develop the BDS-providing sector. Information from the demand survey may also serve to identify new business support services appropriate to Viet Nam and its provinces. This could be ascertained from the reasons given by SME managers for their non-use of BDS, the percentage of non-users who nevertheless believe that BDS would be important to their business competitiveness, and the proportion of SMEs expressing a willingness to pay for a service (North et al., 2011[17]).
Evaluation of the BDS market would enable better decisions on its design and effectiveness
A formal evaluation of the BDS market can help quantify the cost effectiveness of public investment in BDS provision (Piza et al., 2016[1]), an important influence in the decision to expand successful programmes and terminate unsuccessful ones. A rigorous evaluation approach would require comparing the post-intervention performance of assisted firms (i.e. treatment group) with a control group of non-assisted firms from the same sector and sharing similar features to the treatment group. This could be done, for example, by comparing firms selected for support to firms that had applied but had not been selected only due to the budget constraints of the programme (OECD, 2008[18]). In addition, qualitative research, such as cases studies, might also be considered to shed light on the processes and mechanisms through which BDS achieves impact.
In summary, Viet Nam should take two actions to develop a good monitoring and evaluation process: 1) establish a bi-annual (monitoring) survey of SMEs to better understand the ongoing dynamics in the demand and supply of BDS; and 2) design and undertake an evaluation of BDS, preferably conducted by third parties, but in co-operation with a relevant administrative government department.
While the context in Viet Nam is favourable for BDS development, there are still a number of weaknesses in the national BDS ecosystem. The delivery of BDS support is dispersed across a variety of organisational actors – central and provincial government bodies, business associations, and private sector consultancy firms – each functioning separately from the others, providing various forms of BDS support, with limited opportunities to exchange experience or collaborate. There is currently no mechanism for inter-institutional co-ordination of the BDS activities. Such a mechanism would help greatly in reducing the fragmentation of BDS support and its delivery across the country, increasing efficiencies, and filling gaps in service offerings. The AED should seek to achieve a greater level of inter-institutional co-ordination in the area of SME support and, specifically, in the provision of BDS. The MPI-AED should also continue the partnership with JICA to build on the Ha Noi and Ho Chi Minh City pilot project with a view to replicating the “comprehensive BDS support system” and collaborative network of BDS providers in other provinces of Viet Nam.
There is significant variability in the capacities and capabilities of the provincial-level SME support centres (or equivalents) to deliver quality BDS to SMEs, which needs to be addressed. Support for capacity building and expertise-sharing relative to SME assistance is clearly needed. This would strengthen the BDS delivery capacity of provincial entities, ideally leading to a more consistent set of BDS offers and programmes. In this regard, the TACs could assume a stronger leadership in developing the competencies and standards for BDS provision. This could entail developing training programmes focused on basic business knowledge, counselling techniques, and diagnostic skills, as well as guidance on the scope of standard BDS offers. The objective would be to raise the overall quality standard of all BDS providers at the local level.
The private BDS market is not well developed. The recent initiative to establish a network of consultancies, combined with the announcement of a subsidy scheme to promote the use of consultancy services by SMEs, should stimulate a rise in the supply of private providers. To control the quality of these services, the AED will need to play an active role in monitoring the individual assignments, including collecting feedback from SMEs on the consultancy experience.
Existing gaps in BDS provision to underserved SME markets should be addressed. This includes SMEs outside the main cities but may also apply to the mass of SMEs not fitting the profile of the priority target groups stipulated in the SME Support Law (i.e. innovative start-ups, SMEs participating in GVCs, and household businesses). Low cost, high reach approaches to serving these markets should be identified and put into place. The National SME Support Portal is an obvious avenue, assuming Internet services are available, but other virtual, physical, or mobile options may be considered. Since the National Portal is serving as the first-stop entry point for information and guidance, the AED should continue its efforts to enhance content, include value-added tools and resources, and develop linkages to the websites of partner organisations.
Finally, the AED should work with others to design and execute a monitoring and evaluation system for BDS support.
The following recommendations could be considered to strengthen the offer of BDS in Viet Nam.
Policy recommendations on business development services
Consider establishing new Assistance Centres for SMEs to ease access to government-supported BDS by SMEs located away from the current three centres. Alternatively, build up and expand the capacity of the existing centres to reach more peripheral locations, for example through mobile training units.
Encourage the rise of a private market for BDS by covering part of the training or consulting costs faced by SMEs, while also controlling and ensuring the good quality of publicly-subsidised, private-sector BDS.
Introduce a BDS voucher scheme to create an incentive for more SMEs, especially in peripheral regions, to benefit from business development services.
Examine the consistency and quality of BDS delivery in the provincial-level SME support centres, and elaborate a strategy to build the competence and capacity of staff to meet minimum service and quality standards.
Enhance the comprehensiveness of the National SME Support Portal, including linkages with other national/provincial SME portal(s) and the integration of innovative tools, such as the TAC E-learning materials, to make it the “hub” for all information necessary for entrepreneurs and SMEs.
Build on the pilot projects for a comprehensive BDS support system in Ha Noi and Ho Chi Minh City by rolling out this approach to other regions. In the meantime, conduct a mapping of BDS-providing organisations and business consultants in each province, sorted by their location and types of services they provide.
Design a system for the monitoring and evaluation of publicly-supported BDS schemes that includes a bi-annual (monitoring) survey of SMEs to track the supply, use and quality of BDS provision nationwide, including client satisfaction surveys.
References
Cowling, M. and J. Oakley (2009), Early assessment of Business Link health checks, Department for Business Innovation & Skills, Institute for Employment Studies. [7]
Cravo, T. and C. Piza (2019), “The impact of business-support services on firm performance: a meta-analysis”, Small Business Economics, Vol. 53, pp. 753-770. [2]
Edwards, V. and A. Phan (2013), Managers and Management in Vietnam., Routledge. [4]
Gino, F. (2008), “Do we listen to advice just because we paid for it? The impact of advice cost on its use”, Organizational Behavior and Human Decision Processes, Vol. 107, pp. 234-245. [11]
JICA (2019), Data Collection Survey on SME Promotion and Industrial Development in Viet Nam, Japan International Cooperation Agency, Tokyo. [9]
JICA/UNICO (2018), Regional Integrated SME Promotion (RISMEP) in the Kingdom of Thailand. Work Completion Report, Japan International Cooperation Agency, Tokyo. [14]
Johansson, B. and J. Klaesson (2011), “Agglomeration dynamics of business services”, Annals of Regional Science, Vol. 47, pp. 373-391. [10]
North, D. et al. (2011), Research to Understand the Barriers to Take up and Use of Business Support, Centre for Enterprise and Economic Development Research (CEEDR), Middlesex University Business School, London. [17]
OECD (2020), International Compendium of Entrepreneurship Policies, OECD Studies on SMEs and Entrepreneurship, OECD Publishing, Paris, https://doi.org/10.1787/338f1873-en. [3]
OECD (2018), SME and Entrepreneurship Policy in Kazakhstan 2018, OECD Publishing, Paris. [12]
OECD (2010), Poland Key Issues and Policies, OECD Studies on SMEs and Entrepreneurship, OECD, Paris. [13]
OECD (2008), OECD Framework for the Evaluation of SME and Entrepreneurship Policies and Programmes, OECD Publishing, Paris, https://doi.org/10.1787/9789264040090-en. [18]
Piza, C. et al. (2016), The Impact of Business Support Services for Small and Medium Enterprises on Firm Performance in Low‐and Middle‐Income Countries: A Systematic Review, pp. 1-167. [1]
Sala, A., P. Landoni and R. Verganti (2016), “Small and Medium Enterprises collaborations with knowledge intensive services: an explorative analysis of the impact of innovation vouchers”, R & D Management, Vol. 46, pp. 291-302. [16]
Suzuki, A. and K. Igei (2017), Can Efficient Provision of Business Development Services Bring Better Results for SMEs? Evidence from a Networking Project in Thailand, JICA Research Institute, Tokyo. [15]
The Committee of Donor Agencies for Small Enterprise Development (2001), Business Development Services for Small Enterprises: Guiding Principles for Donor Intervention. [5]
Thuy, D. (2017), “Local economic governance and the development of the business sector in Vietnam”, VNU Journal of Science: Economics and Business, Vol. 33, pp. 16-25. [8]
Notes
← 1. “5S” refers to a standard, systemised 5-step continuous improvement process that involves going through everything in a space and deciding what is necessary and what is not (Sort); organising – a place for everything, everything in its place (“Set in order”); keeping the workspace clean (“Shine”); and setting up procedures for performing these tasks on a regular basis (“Standardise” and “Sustain”).
← 2. The online e-learning system of Ha Noi TAC can be consulted at https://vietnamsme.gov.vn.
← 3. Based on information from the list of “focal points to help SMEs locally” and the list of “business support centres” on the National SME Support Portal.
← 4. The Ha Noi SME Support Centre supports enterprises through training (on quality human resources, cleaner production, Kaizen management, new technology, e-commerce, and online marketing) and contracting of domestic and foreign experts to improve the production and export capacity of handicrafts and supporting industries. The centre also supports external market promotion activities via: 1) training businesses on the use of effective marketing tools; 2) organising and supporting the participation of SMEs in specialised trade fairs overseas; and 3) facilitating connections and information exchange with foreign professional organisations and associations.
← 5. The consultancy fees of qualifying SMEs and projects can be subsidised according to the size of the enterprise and the project: 100% subsidy for a consultancy contract to a micro-enterprise, for not more than VND 3 million per year; 30% subsidy for a small enterprise, not exceeding VND 5 million per year; and 10% subsidy for a medium enterprise, not exceeding VND 10 million per year.
← 6. The pilots in Ha Noi and Ho Chi Minh City focused mainly on mapping public organisations because they are the major providers of BDS support to SMEs. In replication of the project in other locations, the mapping should include private BDS providers as well.