The Participation of Vietnamese SMEs in Regional Economic Integration: Survey Results of Three Manufacturing Industries

Abstract

Small and medium enterprises are prevalent in Vietnam. They are also the predominant type of enterprise in the three manufacturing industries surveyed: food; apparel; and wood products. These have been the emerging export sectors in the last decade. The survey shows that SMEs in these sectors are highly aware of ASEAN’s plan for SME development and perceive that the ASEAN Economic Community is beneficial to business. However, the share of SMEs that have business relations with firms in other ASEAN economies is small. There is also limited awareness of Vietnam’s Free Trade Agreements. The regression analysis reveals that foreign ownership and productivity are the two most important determinants of Vietnam SMEs’ participation in production networks. Product innovation, process innovation and membership in business associations also significantly increase the probability that SMEs participate in production networks. The analysis suggests that policies to develop SMEs, increase labour productivity, and intensify international integration will facilitate SMEs’ participation in regional production networks. Government can also craft policies to promote innovation, encourage membership in industry and business associations, and raise awareness of ASEAN’s SME development plans, the AEC and other business related issues.