Challenges for SMEs in Vietnam and Korea

Challenges for SMEs in Vietnam and KoreaRecommendations for the governing/insurance makersProperly aw argon and assess the roles of SMEs and start-up unassailables in the national thriftiness formationThe Korean organisation soon realized the roles of SMEs, particularly start-up firms in economical reform afterwards the pecuniary crisis is 1997. They published any(prenominal) lawfulness and Regulations on SMEs support since the end of the Korean War, some of which are the SMEs Bank Law (July 1961) and the SMEs Co movement Law (December 1961). In addition, the governmental institutions and banks to support SMEs were born really soon, they were adapted to merge into a comprehensive and trustworthy system to maintain the health of SMEs. This reflects the early awareness of the Korean government in the roles of SMEs. In Vietnam, the roles of bleak enterprises look at to be further considered. Besides the measures to enhance the mathematical process of state-owned enterpris es, we carry to maintain intensive measures to support SMEs, e finically start-up firms beca ingestion they are the st sendgic legal document in economic growth. Obviously, when joining WTO an globalistic playground, SMEs in Vietnam in its period state entrust find it hard to compete..To fully aware of the instruct as closely as roles of these enterprises, we need to conduct surveys and searches to find out(a) at which proportion SMEs father contri besidesed to the countrys GDP and some other growth indexes. Further, we based on these indexes to evaluate the potentiality and at what consummation the engraftment of new firms green goddess reinforce the growth rate of the economy as a whole.Create a suitable environment for SMEs and start-up firmsSince the actually beginning state of economic reform, regulations concerning SMEs and start-ups activities were clear and specifically declared. They were withal improve by dint of successions to adapt to the economic and social conditions of each time phase. Besides the synchronized legal environment, they too own a nock of dissolving agents for SMEs since they start the telephone circuit line till dismissal. The Korean government always tries to ca-ca palmy affair environment for the growth of start-up firms and SMEs. To minimize the gap mingled with chaebol firms and start-up firms, the government established many institutions and associations to support start-ups firms, namely SMBA, SMBC, KOTEC as well as provide imprimatur for these firms to receive pecuniary resource from commercial banks with discriminative interest rates. When SMEs encounter hardship during operation, the government also be invites up with backing incubators to alleviate them overcome problems by legal consulting, opening fairs, malls to increase the calamity of trading and finding line of merchandise partners.For any nation in the introduction, favorable business environment is the introductory factor, not only for SMEs, but also for big corporations to grow. Vietnam is no exception. Nowadays in Vietnam, the business environment is well-heeled more than ever before. line of work law, finance law, denotation monetary trading, constancy movement situation work been improved a lot with the foundation, adjustment, supplement of the Business Code 2005, Investment Code 2005, State Bank Code and recognize Institutions Code 2003 These Codes basically have no discrimination among different business sectors. Moreover, we also have other regulations concerning the operation of SMEs, namely Official letter No. 681/CP-KTN on June, 26th 1998 by the Government Office on strategies orientation and SMEs development policies, Decree No. 90/2001/ND-CP on November, twenty-third 2001 on support SMEs. These regulations only emphasize on the most basic matters and have all the analogous compete or consistent. Also, the management level is shut away not flexible in applying those regulations, leading to redundancy in procedures and disarray in dealing with the legal system.Discrimination between big corporations and SMEs is other factor with negative impact on the business environment. Although the policies of the government clearly state that all business sectors needed to be equally treated, in that location still exists discrimination from some government officials in bank loans, doorway to preferential policies, land drop, information main course on merchandiseing market, faculty training Moreover, the social environment also has trong impact on business operation of highly sensitive firms like start-ups and SMEs. That is because there still exists some obsolescent prejudice on these firms such as counterfeited goods, smuggling or commercial fraud.Support start-up firms in terms of financingIt is safe to square up that coin is the most severe problem for entrepreneurs when starting their own business. at that place are already countless enterprises each y ear failing to come alive or going bankrupt since the very beginning of operation due to want of capital. Therefore, support from the government is highly essential for SMEs, especially start-up firms. These support wad be implemented by a add together of ways, suggested as belowDevelop finance coronation firms and establish conviction guarantee fundsIt is clear that we soon need to establish character guarantee funds for SMEs and start-up firms, for them to access to finance when they do not have enough resources for mortgage, pledge, or lend from banks and credit unions as raised in Decree 90/2001. The credit guarantee funds like KCGF, KOTEC and SMBC in Korea are able to guarantee start-up firms for short-term, mid-term and long-term loans for the feasible ideas and business projects. At the same time, they share adventures with credit institutions in case of default risk from SMEsThe lessons from Korea and other developed countries like America, Taiwan show that credit gua rantee is considered one of the most effective measures to improve the capital of an enterprise, and Vietnamese enterprises are no exceptionLoosen the lending requirementsOur government should adjust policies on mortgages for loans. Currently, most start-up firms find it hard to access to commercial bank funds because they own no or little assets. In addition, the requirements on mortgage is too high to meet. One example is most commercial banks use land use right as mortgage, which is sort of impossible to put up with for these types of firms. The recommendation for this is, in some specific cases, banks brush aside assess the potential and value of feasible business projects to minimize their risks. Banks in Vietnam can learn from KOTEC in Korea, where they have a set of technical and commercial criteria to rate a firm before providing funds. Firms guaranteed by KOTEC also have high chance to survive in the long run, which means their assessment is highly effective and we can learn a lot from their system. Besides, venture investment funds should be encouraged to grow, especially foreign investment funds. embellish forms of financial leaseExpanding forms of financial lease is a useful solution for firms to overcome their own problems on financing for engine room. Financial lease is an medium form of long-term credit, where those demanding funds do not receive exchange to purchase equipment and asset but directly receive the demanded asset. The leasee periodically pays payment and buys the whole asset after a specific amount of time. However, in Vietnam, both the government and enterprises have yet aware the strength of this form, so it has not been fully developed. According to the studies SMEs development process of the Development bestow Program for SMEs in Vietnam, there currently exists many obstacles in development financial lease (i) lack of legal procedures, regulations and policies for this matter. The funds of the leasors are also very limi ted due to the strict regulations of the State Bank of Vietnam, (ii) the enterprises are still short in full knowledge and awareness of this utilizations advantages, (iii) lack of complete agreement between the leasors and the government as the base to develop policies on this.Towards the current state as mentioned above, the government needs to look into and adjust the regulations to ensure a agonistic yet favorable business environment for the financial lease corporations, which can bring in the financing problem for SMEs.Develop other financial servicemarket the debt market Currently, corporations have increasingly appropriate funds of others, making oodles of SMEs fall into the artificial funds shortage situation. Sometimes, commercial banks have to guide loans but cannot receive principal before maturity date. Commercializing debts will help SMEs escape from the pressure of variable capital, for instance, through discounting financial instruments like transportable certif icate of deposit. In many other countries in the world, this practice is quite popular but it is fairly new for enterprises in VietnamBoost the performance of financial institutions we can do this by increasing the equity of credit institutions, creating capacity to improve performance and adapt to risks. Simultaneously, they can completely keep overdue debts by developing mortgage handling enterprises and buying rachis mortgages, collateral from commercial banks. This research applies a remote-monitored system towards the financial markets on the basis of international standards.Encourage the growth of financial consulting services, accounting, auditing and related services for financial problems of SMEsPreferential tax, charges policyThe government can also establish more preferential policies for SMEs on credit, tax in a innocent way. We should also avoid excessive yet inefficient tax policies, which leads to tall(prenominal)ies in manage and implement those policies.Recommen dations for start-up firms/SMEsBuild their own finance capabilitiesBesides the government policies and support on finance, start-up firms also need to take advantage of this fortune or else it will go to waste. Currently, the roles of SMEs and start-up firms are gradually realized by the government and the society. The social development strategy nowadays also pays special attention to SMEs. Therefore, those firms need to take good advantage of these chances. In the meantime, start-up firms can have easy access to the credit funds from banks, financial institutions, financial lease firmsThe enterprises can also increase their funds by seizing investment opportunities from other sources. Through the foundation of feasible and persuasive business plans, firms can entirely raise funds from venture investment funds or crowd-funding.By cooperating with other firms, SMEs can enhance their manufacturing process by solving the obstacles together with each other, best exploiting their capa city and cooperation, developing the house servant and foreign business network, as well as jointly combating the competitive pressure from big corporations.Raise their management capacitySMEs need to have their own business strategies to enhance the human resources and management capacity in a worldwide economic context.One of the weaknesses of SMEs in Vietnam is the human resources problems. They lack properly trained labor to meet the requirements of applied skill application, foreign language, business knowledge, Internet access The business management system is pretty obsolete and incomprehensive.Therefore, business owner and the management level need to apply innovational management system, focusing on knowledge on market, the legal system, technology application and building their own business culture and ethics upright about the products, fair competition, compliance with the law, responsible for the customers and the society, and build trust with the customers.For th e labor force, we need to have scheme to train them properly with the most modify techniques and information possible. The enterprises also need plans to attract highly-trained employees by their salary, bonus, allowance, promotion policies. Besides, watertight business culture is also necessary to establish and develop.Actively access technologyFirms on their own should actively seek new opportunities to get access to new technology and equipment. Then, they can flexibly apply technology transfer to create more added value. Also, focusing on developing technology radical to apply e-commerce business is popular in the recent years.On material, one way to exploit this is to make full use of the global sources of material, another is to consider using existing materials, which means diversity and stableness sources of materials for manufacturing.On technology, SMEs need to go in full swing and use their existing dynamic spirit to grasp and seize rare opportunities on technology. On e huge obstacle for enterprises in this matter is limited capital, however, as mentioned, SMEs have many ways out. They can use the government support, encourage with other outsizer firms, transfer from foreign enterprises, participate in science fairsIn specific, SMEs need to construct and develop their own information infrastructure to push information technology application and apply e-commerce. Investing in these is proved to cost reasonably but bring high efficiency. It can saves energy and cost for an enterprise, which lifts the management efficiency but at the same time, it can quickly grasp and exploit the markets information, portion the business activities more professional and flexible.Focus on market research, export promotion, fall guy and image buildingFocusing in market researchStart-up firms and SMEs need to vigorously improve on market research after Vietnam has joined WTO. Only thorough and detailed market research brings a well-rounded business plan. In the co ntext where resources and capabilities is limited, they need to cooperate with the potency and government in pushing e-commerce, searching for market information through the Internet, as well as joining in knowledge share in different prestigious association.Enhance filth investment more or less SMEs in Vietnam are not fully aware of the grandeur of brand building and protection. In the next few year, when we penetrate more into the global economy, this can be a huge risks as there will certainly be many more conflict and disputes on brand. Therefore, SMEs need to have their own strategy for brand right now. Those enterprises need to have well-rounded knowledge about brand. Training for staff to aware of the importance of brand and reputation is vital. In the global context as it is today, when the brand of SMEs in Vietnam have yet owned a strong localisation in the domestic and international market, support from the government and other large corporations in brand building in of great importance. Ignoring this stage in the business plan means they actively put themselves in difficult situation later. Their competitors may use this to destroy the company.Actively apply international standards in business activitiesAs analyzed, one of the biggest challenges for SMEs in Vietnam to penetrate into the international market is the international trade standards. Every countries and trade organizations in the world have their own set of regulations concerning the products standards. During the integration process, it is compulsory that start-up firms and SMEs in Vietnam should hold with these regulations.The lessons from Korea shows that, applying international standards in manufacturing and trading helps raise the export volume of SMEs in this countries. Therefore, it is essential for enterprises to actively apply these standards in their business activities. Depending on the requirements, the selected countries rules and the firms capacity, the firms can freel y choose the standards like TQM, ISO 9000, HACCP, GMP, ISO 14000, SA 8000 Besides, we need to render and adapt to standards in hygiene, safety, rules on packing and markingThese international standards can be an obstacle for SMEs in Vietnam in the short run but they will definitely bring practical value for them, helping them to strongly thrive in this most stable way.