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NEWS UPDATES 18 September 2010

Lack of credit stifles Viet SMAs

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Access to credit remains the most serious obstacle to the success of Vietnam's small-to-medium enterprises, a newly-published survey shows.

Falls in demand are also cited for the first time as a serious constraint to business which "might be a result of the general slowdown experienced in economic activity."

The survey of more than 2,500 SMEs in 10 cities and provinces last year found that almost 40 percent of enterprises were credit constrained with the majority in rural Viet Nam.

The Central Institute for Economic Management; the Institute of Labour Science and Social Affairs; the University of Copenhagen and the Danish embassy organised the survey to research the country's business environment.

The survey investigated the interaction of SMEs with domestic and international business with the focus on growth, employment, production, technology and efficiency, diversification, innovation, survival and closure.

Questions about their role in the informal sector; informal payments as well as their bureaucratic and administrative burden were also asked.

Although almost 70 percent of respondents said the international financial crisis had harmed business, 12 percent - mostly larger enterprises - reported they had actually benefited from it, University of Copenhagen economist Dr John Rand told a conference to reveal the results of the survey in Hanoi yesterday.

The benefits included cheaper inputs, weaker competition and more and better government support, he said.

The researchers say the survey found that the business environment appears to have deteriorated because the number of unconstrained enterprises fell between 2007 and last year.

The yearly survival rate of surveyed SMEs had declined to 91.6 per cent between 2007 and 2009 from 94 per cent between 2005 and 2007.

The survey shows temporary closure as a relatively common SME response to coping with the financial crisis.

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