Competition Policy and SMEs in Vietnam

Vietnam stands at an important crossroad in its transition from a planned to market-oriented economy. Since the implementation of economic reform starting with Doi Moi in 1986, supplemented with further reform from 1989, the economy experienced rapid economic growth during the period of the 1990s until 1997. Since this time GDP growth has noticeably slowed, partly due to the onset of the financial and economic crisis to afflict the region in 1997-98, and partly due to a disconcerting, and related, decline in foreign direct investment flows. Despite this adverse development there has been a remarkable transformation of the economy that has seen it become more globally oriented, as exemplified by a rapid growth of both exports and imports and with a significant contribution to the economy from the foreign invested sector. For Vietnam to once again re-establish high and sustainable rates of economic growth will require further restructuring and reform efforts. In particular, this will require further progress in: establishing the institutional framework necessary for a market economy; ownership reform; encouraging foreign direct investment; allowing the private sector a larger role in the management and ownership of currently state owned enterprises; allowing unviable state owned assets to be liquidated and their assets put to more productive usage; and encouraging fair competition between different ownership forms, with the state, as a buyer, not discriminating against any form of ownership. These should form the core of the country's competition policy. This paper focuses upon the need for competition policy to encourage the nurturing, growth and development, specifically, of private sector small and medium enterprises (SMEs). Private entrepreneurship and enterprise reform can play a crucial role in the reform of the Vietnamese economy. Establishing a dynamic non-state manufacturing sector, with an emphasis on SMEs, will be a precondition for attaining the twin objectives of (1) restructuring and slimming state enterprises and (2) expanding non-farm employment and income opportunities. SMEs have the potential for job creation, contributing to sustainable economic development, allocating resources more efficiently, expanding exports, achieving a more equal distribution of incomes, and assist in rural and regional development.