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BUSINESS DEVELOPMENT SERVICES -
Key to the Growth and Functioning of Enterprises
Business
development services (BDS) refer to a wide range of non-financial
services used by entrepreneurs to help them improve the performance
of their businesses, access to markets, and ability to compete. The
role of BDS in the development of enterprises is widely recognized
throughout the world. In more mature economies like Singapore,
business services are at least 15% of domestic output. In OECD
countries, strategic business services have an annual growth rate of
10% per year. In Vietnam, however, BDS are still at an early stage
of development. Vietnam's business services are probably less than
1% of total domestic product and are growing at a slow rate of 1-2%
per year.1 Recognition of BDS as tools for enterprise
development is low, both at the enterprise and the government agency
level. The BDS market in training, accounting, financial and
taxation advice, and especially management consulting services is
weak both in terms of supply and demand. This bulletin provides a
brief summary of the current development status of BDS and the
constraints faced by BDS providers in Vietnam. Its aim is to promote
better awareness and higher usage of BDS among the private sector,
in order to help those companies grow.
Relatively low awareness
Despite the fact that
Vietnam has a growing business services sector, entrepreneurs are
largely unaware of the potential benefits of purchasing the
services. Entrepreneurs tend to be wary about disclosing
confidential business information to outside consultants.
Furthermore, small entrepreneurs in particular lack the needed
resources to gather information on available business services. In
general, many potential customers lack adequate and accurate
information about the services currently being offered.
However, there is now a positive trend. Raising awareness about BDS
has become a priority for the Government. Development of the BDS
market has been listed as a priority in the country's Comprehensive
Poverty Reduction and Growth Strategy (CPRGS). Most recently, a
Decree on the "provision and use of consulting services" was issued
in order to formalize consulting services as a profession.
Limited demand and supply
As SMEs typically have
modest income and savings, they have low demand for and use of
outside services, including BDS. Most SMEs say that they cannot
afford the business services that are offered on a for-profit basis.
In addition, many SMEs are either unaware of the benefits of such
services or do not see the potential value that BDS could bring to
their firm. This is especially the case with services such as
strategic management advisory services that do not promise immediate
and tangible benefits.
The supply-side of the BDS market is also limited by several
constraints. Service providers lack a clear understanding of the
specific needs of local businesses. They also lack the expertise and
ability to tailor their services according to these needs.
Consulting firms in Vietnam are still very young for the most part,
and Vietnamese consultants, in general, are still in the process of
learning the trade. They lack developed consulting skills and
experience, and in particular, are unable to articulate effectively
the value of consulting services to clients.2
Insufficient availability of information
A reliable and systematic
statistical database on the Vietnamese economy and on specific
industries and markets, does not exist. Information on foreign
markets and the world economy is not readily available, nor are
technical books, documents and information related to the skills
needed by BDS providers. This is a major constraint, as all of these
are crucial for providing strategic advice to companies in a timely
and thorough manner.
Various legal constraints to BDS
An enabling environment is
the key to paving the way for the effective development of the
business service sector and a functioning BDS market in Vietnam.
Recent legal reforms such as the Enterprise Law and the increasing
liberalization of the economy, particularly of the service sector,
have boosted many BDS markets in Vietnam in both supply and demand.
Increasing efforts have been made to improve the investment and
business environment and to strengthen the confidence of the
business community. However, there still remains a number of legal
constraints to the development of the BDS market.3 Most
notable are the excessively high market entry conditions for some
business services such as vocational training, auditing services and
intellectual property services. In addition, there are still
inconsistencies between the Enterprise Law and other legal documents
concerning BDS and restrictions on transactions of some services.
For example, regardless of how much a company spends on marketing,
advertising and branding activities, the amount that is
tax-deductible is capped at 10% of total expenses. As a result, SMEs
feel discouraged from purchasing these kinds of services, as in most
cases, they cannot legitimately claim these as expenses with the tax
authority.
(1) See MPDF, Business Services in
Vietnam, Private Sector Discussion Paper No. 5, December 1998.
(2) See MPDF and GTZ, Management Consulting: an emerging business
service for the private sector in Vietnam,
Private Sector Discussion Paper No.15, April 2003.
(3) See GTZ, VCCI and CIEM, The Legal Environment for Business
Development Services in Vietnam, November 2003. |
