1. 1
MINSITRY OF PLANNING AND INVESTMENT (MPI)
ENTERPRISE DEVELOPMENT AGENCY (EDA)
TA 8184 – VIE: Supporting the Second Small and Medium-Sized
Enterprises Development Program
REGULATORY IMPACT ASSESSMNET (RIA) ON THE
DRAFT LAW IN SUPPORT TO THE SMALL AND MEDIUM-
SIZED ENTERPRISES (SMEs) IN VIET NAM
MAY 2015

2. 2
ACRONYM and ABBREVIATION
ADB Asian Development Bank
AFTA ASEAN Free Trade Area
AP Annual Plan
APEC Asia-Pacific Economic Cooperation
ASEAN Association of Southest Asian Nations
CBA Cost and Benefit Analysis
CIEM Central Instritute for Economic Management
EDA Enterprise Development Agency
EU European Union
GOV Government of Viet Nam
GSO General Statistic Office of Vietnam
MOF Ministry of Finance
MOIT Ministry of Industry and Trade
MOJ Ministry of Justice
MONRE Ministry of Natural Resources and Environment
MOST Ministry of Science and Technology
MPI Ministry of Planning and Investment
NA National Assembly
RIA Regulatory Impact Assessment
SBA Small Business Act
SBV State Bank of Viet Nam
SMEDF Small and Medium-sized Enterprise Development Fund
SOE State-owned enterprise
TPP Trans-Pacific Partnership
USA The United States of America
VND Vietnamese Dong

3. 3
TABLE OF CONTENTS
REGULATORYIMPACTASSESSMENT ON THEVIETNAMESE LAWON SMALL &
MEDIUM-SIZED ENTERPRISES IN VIET NAM 4
A. An overview of the legal development in support to SMEs in Viet Nam 4
B. Development status of SME in Viet Nam and Background for formulation of Law in support
to SMEs in Vietnam 5
Table 1. Number of enterprises closed out and dissolved by captital size as of 2013 8
Table 2. Laws on SMEs by selected economies and regions. 9
C. Regulatory Impact Assessment (RIA) for the draft Law in support to SMEs in Viet Nam 10
C.1. Objectives and Purposes of Regulatory Impact Assessment (RIA) of the Draft Law in support
to SMEs 10
C.2. RIA Methodology 12
C.3. Assessment of the structure and contents of the draft Law in support to the SMEs 12
C.4. Policy Issues / Problems under the ex-ante RIA 13
Table 3. Policy issues proposed from ex-ante RIA for the Law in support to SMEs 13
C.5. Analysis of Potential Impacts of Policy Options 14
D. Recommendations 17
Table 4. Proposed criteria for full RIA in the next steps 18
E. Conclusion 19
F. Annex 20
Table 5. List of consultation workshops on development of Law in support to SMEs in Vietnam 20

4. 4
REGULATORY IMPACT ASSESSMENT ON THE VIETNAMESE LAW
ON SMALL & MEDIUM-SIZED ENTERPRISES IN VIET NAM
A. An overview of the legal development in support to SMEs in Viet
Nam
1. Prior to the birth of the Law in support to Small and medium-sized enterprises (SME), the
Government of Viet Nam (GOV), in fact, has established policies supporting the development of
SMEs in Viet Nam through the Decree No. 56/2009/ND-CP dated 30 June 2009 on assisting and
supporting development of SMEs, superseding the Decree No. 90/2001/ND-CP dated 23 October
2001. For the purposes of policy implementation, the Government issued Resolution No. 22/NQ-
CP dated 5 May 2010 guiding the execution of Decree No. 56/2009/ND-CP in terms of enhanced
implementation and synchronizing the business and production activities of SMEs, maximize all
capabilities and mobilize resources for SME development.1
2. To accelerate development and enhance the competitiveness of SMEs, create an enabling
investment and doing-business environment in which SMEs can increasingly contribute to
economic growth, national competitiveness and international economic integration, the Prime
Minister issued the Decision No. 1231/QD-TTg dated 07 September 2012 approving the SME
development plan for the period of 2011 – 2015 2
. As such, this plan is the basis on which the 5-
year plan for SME development year has been implemented by concerned and responsible
ministries, ministerial-level agencies and local authorities.
3. The established policy mechanisms and programs for support to SMEs in Viet Nam have
contributed to capacity building, awareness, and attention of the government and authorities at
both national and sub-national levels to assisting SMEs in overcoming initial difficulties,
investing in business and production towards economic efficiency and effectiveness. In parallel,
the development of SMEs aims to improve quality and number of SMEs for achieving the targets
of economic efficiency, environmental protection, job creation, poverty alleviation, and social
security3
.
4. In March 2014, Small and medium-sized enterprise Development Fund (SMEDF) was established
to support small and medium-sized enterprises (SMEs) that invest in feasible projects, business
and production plans in prioprized and encouraging sectors and industries by the government
policies, which are in line with SMEDF’s development objectives in terms of (i) enahancing
competitiveness of SMEs, (ii) increasing income and job creation for laborers, given that the list
1
http://www.chinhphu.vn/portal/page/portal/chinhphu/hethongvanban?class_id=2&_page=13&mode=detail&d
ocument_id=163556
2
http://www.chinhphu.vn/portal/page/portal/chinhphu/hethongvanban?class_id=2&_page=13&mode=detail&d
ocument_id=163556
3
http://nif.mof.gov.vn/portal/page/portal/nif/Newdetail?p_page_id=43068753&item_id=160734044&p_details
=1

5. 5
of prioritized sectors and industries would be issued by the Ministry of Planning and Investment
(MPI) in respective periods.
5. Under the approved SME development plan for the period of 2011 – 2015, the GOV assigned the
Ministry of Planning and Investment (MPI) to establish project for preparing the Law in support
to SMEs. Indeed, delopment of the Law in support to SMEs in Viet Nam is a participatory
process, including consultations of expert evidneces and development experiences from both
domestic and inrernational individuals and organizations in public and private sectors. By doing
so, the Law in support to SMEs established by Enterprise Developmnet Agency (EAD) under
MPI is expected to formulate a uniform legal framework, which processes its own characteristics
that do not overlap or conflict with the enacted 2014 Law on Enterprises4
. This development is
also suitable to the international context where such regional countries as India, Japan, and Korea
have already established their laws in support to SMEs. The preparation of this Law at this stage
has qualitatively and quantaitatively considered economic benefits and costs incurred in support
to SMEs, and it is significantly important that the goals of Law aims to factor the macro targets of
socio-economic development in terms of employment generation (reduction of unemployment
rate), and minizing social disorders and crimes from which associated policies and measures shall
be formed and provided to SME sectors in an effective and sustainable manner.
B. Development status of SME in Viet Nam and Background for
formulation of Law in support to SMEs in Vietnam
6. To date, most of the Vietnamese enterprises are categorized as small and medium-sized. In terms
of number of empoyees5
, 97% of the total 500,000 enterprises in active operations are SMEs.
Also, the average capital6
of SMEs is at a small scale, which may be equipvalent to 1.5% and 8%
of those State owned enterprises (SOE) and Foreign Direct Investment (FDI) enterprises,
respectively. The average value of SMEs’ fixed assets is about VND 4-7 billion each, which is
approximately 1% and 5% of those of SOE and FDI enterprises7
in Viet Nam. The total assests of
SME sector accounts for about 38% of the whole enterprise sector. In consideration of (i) number
of SMEs, and (ii) their asset value, it can be seen that there is a big gap between SMEs and large-
sized enterprises that own up to 60% of the total asset of the busnesss sector although the number
of large-sized enterises is occupied about 3%.
7. Over the past years, a number of researches and surveys on SMEs conducted by SME-related
organisations, institutes, universities, e.g. Vietnam Chamber of Commerce and Industry (VCCI),
Central Institute for Economic Mangement (CIEM), and others found that SMEs in Vietnam have
still been chanlleged by their own constraints in business administration, transparency in business
practice and conducts, capabalitie capabilities of applying technique and technology in
manufacturing and businee-doing. These are very common weaknesses facing SMEs, not only in
4
Naitional Assembly (NA), the Law on Enterprise No. 68/2014/QH ratified on November 26, 2014
5 Government of Vietnam (OGV): SME definition by the Decree No. 56/2009/NĐ-CP dated June 30, 2009
6
Investopedia: (i) Capital is defiend as the amount of financial resources available to support the execution of
business; (ii) Asset is a resource with economic value that an individual, enterprise owns or controls with the
expectation that it will provide future benefit.
7
MPI, Annual statistics on SMEs in Viet Nam, 2013

6. 6
Vietnam but also in other countries where SMEs are in developing stages. Besides, Vietnamese
SMEs have been confronted by their own constraints as follows:
a. Of the total number of SMEs, there is a majority of micro and small-sized enterprises
with (i) 68.7% of micro enterpises, and (ii) 27.1% of small-sized enterises, respectively,
while only 1.9% of SMEs is medium-sized enterpises8
. In comparison with SMEs in the
regional countries like Korea, and Japan or others in the world where SMEs are dominant
in the economies9
, a portion of medium-sised enterprises in Vietnam has still been limited
and inclined to decrease in terms of number and scope of operations, i.e. from 4.3% in
2001 down to 2% in 2013, while number of micro enterprises has increased from 54.8%
in 2001 to 69% in 2013.10
b. While creativity and innovation are advantages of SMEs in a number of countries 11
, e.g.
in developed economies, these factors weaknesses of the Vietnamese SMEs. Indeed, there
is still a lack of (i) leading enterprises promoting and investing in advanced technology,
(ii) business incubators, and (iii) venture capital funds in Vietnam specializing in SME
development with the fact that investment in research and innovation on average is only
0.2%-0.3% of turnover while the figures of those in India and Korea are 5% and 10%,
respectively. It can be understood that these specific characteristics,or rather weaknesses,
results in low quality of the Vietnamese SMEs with regard to creation of a strong linkage
among SMEs in and out of sectors, enhancement of competiveness of SMEs’ producsts
and services, increase in quality of economic growth for the national economy.
c. Despite all existing constraints facing SMEs, the crucial role of SMEs in socioeconomic
development is undeniable. It is observed from international experience that SMEs are
identified as an economic growth driver and a backbone of the economy. Such developed
countries as the United States (USA), Japan, European Union (EU), members of
Organisation for Economic Cooperation and Development (OECD), Asia-Pacific
Economic Cooperation (APEC), newly emerging economies like China (PRC), India, and
Association of Southeast Asian Nations (ASEAN) countries have recognized the
importance of SMEs in their economies and economic growth. To that end, support to
SME development in Vietnam is a right way to secure sustainable development, stability,
competitiveness, and health of its economy in future.
d. Facing difficulties and constraints as mentioned, the Vietnamese SMEs have endurably
maintained their business and production activities even in economic downturn periods
and contributed a high value to economic growth. In fact, SMEs have created a
remarkable value for the economy with (i) 40% of GDP, (ii) 39% of social investment,
(iii) 33% of the state budget revenue, and (iv) 1 million job per year, i.e. 62% of the total
employment generated by business sector12
. The following figure 1 demonstates the
8 General Statistic Office of Vietnam, 2013
9
OECD: Outlook for Small and Medium Enterprises (SMEs), 2000. The numbers of SMEs in Japan, Korea and
EU are 98-99% and 95%, respectively.
10
Enterprise Development Agency, Ministry of Planning and Investment, the White Book on SMEs in Vietnam
11
Asian Development Bank (ADB), Creative Productivity Index: Analysing creativity and innovation in Asia,
August 2014
12
General Statistic Office of Vietnam (GSO), 2013

7. 7
numbers (in thousand) of new enterprises, which were newly established during the
period of 1991 – 2013.
Source: Ministry of Planning and Investment (MPI), The White Book on SMEs in
Vietnam, 2014
8. Analysis of the current policies in support to SMEs in Vietnam
a. From the policy-making perspective, chapter A of this report has brieftly reflected the
support to SMEs in various modalities, which are in place. Descriptively, such SME-
support policies and programs are comprehensive and diversified from creation of
enabling business envoiroment through a series of administrative reform in investment,
trade, customs, taxes, into preferential programs prioritizing SMEs’ access to finance,
technology, trade promotion, human resources development, and so on. However, the
outcomes and impacts of the SME-support polcies and programs have yet to meet the
actual needs of SMEs. Specificallly, the impacts are not clearly seen and measured. From
both direct and indirect communications between MPI and SMEs, it is noted that most of
policies in support to SMEs and programs are not fully realized in reality as commented
by representatives of SMEs, particularly at the consultation workshops on development of
the Law in support to SMEs. In other words, SMEs have not been able to approach these
SME-support policies and programs partly because of their multi-layer procedures
without clear guidance that may hinder the participation of business communities.
b. The fundamental reasons leading a gap in support to SMEs in recent time have been
identified. Part of these is associated with the fact that the supportiing policies and
programs did not clearly emphasize concrete SME beneficiaries and address their focal
priorities. This can be seen through following points:
i. Most of current SME-support policies were constituted and integreated into the
sector-wide programs that were separately managed and implemented by
assigned line ministry / ministries. Decree 56/2009/ND-CP is a clear-cut example

8. 8
in which 8 policy groups were proposed and approved, but the coverage, e.g.
target beneficiaries, of each program is board, not entirely specialized for SMEs.
Therefore, the support programs did not fully suit to assisting SME development,
given their patchiness, and dispersal causing certain obstacles to SMEs as the key
beneficiaries to approach these programs in reality, and hence the expected
change effect is still at a low level.
ii. In reality, the available resources for support to SMEs as a whole are intrinsically
scarce, but divided in piece and in a scattering manner. At the national level, each
line ministry implements its own policies and program without an effective
coordination and connectivitity with other concerned programs in order to
maximize the effectiveness in support to SMEs, particularly priopritized group(s)
of SMEs should be focused first. By doing so, the SME-support program help
transform the priopritised SMEs into greater size enterprises whose spillover
effect, in turn, can pervasive into other SMEs. At the sub-national level, the local
authorities have not been prepared themselves in terms of budget allocation for
supporting SMEs. In this regard, support, if any, is insignificant compared to the
realistic needs of SMEs (approximately 19% of local authorities nationwide sets
state budget for supporting SMEs).
.
iii. Since the SME-support objectives and target SME beneficiaries have not been
groundedly established, a system of SME-support ogranisations and
implementation mechanisms has yet to be substantially developed and ready for
supporting SMEs. At present, such organisations are weak and insufficient, and
have yet to be linked to develop an effective and complementary network.
c. During the global economic crisis as of 2008, the Vietnamese SMEs have confronted an
increasing competitiveness and substantial corporate business re-structiring for survival
from which their weaknesses have clearly exposed. According to the 2013 statistics on
SMEs MPI as indicated in table 1, the number of SMEs that completely closed out, and
dissolved and exited the markets has tendentiously increased in recent years. From the
macroeconomic perspective, the process of economic restructuring, transforming growth
model towards quality-based growth, and wide and in-depth economic integration into
regional and global economies has required the Vietmamese enterprises, especially
SMEs, with more critical demand for continued innovative reform, increasing their
competitiveness, and positions in the markets for stronger development. Now, it is an
important timing that SMEs are in need of the government support with concretized
policy actions.
Table 1. Number of enterprises closed out and dissolved by captital size asof 2013

9. 9
Source: Department of Business Registration and Department of Statistics, MPI, 2013
d. As such, external and internal requirements for supporting SMEs have proven that the
Government needs to cover much ground in its SME-support policy reform and support
modalities that must improve the SME-support effectiveness and impacts. It is adopted by
international development partners, national bussiness communities, and SME-related
individulals, orgainsations that formulation of the Law in support to SMEs in Vietnam as
an effective legislative instrument is the highest priority in the law-making agenda.
e. Support to SMEs is an common policy issue drawing considerable attention of the
governments and legalized for decades in the world as illustrated in the following table:
Table 2. Laws on SMEs by selected economies and regions.
Size of registered capital
(VND)
Number of
enterprises
Proportion of
enterprises (%)
Proportion of enterprise in
active operations at Dec
31, 2013 (%)
Below 10 billion 63,462 93.57 24.0
10 – 20 billion 1,911 2.82 4.18
20 – 50 billion 1,338 1.97 4.20
50 – 100 billion 615 0.91 4.94
Above 100 billion 497 0.73 3.56
Total 67,823 100
Economies by size and region SME-related Laws Year of Issuance
Japan Law on SMEs 1963
The United States (USA) Law on small-sized enterprises 1953
Canada Law on financing SMEs 1998
Russia Law on SME development 2008
China (PRC) Law on SME promotion 2002
Korea Law on SMEs 1966
Taiwan Law on SMEs 1991
India Law on support to SMEs 2006
Thailand Law on support to SMEs 2000
Indonesia Law on small-sized enterprises 1995
European Union (EU) Law on support to small-sized
enterprises commonly applied to
member countries / Small Business Act
(SBA)
2008

10. 10
Source: Development Agency (EAD), MPI and consolidated by author, April 2015
The common ground of the SME-related law in the listed contries is that this law was
established as an overall legal framework under which concretized and specific laws such
Laws as SME financing, on credit guarantee, on promotion of linkages between SMEs
and large-sized enterprises, investment promotion, tax incentives for SMEs, innovation
and creativity in SMEs, public procurement with the participation of SMEs shall be
developed accordingly.
9. In summary, the summarized analysis of development status of SMEs and SME-support legal
development process in Vietnam and in connection with international experiences and practices
has suggested that estanlishing a legal framework in the form of Law in support to SMEs in
Vietnam is an urgent task that is strongly supported by internatonal and national stakehoders. And
given the draft Law in support to SMEs in Vietnam prepared by EAD – MPI in place for internal
review, the next section of this report shall come up with an ex-ante regulatory impact assessment
(RIA) alignining with the law preparation process at this stage.
C. Regulatory Impact Assessment (RIA) for the draft Law in support
to SMEs in Viet Nam
C.1. Objectives and Purposes of Regulatory Impact Assessment (RIA) of the Draft
Law in support to SMEs
10. Regulation is one of the main tools as part of government’s interventions that have impact on its
individuals, institutions, organizations in both public and private sectors, including the private
sector in which small and medium-sized enterprises (SMEs) is the major force, to achieve their
objectives in terms of protecting its citizens and environment, economic growth, and so on. So
far, Viet Nam has yet to establish a comprehensive legal framework in the form of Law,
especially for the development of SMEs.
11. The method used in most countries to assess the impacts of new laws and policies is Regulatory
Impact Assessment (RIA). One of the roles of Regulatory Impact Assessment (RIA) is to furnish
a systematic appraisal of the potential impacts of a new regulation in terms of whether or not a
proposal for regulation is likely to achieve the designed goals objectives. The fact is that a
regulation may have numerous impacts, which are in need of assessment through studies and
consultations with affected individuals and parties. Economic approaches commonly used for RIA
are cost and benefit analyses, including an emphasis on associated risks generated by regulatory
costs that is generally conducted in a comparative context.
12. As part of a Regulatory Impact Assessment (RIA) process, the assessment conducted for the draft
Law in support to SME at this stage intends to (i) justify the government’s interventions through
the Law, (ii) find common ground for solutions that produce economic benefits, (iii) support
further public consultations of the contents of the draft Law, (iv) assist the Law in support to
SMEs developed by Ministry of Planning and Investment (MPI) in coordination with the Ministry

11. 11
of Justice (MOJ) to be well targeted, effectively implemented, and proportionate to the needs; and
(v) avoid inconsistencies, incompatibilities, or duplicative policies, if any.
13. Aligning with the purposes specified paragraph 12, the RIA report in this context will provide
technical inputs as part of the policy making process within the Ministry of Planning and
Investment (MPI) with critical evaluation of the contents and policy issues, solutions and potential
impacts, and the next steps in preparation of Law in support to SMEs with the technical assistance
Asian Development Bank (ADB) through the TA 8184-VIE whose overall program objectives
aim to assist sustainable high economic growth in Viet Nam by supporting the development and
competitiveness of small and medium-sized enterprises (SMEs). This second SME Development
Program will support the Government reforms efforts by: enhancing the policy and planning
framework for SME development; improving the efficiency of administrative systems in support
of SME development and operations; strengthening the regulatory framework for competition
policy; and enhancing SME access to finance. And the continuous improvement of the policy and
regulatory framework for SME development and operation will require addressing the current
gaps on SMEs data, facilitating the government evaluation of SME trends during the
implementation of the SME Development Plan 2011-2015; and upgrading the SME database will
also assist the preparation of the White Paper on SMEs 201413
, to conduct RIA tasks.
14. To captioned end, this ex ante Regulatory Impact Assessment (RIA) is indeed an in-house
assessment. The lessons learned from this stage are deemed as preparation of a RIA strategy for
Enterprise Development Agency (EDA) within Ministry of Planning and Investment (MPI) before
submission to Ministry of Justice (MOJ) for review.
15. The Law in support to SMEs is both an important reform towards the stability and quality of legal
framework and system, and a vital national economic and governance reform that are expected to
result in two major benefits of economic growth through SME development, and (ii) efficiency
and effectiveness of public policies, where:
a. Economic benefits. High regulatory costs and risks increase the costs of doing business
and investment, leading to reduction in the national competitiveness with which Viet Nan
is a concrete case factored by the uncertain, unstable and ineffective legal and regulatory
environment. The coming Law in support to SMEs is expected to play significant roles in
minimize costs and risks for SMEs and other businesses, stimulate investment at higher
level(s), promote economic growth, and expand markets in the regional and global
platform.
b. Public policy benefits. Failure to establish effective regulations and its implementation
will cause high risks to citizens, environment, and deficiencies in the government’s roles
and effectiveness in development and implementation of public policies adopted. The
coming Law on support to SMEs aims to boost the quality of regulatory instruments,
directly assisting enforcement and compliance activities among government enforcement
agencies in the public sector and stakeholders in the private sector.
13
ADB, Technical Assistance Report on Supporting the Second Small and Medium-Sized Enterprises
Development Program, October 2012

12. 12
C.2. RIA Methodology
16. The RIA process in principle covers the defined steps as follows:
a. Identify prioritized issues for analysis
b. Determine options for resolving issues
c. Identify RIA method for each policy issue
d. Collect data subject to its availability needed for analysis
e. Select method(s) for data collection
f. Collect the data in line with the agreed method and criteria
g. Conduct the analysis based on data collected
h. Interpret the analysis and findings, and
i. Write the RIA report.
17. The RIA method specifically applied to the draft Law in support to SME has substantially
adopted international practices 14
applied to the RIA process through (i) identifying and
categorizing prioritized issues / problems; (ii) analyzing the impacts of Law on the key groups of
actors / stakeholders and distributional effects and attributing these to the group(s) affected; (iii)
proposing a continued RIA with a focus on an analysis of costs and benefits of each options for
identified and prioritized policy issue based on consultation and data collection from concerned
ministries in the public sector, SMEs and businesses in the private sector, and international
experience. One of the challenges facing this stage is to collect information, which has yet to be
done at this point of time.
18. As mentioned in paragraph 12, the RIA on the draft Law in support to SMEs is preliminarily
conducted within the MPI at this drafting stage. In this sense, the RIA will not consist of all steps
as described in paragraph 16. Instead, it concentrates more on assessment of the (i) outlining
options for the structure, (ii) contents of the draft Law in Support to SMEs; and (iii) an initial
assessment of the draft Law, to be submitted to the Ministry of Justice (MOJ) for its consideration
of its compliance, including desk review and use of the results from the consultation workshops
listed in Annex as part of Law preparation process. As such, the analysis under this RIA of the
Law in support to SME in this context mainly presents respective qualitative impacts.
C.3. Assessment of the structure and contents of the draft Law in support to the
SMEs
19. Before analyzing the Law objectives and policy issues, which are prioritized under the draft Law
in support to SMEs, this sub-section intends to assess structure and contents of the draft Law as
described in the next paragraphs.
20. The draft Law is outlined with 6 main chapters covering important, necessary, and consolidated
contents that aim to support SME in Viet Nam. In terms of its structure, the draft Law can
optionally be modified by dividing Chapter 4: Budget / Funding, Coordination Mechanism, and
Monitoring and Evaluation into three separate chapters, namely (i) Budget / Funding; (ii)
14
Regulatory Impact Assessment Best Practices in OECD Countries: Alternative approaches to regulatory
analysis

13. 13
Coordination Mechanism in support to SME; and (iii) Monitoring and Evaluation (M&E). To this
end, each single Chapter may be in need of additional articles stipulating the (iv) roles and
responsibilities of all concerned individuals and parties; (v) principles of implementation
arrangements, and (vi) resources in a clear-cut manner.
21. The following chapters and articles are in need of supplemental clarifications and modifications,
where appropriate.
a. Chapter 1 – General Provisions
i. Article 4 – Interpretation of Terms. There are only 4 terms are interpreted. In
order to make the Law fully and consistently understandable by public, a further
review of terms that shall be applied in a specific context governed by thus the
Law should be done and added to the next draft version by the drafting team.
Particularly, concrete definitions of (i) financial-typed assistance, (ii) non-
financial-typed assistance, (iii) technical assistance, and (iv) others relevant used
under the Law should be located.
ii. Article 5 – Definition of SME in Vietnam. An in-depth study of a definition of
SME, including micro enterprises, in line with international best practices and
experiences that can suitably be applied to the country context, i.e. size of micro
and SME is defined subject to (i) number of employees, (ii) revenue which is in
line with the Law on Corporate Tax; and (iii) sector, respectively.
iii. Article 8 – Definition of SMEs entitled to preferential support by the
Government. SMEs and sectors and / or industries, which are prioritized,
described in this article should be categorized as appropriate.
b. Chapter 2 – Categories ofsupports to SME and Chapter 3 – Responsible agencies
and organizations supporting SME
i. Articles 11, 12, 13, 14, 15, 16. These sections should fully focus on description
and stipulation of all categories of support to SMEs. In other words, the roles and
responsibilities of line ministries, People’s Committees of provinces and cities,
and concerned agencies and organizations should be separately defined and
stipulated in Chapter 3.
ii. Articles under Chapter 3. These are mainly about state management in
supporting SME development, while the contents of public services, which are
still limited, should be highlighted and provided as an integral part of the Law.
C.4. Policy Issues / Problems under the ex-ante RIA
22. SME development-related issues in prioprities are briefly represented in the table 3 as below:
Table 3. Policy issues proposed from ex-ante RIA for the Law in support to SMEs

14. 14
C.5. Analysis of Potential Impacts of Policy Options
23. Options for Issue 1. A synchronized and uniform legal framework to improve efficiency and
effectiveness in support to SMEs established
a. The goals of Law in support to SMEs aim to ensure the policy synchronization and
highten the legal and legislative value at the highest level in order to enforce
responsibility-taking and orderly implementation. This Law demonstrates the
government’s full attention to the national enterprises, and highly affirms the
responsibilities and obligations that the government shall take concrete actions for
supporting SME development through mobilizing resources and providing pubic services
for promoting SME development. In this sense, the government shall not only take the
state management roles, but also participate in arrangements, implementation, and
coordinating SME-support activities.
b. The objectives of the Law in support to SMEs confirm the consistency, unification, and
syncronisation of all SME-support activities that may differ by narure, scope, and so on.
To this end, SME-support activities can be implemented at different levels, and supported
by diversified resources. But such activities must target the Law objectives by
establishing an integrated, supportive, and complementary system connecting all activities
as designated.
24. Options for Issue 2. A system of comprehensive solutions through establishing SME-support
principles, policies, and programs governing actions supporting SME development in a creative
and sustainable manner introduced and formulated.
a. SMEs are supported by the principles, which aim to ensure the publicity, transparency,
alignment with actual needs of of SMEs, and suitability with the availability of national
No. Policy issues
1 A synchronized and uniform legal framework in support to SMEs
2 A system of comprehensive solutions for supporting SME development towards
innovative and sustainable orientation
3 Classified SME-support solutions and implementation by priopritised sectors and
SME categories
4 Roles and responsibilities of the central government and local authorities, and of
organisations and agencies in both public and private sectors in supporting SME
development5 Competitiveness capabilities of SMEs in the internationalization and globilisation
context
6 Efficiency and effectiveness in use of resources for supporting SME development

15. 15
resources. In this context, the Law has changed the views of general support with a large
coverage of SMEs by moving to selection of SMEs subject to specific sectors, industries,
characteristics, and long-term development objectives for support. Given the current
conditions and development status of the country, the SMEs that are priopritized for the
government support are those operating in manufacturing sectors taking national
competitiveness advantages, applying advanced teachnogies, orienting export of high
value products, and joining vaule chain and industrial clusters generating added value for
the economy.
b. Perceived from the Law, support to SME development is the long-term, consistent, and
thorough strategy in the Government action programs, and the primary tasks in the
natiomal economic development policy.
c. In addition to creation of an enabling legal flatform covering workable policies and
mechanisms facilitating fair competition and development for all economic sectors, the
GOV and societal orgainsations are responsible for guiding and implementing all SME-
support activities, which are concretized, towards the common targets for SME
development with sustainability and higher and greater contribution economic growth in
the long-term.
d. SME-support by the government requires publicity, transparency, alignment with SMEs’
actual needs, and suitability to the availability of national resources. All eligible SMEs as
beneficiaries are equally access to public policies in support to SMEs and take part in
SME-support programs led by the government.
e. The government is in charge of encouraging an increasing participation of private sector
in SME-support programs and activities. It is subject to actualities in support to SME and
development stages, the government shall gradually hand over SME-support programs
into the private sector for implementation in line with the market rules.
25. Options for Issue 3. Dispersal and patchy execution of SME-support policies and programs
overcome through reforming support modalities
a. The draft Law in support to SMEs stipulated support policies for SMEs in prioritized
sectors and areas encouraging the development of support schemes to, namely (i)
innovative and creative SMEs; (ii) SMEs’ access to finance and tax incentives; (iii)
market development for SMEs’products; (iv) distribution of SMEs’products and services;
(v) information services, legal and business consultancies for SMEs; (vi) human resources
development and labor supply for SMEs; (vii) enhancement of business linkages among
SMEs, and between SMEs and large-sized enterprises; and (viii) business start-up for
SMEs.
b. The SME-support policies prescribed in the Law shall be specifically interpreted and
performed in Annual Plan (AP) and 5-year Plan on support to SME development for
securing common development targets and synchronization, and realized through
implementation of the government’s SME-support programs and projects. Applying
advanced SME-support instruments that have been internationally implemented such as

16. 16
business incubators, venture capital funds, and business startup funds together with
expanding SME-support modalities, for instance, in the form of help desk or business
counseling. It is expected that successful SMEs will create the so-called spilover effects
on business partners and enterprise in the value chain and industrial cluster.
c. The SME-support modalities shall also be regularlly renovated in line with market-based
mechnims. Intervention, when implemented, must generate indirect effects through
building and enhaningc capacity for SMEs that take full responsibilities for their own
business and production activities subject to market rules and SME capabilities. In
parallel, SME-support programs and activities must be considred for transferring to
private sector for handling on a step-by-step basis subject to the actual SME-support
implementation status. To this end, the public private partnership (PPP) mechanism is an
important tool in terms of mobilization of resources from both sectors for supporting
SMEs.
26. Options for Issue 4. Responsibilities and roles of the central government and local authorities,
societal organizations, and private sector in supporting SMEs; and (ii) Strengthening the SME-
support implementing systems and mechanisms clearly defined and assigned
a. The draft Law clearly stipulates the functions, tasks, organization and responsibilities of
the (i) state management system in supporting SMEs, including: The national SME policy
advisory council, the Ministry of Planning and Investment (MPI), line ministries in
charge of sector management, People’s committee of provinces and municipalities, and
(ii) SME-support implementation organisations in charge of executing policies and
assigned action plans and programs supporting and providing services to SMEs.
Particularly, responsibilities of the central government and local authorities in mobilizing
resources for SME-support, which is commensurate with SMEs’ contribution in each
location, together with establishing and ditecting established implemtation agencies and
organization to execute SME-suport policies and programs in each locality that shall be
elaborated in associated law documentation in future.
27. Options for Issue 5. Orientation and development of SME-support programs and projects aiming
to (i) strengthen competitiveness capabilities and positions of SMEs in the globalization context,
and (ii) contribute to sustainable development of the national economy and improvement of
people’s living standards groundedly established.
a. The Law in support to SMEs factored by synchronized and focal policies shall accelerate
SME development process in term of increased number and size of registered SMEs,
contributing to sustainable growth, and enhancing substaintial competitiveness
capabilities for SMEs in order to meet prerequisite requirements for an in-depth
international economic integration. Particularly by the end of 2015, Vietnam will remove
the tariff barrier as its commitment under the ASEAN Free Trade Area (AFTA)
framework, and is now in a negotiation process for new Free Trade Area (FTA)
agreements such as Trans-Pacific Partnership (TPP), Vietnam – EU FTA, and so on. In
this context, the Law in support to SMEs is expected to play an important role in
furnishing the Vietnamese enterprises, especialy SMEs, with capabilities and well

17. 17
preparation for further development in a severe competitive business environment now
and future.
b. The Law in support to SMEs is a legal base for Vietnam to develop SME-support
strategies, which are in compliance with the international rules and practices, through
SME-support programs and solutions that facilitate SMEs in market development,
consumption stimulation, enhancing business administration, developing business support
tools for business development, improving efficiency in utilization of SME-support
resources, including opportunities to access SME-support in PPP modality.
c. SME development means to create jobs in the economy, thereby improve incomes and
living standards for laborers, contribute poverty reduction, and form new motivation for
Vietnam to step into the period of economic recovery and sustainable growth.
28. Options for Issue 6. Efficiency and effectiveness in utilizing SME-support resources through a
monitoring and evaluation (M&E) mechanism maximized.
a. The draft Law in support to SMEs stipulates the monitoring and evaluation (M&E)
mechanism(s) for measuring the outcomes and impacts of the SME-support
implementation funded by government’s resources, including:
i. Budget allocation and use of funds mechanism for SME-support from the state
budget and other legal sources of mobilized funds
ii. Monitoring and evaluating the implementation of SME-suppport programs and
projects funded by the state budget on regular and non-regular basis.
iii. Compulsory sanction in place for handling all violating behavior of individuals
and organisations participating in implementation of SME-support policies,
programs, and projects
29. In brief, the addressed 6 policy issues and solutions with anticipated impacts are at a significance
level that is in need of the government support in cooperation with other concerned stakeholders
from international community, individuals and organisations of both public and private sectors in
formulating concrete SME-support policies, programs, projects, action plans, activities so as to
realize the Law and regulations in supporting SMEs in Vietnam in practices with measurable
outcomes and impacts in future.
30. Given the ex ante RIA within the framework of this assignment at this stage, the following
section covers necessary recommendations on a comprehensive RIA for the Law in support to
SMEs in the next steps.
D. Recommendations
31. In addition to the captioned analysis of potential impacts of policies supporting SME in Viet Nam
set under the draft Law, the following are recommendations in need of consideration:

18. 18
a. The draft Law is continuously revised, where appropriate, before submission to MOJ;
b. The Law is passed through a public consultation process with the parricipation of
representatives from both public and private sectors, especially SMEs who are directly
affected by the Law;
c. A comprehensive Regulatory Impact Assessment (RIA) is fully conducted with (i)
determing various options for each policy issues, (ii) set up criteria for RIA of the Law in
support to SMEs as suggested in the table 4; (iii) collecting data; and conducting cost and
benefit analysis (CBA) for each option with a focus on comparison of benefits generated
and costs incurred to SME and the government, respectively; and (iv) RIA analysis and
reporting.
Table 4. Proposed criteria for full RIA in the next steps
d. The RIA report is publicised together with the draft Law for consultantion as part of the
law making process in Viet Nam.
No Continued Criteria for RIA of Law in support to SMEs
1 Number and percentage of newly established SMEs
2 Failure SMEs after the first years in operations, e.g. business-doing and investment
activities
3 Compliance costs for complying with the Law and regulations, and costs incurred to
SMEs against benefits for SMEs
4 Public policy costs against benefits from establishment of the Law in support to SMEs
5 Quality and efficiency of public services
6 Transparency of the Law and regulations in support to SMEs
7 Job creation by SMEs categorized by number of employees and assets
8 Diversity in business and services areas participated by SMEs
9 Consistencies in execution of the Law and associated policies
10 Size and quality of business relationships, e.g. (i) among SMEs, (ii) between SMEs and
large-sized enterprises, and between domestic enterprises, especially SMEs, and (iii) FDI
enterprises both horizontally and vertically
11 SMEs’access to resources, production factors, including labor, capital, land use,
infrastructures, and so on.

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32. It is critical that supporting SME in Viet Nam be understood as the highest priority with the fact
that this established Law is intended to create benefits that are expected to outweigh costs
imposed on the SMEs. Therefore, a comprehensive RIA on the draft Law in support to SME that
shall be presented to the Ministry of Planning and Investment (MPI) and Ministry of Justice
(MOJ) for review should be fully implemented for key provisions of the Law that may make
concerned stakeholders, especially SME communities, better off.
E. Conclusion
33. The Law in support to SMEs is a new legal framework, which is the highest legislation especially
designated to SME sector in Vietnam. The draft Law with 6 chapters and 34 articles cover highly
important contents, which clearly prescribe, such as (i) state management and government policies
in support to SMEs; (ii) prioritized SMEs and sectors and industries; (iii) a system of measures and
solutions for support to SMEs; (iv) a system of central agencies and organisations and local
authorities, and other international and local stakehoders involved in implementing the government
policies and SME-support projects and programs; (v) budgetary arrangements and budget
allocation; (vi) coordination procedures and process; and (vii) monitoring and evaluation system(s)
for implementation. For an effective execution of the Law, it does require an inter-disciplinary
coordination in syncronisation from the central government to local authorities, and effective
participation and cooperation of both public and private sectors, and therefore propagation and
dissemination of laws and associated regulations need to go with incorpotated training and guidance
programs that aim to ensure that each responsible individual and organization are fully aware of
their roles and responsibilities for supporting SME development towards a full achievement of the
highest goals set by this Law.
34. It is significantly noted that international partcices and experiences in supporting SME development
are important for the government to consider and employ in an appropriate manner in the context of
Vietnam. In order to do so, international approaches and methologies, which are selected, should be
prepared for further promotion that can motivate the proactive participation and contribution from
both public and private sectors, or rather the whole society, implementing the Law under which all
regulations and associated legal documents can properly be realized, especially the country is now
in the process of accelerating its economic cooperation and integration into the regional and global
platforms.

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F. Annex
Table 5. List of consultation workshops on development of Law in support to SMEs in Vietnam
No. Workshop title Host
organization
Participants Time
1 Law in support to SMEs:
International experiences
and lesson learnt for
Vietnam
Ministry of
Planning and
Investment (MPI)
MPI, Vietnam Chamber
of Commerce and
Industry (VCCI),
National University of
Eeconomics,
Departments of
Planning and
Investment (DPI), SME
Business Association,
and other concermed
stakeholders
August 7,
2014
2 Assessment of the
implementation status in
support to SME
development in Vietnam
Ministry of
Planning and
Investment (MPI)
MPI, Vietnam Chamber
of Commerce and
Industry (VCCI),
National University of
Eeconomics,
Departments of
Planning and
Investment (DPI),
SMEs, and other
concermed stakeholders
September
9 2014
3 Proposal of key contents
for the Law in support to
SMEs
Ministry of
Planning and
Investment (MPI)
MPI, Vietnam Chamber
of Commerce and
Industry (VCCI),
National University of
Eeconomics,
Departments of
Planning and
Investment (DPI),
SMEs, and other
concerned stakeholders
November
4, 2014
4 Support to Small and
Medium-Sized
Enterprises (SMEs): The
roles of Government in
Ministry of
Planning and
Investment (MPI)
National Assembly
(NA), MPI, Vietnam
Chamber of Commerce
and Industry (VCCI),
National University of
May 30,
2015

21. 21
Vietnam Eeconomics,
Departments of
Planning and
Investment (DPI),
SMEs, ADB
consultant, and others