HCMC – The Asian Development Bank (ADB) is supplementing a US$40 million loan to an earlier reform program helping to untangle a knot of red tape for doing business simpler and quicker for small and medium-sized enterprises (SMEs).
ADB’s board of directors on Monday approved the loan for the first phase of the Second Small and Medium-Sized Enterprises Development Program, the bank said in a statement.
The supplementation follows an earlier ADB loan for an initial reform program helping to slash the time needed to register a business, and support a sharp rise in new enterprises and private sector jobs. SMEs make up a large majority of all registered enterprises in Vietnam and most new jobs in the last decade were generated by the sector.
“The priority for the Government of Vietnam is to sustain high economic growth to create productive jobs for around 1.7 million new workers each year, and growing SMEs is an essential part of its development strategy,” Edimon Ginting, senior economist in ADB’s Southeast Asia Department, said in the statement.
Despite the strong progress over the past four years, difficulties in businesses’ accessing medium-term capital as well as some ongoing regulatory issues have slowed down the registration of new SMEs and the expansion of existing ones. Meanwhile, economic overheating and the global financial crisis have created further challenges for local enterprises.
The release of funds for the latest program follows the achievement of key reform milestones by the government. These include steps to develop a comprehensive policy to address constraints to trade and competition, as well as measures to simplify and streamline business procedures, the introduction of a pilot e-customs program in 10 provinces, and the introduction of a web-based national business registration system. The Government has introduced a nationwide credit guarantee system to support commercial banks lending to SMEs.
The latest loan from ADB’s concessional Asian Development Fund has a 24-year term including a grace period of 8 years, with an annual interest charge of 1%, rising to 1.5% for the balance of the term.
A second phase of the program will provide support to continue reforms to improve business competitiveness, and access to finance for SMEs.
The Ministry of Planning and Investment is the executing agency for the full program with the target completion date yet to be finalized.
