Collaboration between Vietnamese SMEs and FDI companies

According to a study by the Institute for Sustainable Development, National Economics University, small and medium-sized enterprises with foreign direct investment or FDI impact on local SMEs bring more benefits to the economy than large-scale enterprises in terms of job creation, dynamism and quick response to urgent market needs.

1. The Role of SMEs and FDI Companies in Economic Growth

Foreign direct investment (FDI) enterprises play an important role in the Vietnamese economy. These enterprises have the main role of creating job opportunities for local people, contributing to the overall development of the country; bringing a large amount of foreign capital into the country, which can be invested in many different areas, including infrastructure development and technology upgrading; bringing advanced technology and management expertise, helping to modernize and improve the efficiency of Vietnamese industries; helping to increase exports by producing export goods and promoting Vietnamese products in the international market; attract more investment, improve the business environment and increase competition, leading to more innovation and growth.

But compared to large-scale enterprises, small and medium-sized enterprises (SMEs) bring more benefits to the economy in terms of job creation, dynamism and quick response to urgent market needs and faster development. For developing countries, SMEs contribute to solving the problem of creating jobs for low-skilled workers. Resources are available but abundant in developing countries. According to the General Statistics Office, the number of SMEs in Vietnam as of June 2022 was nearly 870,000, accounting for 98% of the total number of operating enterprises. In 2022, these enterprises contributed 50% of GDP, approximately 196 billion USD, 33% to the state budget, created 31.5 million jobs (accounting for 62% of total jobs) and paid 19.8 billion USD to the state budget.
 

Case studies of successful collaborations between Vietnamese SMEs and FDI companies

2. The Growing Investment in SME-FDI Partnerships

Currently, case studies of successful collaborations between SMEs and FDI companies investment capital is increasing, especially those with total accumulated investment capital of less than 100,000 USD, increasing at a fairly stable rate from 12.12%/year in 2008 to 14.68% in 2012 and 18.23% in 2019, 21.2% in 2022. For enterprises with investment capital from 100,000 USD to 500,000 USD, although the proportion decreased slightly during the year, this group of enterprises then increased rapidly and reached 27.79% and became the group with the highest proportion in FDI enterprises in 2022. FDI enterprises with investment capital from 500,000 USD to 1 million USD accounted for 17.12% of the total number of FDI enterprises in 2008, decreasing to 12.69% in 2022. 2022. In 2008, foreign-invested enterprises with capital of 1 to 5 million USD accounted for nearly one-third of the total number of FDI enterprises, but this proportion decreased to 24.56% in 2022. The proportion of large-scale enterprises with capital of 5 million USD or more increased in the early period but then gradually decreased after 2012 and accounted for 16.73% in 2022.

3. Enhancing Sustainable Growth for SMEs and FDI Enterprises

Despite their great contributions to the economy, these SMEs always face great difficulties in maintaining and developing sustainably due to limited access to resources. The sustainable production efficiency of this group of enterprises as well as the factors affecting their production efficiency are important issues for policy makers and economic researchers. The study by the Institute for Sustainable Development investigated the sustainable performance and factors affecting the performance of FDI impact on local SMEs operating in the food and beverage, wood and steel sectors. The results showed that the production efficiency index of Vietnamese FDI enterprises ranged from 82.5% to 89% depending on the sector, with financial leverage, renewable energy, scale and operating time being related to the performance of FDI enterprises and having a positive FDI impact on local SMEs’ performance.
 

Government support for SME-FDI partnerships 2025

At the same time, financial leverage and the use of renewable energy can promote the performance of enterprises in the case of FDI SMEs. The study showed that the older the age of FDI SMEs, the better their business performance. Long-standing FDI SMEs have better business performance than young FDI SMEs, and the more green energy enterprises use, the better their business performance. Therefore, policymakers need to focus on developing appropriate policies to maintain the efficiency of these enterprises, encourage them to borrow more and use renewable energy to improve the economic efficiency of the country.

For business managers, to ensure sustainable development, in addition to expanding their scale, FDI SMEs should integrate environmental, social and government support for SME-FDI partnerships (ESG) considerations into their operations and adopt responsible business practices. This could include reducing carbon emissions, promoting human rights and labor standards, and ensuring transparency and accountability. In addition, government support for SME-FDI partnerships can play a role by establishing regulations and standards to encourage sustainable FDI and by incentivizing businesses to adopt sustainable practices.

As investment in SMEs continues to grow, strategic policies and financial support are essential to unlocking their full potential. By leveraging renewable energy, adopting responsible business practices, and strengthening SME-FDI partnerships, Vietnam can create a more resilient and competitive economy.

If you are looking to invest in Vietnam or establish successful collaborations between SMEs and FDI enterprises, our expert team at Faro Vietnam is here to help. With deep market insights and great solutions, we assist foreign investors in navigating the Vietnamese business landscape. Call us for more detailed information.

>>>Read more: Market entry strategies for international investors in Vietnam

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