mid term report the impact of government regulation on smes in vietnam

1 FOREIGN TRADE UNIVERSITY HO CHI MINH CITY CAMPUS MID-TERM REPORT THE IMPACT OF GOVERNMENT REGULATION ON SMES IN VIETNAM Lecturer: MA.Lê Thị Thanh Ngân MA Trần Thanh Tâm Class: K57CLC4 Student: Lê Phương Thảo 1801015809 Quách Minh Tân 1801015776 Bùi Thanh Tầm 1801015773 Nguyễn Chánh Thắng 1801015778 Hồ Minh Tâm 1801015767 Ho Chi Minh City, October, 2020 Table of Contents Abstract I Introduction Background and Problems Purpose of research Research method 12 Research structure 13 II Literature review: 14 Overview of SME 14 1.1 Definition of SMES: 14 1.2 Importance of SMES 16 1.3 Characteristics of SMES 19 1.4 SMES performance 21 Government Policy 24 Relationship between Government Policy and SME Firm performance 26 Relationship between Government Policy and SME Firm performance in the Vietnamese context 30 4.1 Growth of SMES in Vietnam 30 4.2 Distribution of SMEs in Vietnam 32 4.3 The background of government support and its role in SME performance in Vietnam 33 III Methodology 37 Data selection 37 Model specification 38 Regression Results 39 IV Conclusion and discussion 43 References: 46 mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam Table catalog Table 2.1.1.1: Definition of micro-, small- and medium-sized enterprises in EU 13 Table 2.1.1.2: A comparision of official definitions of SMES 15 Table 2.4.2.1: Distribution of SMEs by industry, 2006-2015 30 Table 2.4.2.2: Distribution of SMEs by economic region over time, 2006-2015 31 Table 3.1: overview of descriptive statistics of all variables 35 Table 3.2: List of independent variables with their measurement, parameter expectations, and meanings 36 Table 3.3.1: Correlation between independent variables of model 37 Table 3.3.2: Regression result of model 37 Table 3.3.3: Correlation between independent variables of model 38 Table 3.3.4: Regression result of model 38 mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam Figures Catalog Figure 2.1.4.1: Components of Performance Measurement 21 Figure 2.4.1.1: Contributions of SMEs to business sector in Vietnam, 2006-2015 28 Figure 2.4.1.2: Number of SMES in Vietnam, 2006-2015 29 Figure 2.4.1.3: Total revenues of SMEs in Vietnam, 2006-2015 29 mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam Abstract Vietnam has been developing rapidly since Doi Moi (Renovation) 1986 The number of SMEs in Vietnam has been increasing each year which is shown in the motivation, entrepreneurship and the performance of SMEs in Vietnam the government has had to adapt with the rapid changes, so the regulations have been revisited every year for updating This has a major impact on the SMEs since constant changing every year is inevitable This study presents the impact of government regulations on the development of SMEs in Vietnam We gathered data from many studies to show the growth rate of SMEs, the positive and negative impact of government regulations on SMEs growth, the problem and solutions to the problem The research results provide objective insight for policy makers, the central and local government about their policies effectiveness mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam I Introduction Background and Problems Vietnam began an economic reform program called Doi Moi in 1986 This officially heralded the shift to a market economy from a centrally planned one As a result, the Vietnamese economy is transformed into a multi-sector market economy comprising the domestic public, private and foreign-invested sectors Strong and sustainable economic growth and rapid poverty reduction are characteristic of economic reform in Vietnam Annual GDP growth averaged 6.8% in the period 19862009 (General Statistics Office, 2006; General Statistics Office, 2009; General Statistics Office, 2009) Vietnam emerged from the Asian financial crisis in the late 1990s and the recent global financial crisis in a relatively healthy state with much higher GDP growth rates than other countries in the region Poverty reduction is another important achievement that Vietnam has achieved in the reform process Rapid and sustained economic growth has improved the lives of many Vietnamese Vietnam's poverty rate has declined rapidly from 58.1 percent in 1993 to 12.3 percent in 2009 (World Bank, 2005) In line with the significant economic development of Vietnam since Doi Moi (Renovation) 1986, small and medium-sized enterprises (SMEs) in Vietnam have experienced phenomenal growth, especially since 2000 when the Enterprise Law was promulgated From 2010-2015, SMEs are making a significant contribution to the development of Vietnam’s economy By the end of 2014, this group of businesses contributed about 45% to GDP, 31% to the overall budget revenue, accounting for about 31% of the investment capital of the business community in general, and most significantly, is creating 51% of Vietnam's total employment mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam The role of the government is important in investing in fundamental infrastructure, such as electricity, water supplies, roads, ports, industrial zones, telecommunications, and the internet Such infrastructure is important for the startup and development of SMEs In general, SMEs suffer from a scarcity of sufficient finance and thus require special attention due to their inherent informational opaqueness and limited finance sources available (Guiso and Minetti, 2010), with this imperfect ability to get finance often used to justify government intervention It is possible that recent policy reforms have helped stimulate the expansion of SMEs both in number and in scale The number of registered enterprises has increased rapidly Given the aforementioned importance of SMEs, the Vietnamese Government and Ministries and Agencies have issued many policies to support and stimulate the development of these SMEs Many policies are aiming for better accessibility to capital, production premises; innovation and capacity building technology, technical level, while others are promoting market expansion; joining the shopping plan, providing public services; information and advice and assisting in human resource development …In other words, firms use fewer resources, such as human resources and capital, to produce the exact same level of output As a result, enterprises with government support increase R&D and thus improve their productivity (Wu, 2017) On the other hand, there are some lengthy debates regarding the impact of those schemes with poor evidence of any additional or incremental effect (Riding; Madill and Haines, 2007) Additionally, there is some question as to whether the purported benefit of these programs exceeds their often-large costs (Craig et al., 2009) This perspective suggests that government support may hinder firm productivity, especially in developing countries, a result of the fact that corruption is extremely common in such countries Simultaneously, government support may also be distributed ineffectively when the granting of subsidies is based on political connections instead of a firm’s contribution to society (Vu, Tran, Nguyen, & Lim, 2018; Tsai, Zhang, & Zhao, 2019) As a result, government subsidies might not promote a firm’s adoption of mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam innovative activities to boost firms ‘productivity and efficiency Enterprises complain that they cannot approach the government policies and that few enterprises benefit from governmental support Many people claim that the development of SMEs mainly depends on their own efforts and that the support of the government is only superficial Moreover, despite promotional efforts by the Vietnamese government, SMEs still have not received appropriate policy support and resources The government has not introduced macroeconomic reforms to develop supporting infrastructure, built regulatory institutions and devise an appropriate legal framework for SMEs growth Furthermore, SMEs are not aware of the policies regime in place Therefore, insight regarding the real effect of these policies in the development of SMEs would be helpful to both policy makers and the government In the context of the above reasons, there is a need to investigate and understand support policy behind the development of SMEs in Vietnam, since this sector has enormous growth potential This paper provides insight into the effectiveness of the Vietnamese Government’s policies that encourage the development of SMEs The adequacy of the policy regime and the effectiveness of the support on infrastructure, finance, administrative procedure have been discussed to identify the problems of the market development process under the socialist market economy model of Vietnam The current study differs considerably from previous studies in two ways First, while most studies focus on the analysis of developed countries or capitalism countries, this study provides the research on socialist market economy model of Vietnam Furthermore, different forms of government assistance can have different effects on companies' financial performance In our research, we go beyond existing literature by looking at the effects of different types of government assistance on firm’s performance Purpose of research mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 35 • Resolution No 98 / NQ-CP dated October 3, 2017 on the Government's Action Program to implement the Party's Resolution No 10-NQ / TW dated June 3, 2017 on private economic development; Resolution No 19 / NQ-CP dated May 15, 2018 on improving the business environment, enhancing national competitiveness The implementation of these resolutions simplifies and reduces business conditions, creating favorable, equal and transparent business environments for all economic sectors, helping SME development Many revised, supplemented and newly issued policies aim to expand the rights and obligations of private economic entities related to land, creating a favorable environment for businesses and investors to expand the scale of investment, production and business Although these policies cover all aspects of SME support, difficulties in the implementation process persist due to ambiguous and unrealistic requirements (Le, 2010) For example, a recent decree (56/2009 / ND-CP) lists the types of support that SMEs can receive from the government However, in reality, these instructions are unclear or lacking in detail (Anh, Mai, Nhat, & Chuc, 2011) Therefore, it takes time and effort for SMEs to get support In addition, although the dominant role of the public sector has been removed, discrimination against non-state SMEs persists In addition, corruption is still pervasive (Nguyen & Van Dijk, 2012; Vu, Tran, Nguyen, & Lim, 2018) According to the Central Institute for Economic Management (CIEM, 2010), Vietnamese SMEs are likely to make informal payments to receive support from the government Therefore, when evaluating financial performance, it is not clear whether the benefit of government assistance outweighs the cost or vice versa Context motivates us to assess whether government assistance benefits the financial performance of businesses In Vietnam, there is an increasing number of articles researching the role of government supporting business activities Several studies have shown that mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 36 government support is an effective tool to improve business growth and survival (eg, Hansen et al., 2009) Other research shows that the impact of government support on business performance is negligible or insignificant (Vu, Holmes, Tran, & Lim, 2016) However, little is known about the link between government assistance and the financial performance of firms, especially for private SMEs In addition, there is limited understanding of the impact of government assistance on companies' financial performance The overall investigation of subsidies instead of subsidies may obscure the real effect of government assistance on business operations More precisely, very few studies have examined the relationship between government support and SME financial performance in consultation with developing countries, especially Vietnam, considering the impact of support from Government and forms of support for SMEs' financial activities Therefore, the contribution of this study will be to fill the gaps in the document using a log linear model to examine the role of government support for the financial performance of firms in the context of domestic SME production in Vietnam Moreover, this study aimed to provide insight into the effectiveness of the Vietnamese Government’s policies that encourage the development of the SMES and to determine which policies are most effective mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 37 III Methodology Data selection The data is extracted from the trustworthy database such as: • The Vietnam SMES growth rate is taken from United Nations University This dataset is part of the structural transformation and inclusive growth in the Vietnam project • The indicators of finance policy, infrastructure policy and other regulations are taken from World Development Indicators in the period of time from 2007 to 2015 The data will be organized in panel form which consists of corresponding variables to the performance of SMES in Vietnam in the given time period Each observation is described by factors: GROWTH(Vietnam SMES growth rate), OVERALL( Quality of overall infrastructure), ROADS(Quality of roads), AIR(Quality of air transport infrastructure), AID( Fiscal Aid), INTEREST( Lending interest rate), TIME( Time required to starts a business) The table below illustrated the overview of descriptive statistics of all variables taken from the model: LogGROWTH Mean Min Max 1,98 1,7882 2,0959 LogOVERALL 0,5040 0,4389 0,5883 LogROADS 0,4511 0,4082 0,5239 LogAIR 0,6136 0,5928 0,6584 LogAID 0,5146 0,3657 0,6249 mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 38 LogINTEREST 1,0484 0,8523 1,1982 1,5259 1,3010 1,5821 LogTIME Table 3.1.1: overview of descriptive statistics of all variables Model specification We analyzed the following gravity model to estimate the effect of independent variables including Quality of overall infrastructure, Quality of roads, Quality of port infrastructure, Quality of air transport infrastructure, Fiscal aid, Lending interest rate, Time required to start a business on the dependent variable which is performance of SMES in Vietnam LogGROWTH= C+ ß1LogOVERALL + ß2LogROADS + ß3LogAIR + ß4LogAID + ß5LogINTEREST + ß6LogTIME Coefficient Measurement Parameter Expectations ß1 Quality of overall infrastructure + ß2 Quality of roads + ß3 Quality of air transport infrastructure + ß4 Fiscal Aid + ß5 Lending interest rate - ß6 Time required to starts a business - Table 3.2.1: List of independent variables with their measurement, parameter expectations, and meanings Based on governmental reports, comments of enterprises and the author’s previous contacts with SMEs in Vietnam, hypotheses in five groups are proposed as outlined in Table The first group, labeled ‘Finance’, covers fiscal mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 39 policies The second group ‘infrastructure’ investigates the consequences of the government’s policies involving the development of roads, air transport infrastructure The third group ‘Regulation on starting business investigates time required to start a business Whereas Fiscal aid, infrastructure are hypothesised to positively impact SME performance (+), the landing interest rate and ineffective Regulation on starting business are hypothesised to hinder business development Regression Results Table 3.3.1: Correlation between independent variables of model mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 40 Table 3.3.2: Regression result of model After running the model, we find that the variable of INTEREST has a very high correlation with ROADS variable, which makes both statistically insignificant Therefore, we decide to delete the INTEREST variable to get another model as follows: LogGROWTH=C+ ß1LogOVERALL+ ß2LogROADS+ ß3LogAIR+ ß4LogAID+ ß6LogTIME Table 3.3.3: Correlation between independent variables of model mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 41 Table 3.3.4: Regression result of model Regarding the regression result of model 2, we find that deleting variable of INTEREST can make the rest of independent variables statistically significant Firstly, the quality of overall infrastructure, Quality of air transport infrastructure and quality of roads comes with the positive sign to imply the fact that the improvement of infrastructure helps boost the growth of SMES in Vietnam In other mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 42 words, the quality of infrastructure will have the positive effect on performances of SMES in Vietnam More specifically, the performance of SMES will increase by about 12.25% on average if the overall infrastructure of Vietnam increases by 1% Moreover, the performance of SMES will increase by about 15.92% on average if the quality of air infrastructure increases by 1% Especially, the result suggests the quality of roads have the most effective impact on performance of SMES in Vietnam With the coefficient of 23.94%, the performance of SMES will increase by 23.94% if the quality of roads increased by 1% This result is the same as our expectation However, the extent of its impact is higher than we imagine Secondly, the negative sign of the variable TIME suggests the negative relation between performance of SMES and the time required to start a business applied From this result, if the time is announced to be reduced by 1%, the performance will increase by about 1.1059% on average This result is the same as our expectation This is because complicated administrative procedures might be the barrier to start a business, which lead to decrease in revenue of SMES Finally, the sign of variable AID is positive, which is also the same as our expectation With the coefficient of 15,613, the fiscal aid has a significant impact on performance of SMES in Vietnam The impact of the financial crisis and the global economic recession since 2008 made the world economy recover slowly and the domestic economy faced many difficulties The government has issued and implemented many solutions Issuing fiscal aid package is one of the most effective solutions of the government mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 43 IV Conclusion and discussion SMEs are chosen because they hold an important position in the economy, especially based on a compelling view of the growth of local and regional economic systems This study shows the relationship between government policy and SME performance Likewise, government policy has a major impact on the competitiveness of SMEs Conceptually, research shows that SME performance varies according to the choice of government policy they have adopted Conceptually, the survey found that SME performance varies with government policy choice, government spatial relations and guidelines, plans and incentives and regional support The best positive policies were the group of infrastructure supported in roads and air infrastructure This finding supports the viewpoint that good infrastructure helps enterprises reduce their costs of production, services, and marketing and improve business opportunities The research results show that, wherever the infrastructure is well developed, SMEs have conditions in which they can grow, which explains why SMEs concentrate in urban areas The results also show that Vietnam has chosen an appropriate way to focus on basic infrastructure construction as a stimulus for the economy Vietnam is currently implementing many investment projects to develop infrastructure such as roads, railways, sea lanes, ports, airports, etcetera Vietnam government spent about 20 billion USD / year for infrastructure The second group was financial support from the government In this group, fiscal fund aid has a positive impact on performance of SMES These policies help reduce the financial difficulties of enterprises when they start up, encounter crises or function in difficult economic time periods In addition, many fiscal aid packages to promote enterprise development have not been brought into full play due to lack of specificity, lack of consideration of feasibility related to access conditions, consultation to support enterprises to access, not really create opportunities for businesses mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 44 The regulation on starting a business were ranked by the authors of this study as poor because these policies are not consistent, change quickly, and create difficulties for enterprises needing administrative procedures to register for their activities Accordingly, although there were many business conditions, administrative procedures in the previous documents were cut off and improved However, a paradox is that in the new documents issued this year, there are still many shortcomings related to the provisions of administrative procedures This will be a big challenge in the administrative procedure reform process that the state is implementing Support activities are one of the factors that ensure the existence and sustainable development of SMEs Support activities of the State are carried out according to the strict order and procedures prescribed by law and on the basis of certain principles In addition to the support from the State, in the process of operating, SMEs also need to receive support from other organizations and individuals In order to continue promoting the role of SMEs, overcoming difficulties and problems in the current competitive and integration environment, it is necessary to pay attention to the following key solutions Firstly, to maintain development of SMEs, Vietnam needs more new infrastructure projects With the trend of integration, the growing economy, the internal traffic infrastructure system throughout the country is increasingly pre-loaded with the need to use many means of transport, especially cars, in most big cities In the country there are traffic jams Roads are few, not newly built and expanded Over the past time, the road and waterway system throughout the country has been constantly upgrading and building many new routes from ODA capital, budget capital for the development of the country's economy, which is a great effort of the State mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 45 Secondly, Government should continue to promote administrative procedure reform in the field of taxation and customs (i) Promote reform of tax administrative procedures through the enacting of risk management regimes for enterprises subject to tax inspection/inspection; continue to amend regulations on tax refund dossiers, software to support the automatic development of tax refund dossier reports; submit tax refunds online; develop a database on tax refund management and public implementation so that tax refunds are informed about the status of tax refund dossier settlement; (ii) Implementing simultaneously and widely the application of information technology in tax declaration, payment, tax refund, payment of tax via mobile, payment over the internet; (iii) Perfecting the legal framework to ensure the full implementation of electronic customs systems… Thirdly, banks need to increase the search and access to cheap capital sources from preferential programs and projects of domestic and foreign organizations to finance specific business fields of SMEs Designing specific loan products suitable for SME customers according to each industry group have flexible solutions to customer requirements At the same time, improve and simplify the lending process, request practical information and provide detailed advice and instructions so that SMEs can easily grasp and implement mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 46 References: Purwaningsih, A., 2014 Impact of Government Regulation No 46 Year 2013 in Income Tax of Small and Medium Enterprises in Indonesia Eniola, A and Entebang, H., 2015 Government Policy and Performance of Small and Medium Business Management Nguyen, T and Alam, Q., 2008 The impact of government policy and land accessibility to the development of SMEs: Do industrial cluster and network models work in Vietnam? Mazumdar, Dipak, and Sarkar, Sandip (2013) Manufacturing enterprise in Asia: size structure and economic growth Ministry of Planning and Investment (2017) Overview and Operation Direction of Small and Medium Enterprise Development Fund Hanoi, Vietnam Guiso, L and Minetti, R (2010), “The structure of multiple credit relationships: evidence from US firms”, Journal of Money, Credit and Banking, Vol 42 No 6, pp 1037-1071 Riding, A., Madill, J and Haines, G (2007), “Incrementality of SME loan guarantees”, Small Business Economics, Vol 29 No 1, pp 47-61 Craig, B.R., Jackson, W.E and Thomson, J.B (2009), “The economic impact of the small business administration’s intervention in the small firm credit market: a review of the research literature”, Journal of Small Business Management, Vol 47 No 2, pp 221-231 Wu, A (2017) The signal effect of Government R&D Subsidies in China: Does ownership matter? Technological Forecasting Social Change Vu, V H., Tran, T Q., Nguyen, V T., & Lim, S (2018) Corruption, types of corruption and firm financial performance: New evidence from a transitional economy Journal of Business Ethics Eniola, A A (2014) The Role of SME Firm Performance In Nigeria Arabian Journal of Business and Management Review, Vol 3(12), 33-47 mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 47 Harvie, C, Narjoko, D., & Oum, S (2010) Constraints to Growth and Firm Characteristic Determinants of SME Participation in Production Networks Integrating Small and Medium Enterprises (SMEs) into the More Integrate East Asia Naudé, W., Szirmai, A., & Goedhuys, M (2011) Innovation and Entrepreneurship in Developing Countries: UNU-WIDER Sato, Yuri (2015) Development of small and medium enterprises in the ASEAN economies Beyond 2015 Gilbert, David H (2007) Firm innovativeness in SMEs: lessons from Japan International Journal of Organisational Behaviour Bakiewicz, Anna (2008) Small and Medium Enterprises in South Korea In The Shadow of Big Brothers Asia and Pacific Studies ERIA SME Research Working Group (2014) ASEAN SME Policy Index 2014: Towards Competitive and Innovative ASEAN SMEs Nguyen, Q., 2020 Vietnam Has Highest Rate Of Smes In Southeast Asia With Expansion Plans - Vnexpress International [online] VnExpress International – Latest news, business, travel and analysis from Vietnam Available at: [Accessed 28 October 2020] Vietnamnews.vn 2020 Smes Needs To Identify Their Problems To Develop [online] Available at: [Accessed 28 October 2020] English.vietnamnet.vn 2020 Vietnam's Smes Face A Range Of Difficulties News Vietnamnet [online] Available at: [Accessed 29 October 2020] News, V., 2020 In Vietnam, Many Businesses Close After Several Years Of Development - Vietnamnet [online] VietNamNet Available at: [Accessed 29 October 2020] mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam mid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnammid.term.report.the.impact.of.government.regulation.on.smes.in.vietnam 48 Vnexpress.net 2020 80 Chính Sách Cho Doanh Nghiệp Nhỏ & Vừa Nhưng 'Đều Trên Giấy' [online] Available at: [Accessed 29 October 2020] Chen, J (2006) ‘Development of Chinese small and medium – sized enterprises’, Journal of Small Business and Enterprises Development, Vol 13, No 2, pp.140–147 Tambunan, T (2007) ‘Entrepreneurship development: SMES in Indone sia’, Journal of Development Entrepreneurship, Vol 12, No 1, pp.95–118 Minzhu, R.C.C and Garg, R (2005) ‘Assessing the environment for small and medium enterprises success in Sichuan, China’, International Journal of Commerce and Management, Vol 15, Nos and 4, pp.243– 254 Hansen, H., Rand, J., & Tarp, F (2009) „Enterprise growth and survival in Vietnam: Does government support matter?‟ The Journal of Development Studies, 45(7), 1048-1069 Angrist, J D (2001) Estimation of limited dependent variable models with dummy endogenous regressors: simple strategies for empirical practice‟, Journal of business & economic statistics Abonyi, G., 2003 “Challenges of Industrial Restructuring in a Globalizing World: Implications for Small-and Medium-scale Enterprises (SMEs) in Asia” Abdullah, M., 2002 An overview of the Macroeconomic Contribution of SMEs in Malaysia Báo điện tử Dân Trí 2020 Doanh Nghiệp Vừa Và Nhỏ Ở Việt Nam Vẫn Loay Hoay Tìm Cách Chuyển Đổi Số [online] Available at: [Accessed 29 October 2020] TapChiTaiChinh 2020 Hỗ Trợ Của Nhà Nước Đối Với Doanh Nghiệp Nhỏ Và Vừa Ở Việt Nam [online] Available at: