IT usage for indirect IT usage for indirect exports by SMEs in Vietnamexports by SMEs in Vietnam

Ngo Quang HungVietnam

AgendaAgenda

Vietnamese Enterprises: a SnapshotVietnamese Enterprises: a Snapshot IT for Indirect Export by SMEsIT for Indirect Export by SMEs Case study: the Textile and Apparel Case study: the Textile and Apparel

IndustryIndustry Case study: the Tourism IndustryCase study: the Tourism Industry

Part 1: Part 1: Enterprises in Vietnam:Enterprises in Vietnam: a snapshot a snapshot

39%

42%

19%

The state sector

The private sector

Sector with foreign direct investment

Vietnam economic sectors Vietnam economic sectors

Enterprises in Vietnam, a snapshot Enterprises in Vietnam, a snapshot

130,000 5,200 3,000

2,400,000

10,000,000

Private Enterprises

State-owed Enterprises

Foreign invested Enterprises

Registered house hold businesses in service and industry sector

Household businesses engaged in agriculture production

SMEs in Vietnam SMEs in Vietnam

Boom after the Enterprise Law was Boom after the Enterprise Law was issued in 1999issued in 1999

SMEs as specified in Government SMEs as specified in Government Decree No.91/2001/CP-NDDecree No.91/2001/CP-ND registered capitalregistered capital = < = < VND 10 billionVND 10 billion

(USD 650,000)(USD 650,000) or or annual average number of annual average number of employeesemployees

=<=< 300 people 300 people

As of 2003: 132,000 SMEs, accounting As of 2003: 132,000 SMEs, accounting for 96% of enterprises in Vietnamfor 96% of enterprises in Vietnam

SMEs share of Vietnam economy:SMEs share of Vietnam economy:

Contribution to GDP

Others74%

SMEs26%

Contribution to National industrial ouput

Others69%

SMEs31%

Contribution to the country's regular job supply

SMEs25%

Others75%

Contribution to total retail volume

Other22%

SMEs78%

Part 2: Part 2: IT for indirect export of SMEsIT for indirect export of SMEs

SME and IT applications SME and IT applications

60%-70% of SMEs have no fax machines nor 60%-70% of SMEs have no fax machines nor computerscomputers

Of the SMEs that have Internet connection, Of the SMEs that have Internet connection, 48% use it only for emailing and 33% for non-48% use it only for emailing and 33% for non-business purposes.business purposes.

800

1500

3000

5000

Enterprises that have websites

2001 2002 2003 2004

By 2004, 5000 By 2004, 5000 enterprises have enterprises have their own their own websiteswebsites

< 50% of < 50% of websites owners websites owners are SMEsare SMEs

SMEs and export activities SMEs and export activities

Export revenue accounts for 16% of Export revenue accounts for 16% of total sales of SMEs total sales of SMEs

14% of SMEs engage in export 14% of SMEs engage in export activities (both direct and indirect)activities (both direct and indirect)

Low production capacity and limited Low production capacity and limited access to foreign market access to foreign market

-> mostly export through indirect -> mostly export through indirect channel, in partnership with large channel, in partnership with large enterprisesenterprises

-> in some cases, SMEs form a -> in some cases, SMEs form a horizontal clusterhorizontal cluster

Industries with substantial indirect Industries with substantial indirect export elements export elements

Textile and garmentTextile and garment FootwareFootware HandicraftsHandicrafts Agriculture productsAgriculture products Electronic goodsElectronic goods Cars and automobilesCars and automobiles TourismTourism

Part 3:Part 3: The textile and garment The textile and garment industry industry

Characteristics of the industryCharacteristics of the industry

Export – oriented: Export – oriented: $ 2,752 mil, 16.5% total $ 2,752 mil, 16.5% total export value of Vietnam in 2003export value of Vietnam in 2003

Characteristics of the industry Characteristics of the industry

Highly fragmentedHighly fragmented

Yarn Yarn Fabric Fabric Garment Garment Accessories Accessories & other & other

State-owned 42 42 69 69 139 139 60 60

Private 17 33 299 65

FDI & joint venture

40 76 221 25

Total Total 99 99 178 178 659 659 150 150

A few major enterprises (30 - 40) dominate A few major enterprises (30 - 40) dominate the textile export market the textile export market

Significant technology gap between large Significant technology gap between large corporations and SMEs corporations and SMEs

IT usage for exportIT usage for export

Low use of IT in vertical integration of Low use of IT in vertical integration of the supply chainthe supply chain

Low use of IT to promote exportLow use of IT to promote export Exhibitions and missions are main Exhibitions and missions are main

channels to establish business channels to establish business relations, the Internet is scarcely used relations, the Internet is scarcely used to this end to this end

Decentralized efforts by individual Decentralized efforts by individual companies to tap export marketscompanies to tap export markets

IT usage for export (cont) IT usage for export (cont)

A national portal for textile and A national portal for textile and apparel transactions is under apparel transactions is under construction by the Vietnam Textile construction by the Vietnam Textile and Apparel Association (VITAS),and Apparel Association (VITAS),

Scheduled to be up and running by Scheduled to be up and running by the end of 2004, for pilot test with the end of 2004, for pilot test with 20 major enterprises20 major enterprises

Scheduled to be in full operation by Scheduled to be in full operation by 2006, with participation of all VITAS 2006, with participation of all VITAS members members

Problems for SMEs in introducing Problems for SMEs in introducing and utilizing IT and utilizing IT

High cost of IT applications vs. tight High cost of IT applications vs. tight profit margin of the textile industry profit margin of the textile industry and low capital flows of SMEs. and low capital flows of SMEs.

Lack of skills and limited training Lack of skills and limited training budgetbudget

Lack of awareness of the benefits IT Lack of awareness of the benefits IT would bring would bring

Lack of an appropriate business Lack of an appropriate business model to efficiently utilize IT in supply model to efficiently utilize IT in supply chain managementchain management

Part 4:Part 4: The tourism Industry The tourism Industry

The industry: some statisticsThe industry: some statistics

1998 1999 2000 2001

Number of tourist enterprises

324 355 386 392

Number of hotels and dwelling establishments

369 402 400 418

Turnover of services(Billion VND)

1,679 1,569 1,975 2,272

- Room for rent 604 578 684 821

- Travel, transportation 802 650 866 983

- Other services 273 341 425 468

Turnover of alimentation (Billion VND)

613 681 714 847

Others (Billion VND) 174 157 128 140

CCasase: e: wwww.bww.booookingvietnam.comkingvietnam.com

Portion Portion ofof SM SMEsEs in the hotel net in the hotel netwworkork

CityCity TotalTotal SMEsSMEs %%

HochiminhHochiminh 367367 326326 88.888.8

Ha NoiHa Noi 314314 275275 87.587.5

Nha TrangNha Trang 6969 6060 86.986.9

HueHue 2929 2323 79.379.3

Da LatDa Lat 2424 1919 79.179.1

Vung TauVung Tau 4343 3636 83.783.7

Ha LongHa Long 1616 1313 81.281.2

Sapa - Lao CaiSapa - Lao Cai 1010 99 9090

Can ThoCan Tho 1111 66 54.554.5

Da NangDa Nang 4747 3838 80.880.8

Hai PhongHai Phong 4646 4343 93.493.4

Chau DocChau Doc 1515 1313 86.686.6

Some chSome chararacteristacteristicsics ofof the cl the clususterter

8989%% members of the hotel network are members of the hotel network are SMEs, SMEs,

Only 3Only 3%% of these SMEs have their own of these SMEs have their own websiteswebsites

7272% have comput% have computererss 63% have Internet, mostly for emailing63% have Internet, mostly for emailing Major marketing channel: through Major marketing channel: through

travel agentstravel agents 81% see bookingvietnam as the single 81% see bookingvietnam as the single

place for their Internet presence.place for their Internet presence.

MMosost t ofof the small and medium hotels the small and medium hotels already have computalready have computersers and and ususe e them them for business purposesfor business purposes

Limited use of IT to generate direct Limited use of IT to generate direct exportexport

Increasing role of IT in communication Increasing role of IT in communication with the travel agents -> facilitate with the travel agents -> facilitate business transactionsbusiness transactions

IT application as the base of SMEs IT application as the base of SMEs cluster -> broaden clients’ choice, cluster -> broaden clients’ choice, improve competitiveness of the improve competitiveness of the industry, and facilitate export of SMEsindustry, and facilitate export of SMEs

IT usage by SMEs in the clusterIT usage by SMEs in the cluster

IT usage in booking procedureIT usage in booking procedure

Client/Agent Booking Vietnam

Client/Agent's booking request is sent to Booking Vietnam via BookingVietnam.com Booking Cart,

BookingVietnam sends to the Client/Agent a service agreement.

The Client/Agent signs the service agreement and sends to  BookingVietnam via e-mail or fax a copy of the service agreement and a copy of the bank receipt that proves the deposit has been executed.

Upon all required documents are received by BookingVietnam, BookingVietnam sends to the Client/Agent a confirmation via e-mail or fax

BookingVietnam then emails or fax the booking form to the member hotel

Member hotel confirms with Booking Vietnam (by phone, fax, emails)

Member Hotel

Problems for SMEProblems for SMEss in utilizing IT in utilizing IT

Technology involved: not complicated Technology involved: not complicated and available at and available at affordable priceaffordable price

Space for improvement: use of IT for full Space for improvement: use of IT for full integration of business transactionsintegration of business transactions Automatic feedback system between the Automatic feedback system between the

hotel and bookingvietnamhotel and bookingvietnam

Introduction of EDI form to transmit booking Introduction of EDI form to transmit booking details from bookingvietnam to the hoteldetails from bookingvietnam to the hotel

Integration of the online transmitted form Integration of the online transmitted form and the internal room management systemand the internal room management system

Thank youThank you