Many Vietnamese private companies are using technology 50 years out of date, and as a consequence Vietnam was lagging far behind its competitors in the region, senior officials said.
Even though small- and medium-sized enterprises (SMEs) account for up to 98 percent of all non-state firms in Vietnam, most of them are still using technology from the 1960s and 1970s, said Bui Thu Thuy, deputy director of the Ministry of Planning and Investment (MPI)’s Department of Enterprise Development.
Thuy said non-state enterprises, especially SMEs, play a significant role in the country’s economy, with non-state enterprises contributing as much as 50 percent to Vietnam's GDP during in the period 2009-2012, and one third of the state budge in the 2011-2012 period.
They also account for some 30 percent of total investment and 45-47 percent of all jobs.
“Despite their important role in the country’s socio-economic development, SMEs in Vietnam are too modest in business size, and backward in technology and management, which results in weak competitiveness and inefficient operations,” Thuy said.
Most SMEs lacked adequate funding and mainly rely on bank loans to finance operations because of the lack of investment capital. Many SMEs have reported a considerable decrease in revenue and profit in recent years.
Backward technologies hinder development of private firms in Vietnam
“Due to the lack of funding, private firms, especially SMEs cannot afford sufficient investment in technology," Thuy said.
"Most of them are using technologies that are from two to three generations older than the world average,” she emphasised.
According to her, as much as 80-90 percent of technology was second-hand and imported from foreign countries. Up to 75 percent of business and production machinery belonged to the 1960s and 1970s, and 75 percent of equipment has already been depreciated to zero, with only half the machinery replaced.
Thuy said such enterprises were spending only 0.2-0.3 percent of revenue on updating technologies, compared with five percent in India and 10 percent in South Korea.
Only 20 percent of Vietnam's enterprises have applied high-tech in their business, compared with 73 percent in Singapore, 51 percent in Malaysia and 31 percent in Thailand. As a result, Vietnam ranked 102nd out of 148 economies in the world and ninth out of ten countries in ASEAN in terms of technology application.
SMEs are facing increasing difficulties in getting access to bank loans due to their modest size and the lack of confidence in their capacity.
Tran Thi Hong Hanh, general secretary of the Vietnam Banks Association, said integration has brought about several business opportunities, but it was necessary to pay more attention to enhancing the competitiveness of local enterprises in order to ensure sustainable development.
