Digitalisation and innovation spur Vietnamese small businesses on expansion

Content Summary

Nine-in-10 Vietnamese small business owners expect local economy to grow
Business growth to rise on back of innovation and digitalisation
Small businesses increasingly cautious about borrowing costs

Vietnamese small business owners overwhelmingly expect to grow in 2023, with a new survey showing they are the most confident in their local economy across the surveyed markets in Asia-Pacific.

CPA Australia’s latest Asia-Pacific Small Business Survey shows Vietnamese small businesses’ swift recovery from the COVID-19 pandemic helped pave the way for growth last year. This momentum is expected to continue, with 83 percent of Vietnamese respondents expecting their business to grow.

Nine-in-10 small businesses surveyed in Vietnam also expect the local economy to grow in 2023. This was the strongest result of the 11 markets surveyed. Vietnam also topped the list for small businesses growth in 2022 (78 percent).

COVID-19 was the most detrimental factor for Vietnamese small businesses last year but its impact had lessened. Fewer than one-third (32 percent) reported that COVID-19 negatively impacted their business in 2022. This is down from 78 percent in 2021.

“The government’s support to small businesses to overcome COVID-19 has enabled them to rebound rapidly”, Dr. Can Van Luc, FCPA (Aust.) Chair of CPA Australia’s North Vietnam Advisory Committee, Chief Economist of BIDV said.

“Vietnam reopened its borders in the first quarter of 2022, boosting foreign investment, international trade and tourism. The country’s digital economy boomed as businesses moved more online in response to COVID-19. This has significantly contributed to solidifying Vietnam’s economic development. Vietnam’s institutional reforms and implementation of free trade agreements may further boost confidence”.

Financing demand has eased in Vietnam last year. Half of respondents found accessing external finance easy, but their need to borrow also dropped. Forty-seven percent sought external funds last year, decreasing sharply from 79 percent in 2021. Six-in-10 have plans to seek external funds this year.

“The majority of small businesses relied on banks for finance last year. Soaring interest rates are impacting small businesses’ intentions to seek external finance. It’s a sign that small businesses are increasingly cautious about financing costs. Tightening financial conditions across international markets also impact the appetite to borrow”.

E-commerce maintained steady growth last year, with 75 percent saying that they received more than 10 percent of revenue from online sales. However, the percentage of businesses reporting that their technology investment was profitable slumped to 51 percent in 2022, from 82 percent in 2021. Their focus on innovation remains strong with nine-in-10 having plans to introduce new products or services this year.

Of the 11 markets surveyed, Vietnam had the highest percentage of small business owners aged between 30 to 49. Nine-in-10 small businesses had been established for less than 11 years.

“This is an interesting characteristic of Vietnamese small businesses,” Dr. Luc indicated, “It implies that Vietnamese small business owners are likely more digitally sophisticated than their peers in the region. They are not only tech-savvy and embrace innovation, but also have solid working experience to expand their businesses”.

“A booming economy and an increase in foreign investment into Vietnam may be prompting mature employees at management level to launch businesses. Their experience may help ensure a higher success rate.

Small businesses have experienced strong growth in digital transformation and technology adoption over the past three years driven by the pandemic. However, they should seek advice from professional advisers to improve the profitability of their technology investments.

Some Vietnamese small businesses spent time and resources on ESG practices such as staff health and safety. There is room for them to increase their focus on ESG as Vietnam move towards a green economy. This is an inevitable trend in Vietnam. Only around two-in-10 monitored energy and water use in their business. They should put in more effort towards energy saving to reduce costs and contribute to the long-term sustainable development of Vietnam”.

CPA Australia’s Asia-Pacific Small Business Survey

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