Private entrepreneurship, local livelihoods and rural transforma5on in the Mekong Delta, Vietnam 20 June 2013 Serge Birtel, Simon Benedikter & Gabi Waibel WISDOM project (Water- related Informa=on System for the Sustainable Development of the Mekong Delta) Center for Development Research () University of Bonn Slide 1
Outline! Background: Small private enterprise development in Vietnam! Context: Livelihoods and rural transforma=on in the Mekong Delta! Case study! Research objec=ves! Enterprise profiles in Can Tho City! Livelihoods of rural entrepreneurs! Conclusion & policy recommenda=ons Slide 2
Background: Small private enterprise development in Vietnam Number of registered enterprises in Vietnam (GSO 2010) 250000 200000 150000 100000 50000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Small enterprises 95.7% of all registered enterprises 85% of the workforce 39% of the GDP (GSO 2010) Private enterprises State- owend enterprises GSO (2010): Enterprises in Vietnam during the first nine year of 21st century. Hanoi: General Statistics Office. Slide 3
Background: Small private enterprise development in Vietnam! Private sector development since 1986! Boost with 2001 Enterprise Law! SME Development Plan 2006-2010! SME defini=on! registered under law,! have less than 10 billion VND (470.000 USD) of capital, and! not more than 300 employees.! Growth- vs. livelihood- oriented enterprises Slide 4
Case study area Slide 5
Context: Livelihoods and rural transforma5on in the Mekong Delta Slide 6
Research objec5ves 1. Capture and understand the development of SMEs as an important dimension of socio- economic transforma=on in the Mekong Delta 2. Iden=fy the local SME profiles 3. Assess the role of SMEs for the local labor market Slide 7
Data and methods! Secondary data analysis! Preliminary field visits! Expert interviews with district and provincial agencies! Ques5onnaire based survey! 197 proprietors or managers of private businesses! 95 employees of SMEs! 12 Focus group discussions with residents of the study area! Stakeholder workshop: Presenta=on and discussion of preliminary results Slide 8
Enterprise profiles in Can Tho City! Dominance of micro- or household- based enterprises! 91% are micro enterprises! 47% are household- based (family- run or self- employed)! Average number of employees is with 3.5 far below the na=onal average of 40 employees 9% 0% 91% SME type Informality Micro enterprise (0-9 employees) Small enterprise (10-49 employees) Medium enterprise (50-299 employees)! Half of the enterprises are not registered and thus do not pay taxes 49% 51% Registered Unregistered Slide 9
Enterprise profiles in Can Tho City! Majority of enterpriss has no registered capital! Average registered capital: 250 million VND! Na=onal average: 1.8 billion VND! Enterprise owners rarely received bank loans for their business establishment Registered capital of enterprise No charter capital up to VND 2 million VND 2-20 million VND 20-100 millon VND 100-400 million VND 400 million - 13 billion 9% 7% 11% 53% 13% 7% Most important financial source 63% 19% Bank loans Own savings 15% 3% Friends and family in Vietnam Private money lender(s) Slide 10
Enterprise profiles in Can Tho City! Bulk of enterprises in the service and trade sector! Half of the entrepreneurs are women Business sector 14% Manufacturing 38% 48% Service Trade! Embedded in the local market! Major Constraints! Lack of access to credit! Strong compe==on! Low demand Sex ra5o of entrepreneurs 51% 49% Male Female Slide 11
Enterprise profiles in Can Tho City Household businesses in the informal sector Micro enterprises Share in survey 47% 45% 7% Small manufacturing enterprises Business sector Service (& trade) Trade Manufacturing Employees Help of family members 2-3 employees 18 employees Informality 91% 20% 0% Gender 58% male 60% female 83% male Products/ services Motorbike service, coffee shop Construc=on materials, agricultural utensils Rice processing, wood processing, petrol Capital 5.5 million VND 110 million VND 1.8 billion VND Turnover 46 million VND 460 million VND 17 billion VND Self- employment 53% 10% 8% Slide 12
Enterprise profiles in Can Tho City 35 Year of establishment 30 25 20 15 10 Group 3 Group 2 Group 1 5 0 1964 1980 1987 1990 1994 1996 1998 2000 2003 2005 2007 2009 2011 Slide 13
Livelihoods of private entrepreneurs Slide 14
Livelihoods of private entrepreneurs! Shif from agriculture to off- farm ac=vi=es! Main ra=onale is income diversifica=on and beger livelihood opportuni=es especially for young people! Households are engaged in other off- farm ac=vi=es! Many households are landless: home as the working place! Low educa=onal level! Government policies rarely affected enterprise owners, and enterprise owners rarely received trainings from state departments! Livelihood- oriented entrepreneurs dominate the enterprise landscape in Can Tho City Slide 15
Livelihoods of private entrepreneurs! Livelihood- oriented entrepreneurs! Risk aversion, low capital investment and produc=vity! Provide off- farm livelihood opportuni=es for underemployed and landless households! Important contribu=on to poverty reduc=on! Growth- oriented entrepreneurs! Contribute to off- farm labor markets! High investment and return above subsistence level! High survival rate! Entrepreneurs have non- farm backgrounds Slide 16
Conclusion! Private enterprise development important for livelihood diversifica=on and socio- economic development! In contrast to the vision of moderniza=on and industrializa=on, the majority of enterprises are micro- or household- based enterprises opera=ng at subsistence level! Small and medium sized enterprises are the excep=on rather than the rule in Can Tho City! Household business is an important livelihood strategy for income diversifica=on and escaping unemployment Slide 17
Conclusion! Enterprises in rural areas in Vietnam are considerably smaller and have less capital and turnover than in urban areas! Livelihood perspec=ve enables to understand mo=va=ons and ra=onale for rural entrepreneurship! Differen=a=on between growth- and livelihood- oriented entrepreneurs necessary! Constraints faced by household businesses lead to a low survival rate Slide 18
Recommenda5ons for a suppor5ve policy framework! Specific policies tailored to livelihood- oriented enterprises and household based enterprises! Financial assistance for the smallest enterprises (micro- credit scheme?)! Support the diversifica=on of products/services provided by the enterprises through voca=onal trainings Slide 19
Thank you for your axen5on www.wisdom.eoc.dlr.de Contact: Serge Birtel Center for Development Research (), University of Bonn + (0) 49 228 73 4919 serge.birtel@uni- bonn.de www.zef.de Slide 20
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