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ENABLING ENVIRONMENT & OPPORTUNITIES

Viet Nam

STRENGTHENING DISASTER AND CLIMATE RESILIENCE OF SMALL & MEDIUM ENTERPRISES IN ASIA

The iPrepare Business facility for engaging the private sector in Disaster Risk Management is a joint initiative by the Asian Disaster Preparedness Center (ADPC), the Asian Development Bank (ADB) through the Integrated Disaster Risk Management (IDRM) Fund and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH within the framework of the Global Initiative on Disaster Risk Management (GIDRM). It focuses on building disaster-resilient businesses in the region through partnerships to strengthen the resilience of the private sector, particularly SMEs; providing technical assistance in strengthening resilience on a demand-driven basis; supporting governments in strengthening the enabling environment that promotes risk sensitive and informed investments by private sector; and facilitating knowledge sharing at the regional and national levels.

The Asian Disaster Preparedness Center (ADPC) is an independent regional non-profit organization that works to build the resilience of people, communities and institutions to disasters and climate change impacts in Asia-Pacific. Over the past 30-years, ADPC has expanded its scope and diversified its operations for a programmatic approach that offers long-term and sustainable solutions to addressing the underlying causes of disasters and climate change risks.

The Asian Development Bank (ADB) is a multilateral development finance institution dedicated to reducing poverty in Asia and the Pacific. ADB assists its members, and partners, by providing loans, technical assistance, grants, guarantees, and equity investments to promote social and economic development. With support from the Government of Canada, ADB established the Integrated Disaster Risk Management (IDRM) Fund in 2013, to assist the development of proactive IDRM solutions on a regional basis within ADB’s developing member countries in Southeast Asia, including Cambodia, Indonesia, Laos, Myanmar, Philippines, Thailand and Viet Nam. The Fund provides a strong mechanism for supporting ex ante investment in IDRM and complements the existing financing modalities of ADB for supporting ex post relief and recovery activities.

In order to respond more effectively to the global challenges posed by disaster risks, the German Government, led by the Federal Ministry for Economic Cooperation and Development (BMZ), has founded the Global Initiative on Disaster Risk Management (GIDRM). The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ GmbH) has been commissioned to manage the GIDRM. The aim of the Global Initiative is to bring together German and regional experts from the public and private sectors, civil society and the academic and research community, to facilitate mutual learning across national boundaries as well as to develop and pilot innovative disaster risk management solutions. The Global Initiative focuses on three priority areas including Disaster Response Preparedness and Civil Protection; Critical Infrastructure and Risk-sensitive Economic Cycles; and Early Warning Systems.

Publication details On behalf of the iPrepare Business facility,Published by the Asian Disaster Preparedness Center (ADPC) SM Tower, 24th Floor 979/69 Paholyothin Road, Samsen Nai Phayathai, Bangkok 10400, ThailandTel: +66 2 298 0682-92 Fax: +66298 0012-13E-mail: [email protected]

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Acknowledgements

The iPrepare Business facility wishes to thank all the individuals and organizations who contributed to this report, and who continue to support the regional project on “Strengthening the Disaster Resilience of Small and Medium Enterprises in Asia’’.

The report was prepared by the iPrepare Business facility, headed by Aslam Perwaiz. The policy research, analysis and report-writing was led by Dr. Mary Picard, ADB International Consultant, with support from Tran Hoang Yen, ADB Viet Nam National Consultant, who also coordinated the SME Resilience Survey with national partners, analyzed and presented the survey results.

The success of the Viet Nam SME Survey, the January 2016 mission by the International Consultant, and implementation of the broader project within Viet Nam has been possible due to the continuing support and cooperation of the country partner, the Ministry of Planning and Investment, in particular the Agency for Enterprise Development and The Assistance Center for SME-North Viet Nam (TAC-Hanoi). Special thanks are extended to Le Manh Hung and Nguyen My Anh of TAC-Hanoi for their support, as well as to all those who met with the team throughout the project, including those listed in Annex 2 of this report.

Table of Contents

Acronyms ivKey Terminology viExecutive Summary viiiIntroduction xii

01 Towards Disaster-Resilient SMEs 2What is disaster resilience? 3Characterizing SME disaster risk in the policy context 4

02 SMEs in Viet Nam – characteristics and risks 7SMEs in Viet Nam’s Economy 9SME Disaster and Climate Risk in Viet Nam 10The survey group 11

03 How disaster-resilient are SMEs? – The SME Survey 12Findings on Risk Exposure and Impacts of Previous Disasters 14Findings on Business Continuity Plan Adoption 16Findings on Incentives and Training Needs 16Findings on disaster preparedness 17Findings on financial coping mechanisms 19Survey overview and conclusions 20SMEs and the ‘natural disaster prevention and control’ system 23

04 Including SMEs in the systems for ‘natural disaster prevention and control’ and climate change adaptation 23

SMEs and climate change legislation and institutions 26Roadmap Issues for SME inclusion in CCA and NDPC system(s) 27The SME Development and Promotion System 29

05 Disaster resilience in Viet Nam’s support for SME development 29SME access to Finance 30New Law on SME support in preparation 32Private Sector & NGO Support for SMEs 32Gender and SME Development and Resilience 34Roadmap Issues 34Approaching a roadmap process for SME disaster resilience 36

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CONTENTS iii

06 Towards a Road Map for SME Disaster Resilience in Viet Nam 37Who are the stakeholders and experts? 38How stakeholders can be engaged 39Which policy mechanisms or actions might be addressed 39What issues might be considered 39Disaster Insurance and Risk Financing 41

Annex 42

List of Figures and Tables

Figure 1 Legal definition of very small (micro), small and medium enterprises in Viet Nam under Decree 56 8

Figure 2 Classification of enterprises based on size of labor force and form of business ownership 2013 9

Figure 3 Number of SMEs in Viet Nam 2007-2013 10

Figure 4 The relative frequency of natural hazards in Viet Nam 11

Figure 5 Distribution by major industry sectors 13

Figure 6 Distribution of respondents according to number of employees 14

Figure 7 Hazards that can potentially affect business operations by the respondents 15

Figure 8 Top 3 reasons for not preparing a BCP so far 16

Figure 9 Motivations for SMEs that had developed BCPs 17

Figure 10 Whether BCP should be compulsory 18

Figure 11 Attendance at BCP-related training 18

Figure 12 Attendance at disaster risk management-related training 19

Figure 13 Willingness to participate in activities to support SMEs 20

Figure 14 Distribution of disaster risk financing mechanisms used by respondents 21

Acronyms

AED-MPI Agency for Enterprise Development, MPI

ADB Asian Development Bank

ADPC Asian Disaster Preparedness Center, Bangkok

AEC ASEAN Economic Community

APBSD ASEAN Policy Blueprint for SME Development

APEC Asia-Pacific Economic Cooperation

ASEAN Association of Southeast Asian Nations

ASEC ASEAN Secretariat

BCP business continuity plan

BCM business continuity management

BMZ German Ministry for Economic Development and Cooperation

CBDRR community based disaster risk reduction

CBDRM community based disaster risk management

CCA climate change adaptation

CCFSC Central Committee on Flood and Storm Control (now replaced by SCNDPC since March 2015)

DIT Department of Industry and Trade (DIT)

DNDPC Department of Natural Disaster Prevention and Control, MARD

DMC Disaster Management Center, MARD

DRR disaster risk reduction

DRM disaster risk management

FIE foreign invested enterprise

FSC flood and storm control

GIDRM Global Initiative on Disaster Risk Management

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH

GSO General Statistics Office, PMI

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ACRONyMS V

GVCs global value chains

HCMC Ho Chi Minh City

HHB Household Business

IDRM Fund Integrated Disaster Risk Management Fund, ADB

IPCC Intergovernmental Panel on Climate Change

MBB Military Bank

MPI Ministry of Planning and Investment

MARD Ministry of Agriculture and Rural Development

MONRE Ministry of Natural Resources and the Environment

MSMEs micro, small and medium enterprises

NCFAW National Committee for the Advancement of Women

NDPC ‘natural disaster prevention and control’ (used when referring to the specific scope of the Viet Nam law, otherwise the term DRM is used)

NSCCC National Steering Committee on Climate Change

NS-NDPC National Strategy on Natural Disaster Prevention and Control

NTP-RCC National Target Program to Respond to Climate Change

SC-NDPC Steering Committee for Natural Disaster Prevention and Control (replaced CCFSC from March 2015)

SMEs small and medium enterprises

SMEDF Small and Medium Enterprise Development Fund

SMEWG Small and Medium Enterprises Working Group - APEC

SOE state owned enterprise

SOM Senior Officials’ Meeting - APEC

TAC-Hanoi The Assistance Center for SME-North Viet Nam, Ministry of Planning and Investment, MPI

UNFCCC United Nations Framework Convention on Climate Change

VINASME Viet Nam Association of Small and Medium Enterprises

VCCI Viet Nam Chamber of Commerce and Industry

VWU Viet Nam Women’s Union

Key Terminology

Business continuity management (BCM) – (ISO 22301:2012)

“Holistic management process that identifies potential threats to an organization and the impacts to business operations those threats, if realized, might cause, and which provides a framework for building organisational resilience with the capability of an effective response that safeguards the interests of its key stakeholders, reputation, brand and value-creating activities.”

Business continuity plan (BCP) – (ISO 22301:2012)

“Documented procedures that guide organizations to respond, recover, resume, and restore to a pre-defined level of operation following disruption.”

Coping capacity – (UNISDR1)

“The ability of people, organizations and systems, using available skills and resources, to face and manage adverse conditions, emergencies or disasters.”

Disaster – (UNISDR)

“A serious disruption of the functioning of a community or a society involving widespread human, material, economic or environmental losses and impacts, which exceeds the ability of the affected community or society to cope using its own resources.”

Disaster risk management (DRM) – (UNISDR)

“The systematic process of using administrative directives, organizations, and operational skills and capacities to implement strategies, policies and improved coping capacities in order to lessen the adverse impacts of hazards and the possibility of disaster.”

Disaster risk reduction (DRR) – (UNISDR)

The concept and practice of reducing disaster risks through systematic efforts to analyse and manage the causal factors of disasters, including through reduced exposure to hazards, lessened vulnerability of people and property, wise management of land and the environment, and improved preparedness for adverse events.”

1 UNISDR Terminology 2009. Available at http://www.unisdr.org/we/inform/terminology. Other relevant terms defined therein include: disaster risk, emergency response, exposure, hazard, mitigation, preparedness, recovery, risk, vulnerability.

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http://www.unisdr.org/we/inform/terminology

TERMiNOLOGy Vii

Emergency response – (UNISDR)

“The organization and management of resources and responsibilities for addressing all aspects of emergencies, in particular preparedness, response and initial recovery steps.”

Natural disaster prevention and control – (Government of Viet Nam)

This term is used in quotation marks and only when referring to the specific terminology of the English translation of Viet Nam’s Law on Natural Disaster Prevention and Control (NDPC), as defined in that law Article 3. Otherwise the more universal term DRM is used in this report. The NDPC Law definitions are:

Art. 3(1) “Natural disasters means abnormal natural phenomena which may cause damage to human life, property, the environment, living conditions and socioeconomic activities. Natural disasters include typhoon, tropical low pressure, whirlwind, lightning, heavy rain, flood, flashflood, inundation, landslide and land subsidence due to floods or water currents, water rise, seawater intrusion, extreme hot weather, drought, damaging cold, hail, hoarfrost, earthquake, tsunami and other types of natural disaster”; and

Art. 3(3) “Natural disaster prevention and control means a systematic process involving the prevention of, response to, and remediation of consequences of, natural disasters.”

Resilience (IPCC2)

“The ability of a system and its component parts to anticipate, absorb, accommodate, or recover from the effects of a hazardous event in a timely and efficient manner, including through ensuring the preservation, restoration, or improvement of its essential basic structures and functions.”

2 IPCC. 2012: “Glossary of terms. In: Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation.” Available at http://www.ipcc.ch/pdf/special-reports/srex/SREX-Annex_Glossary.pdf

http://www.ipcc.ch/pdf/special-reports/srex/SREX-Annex_Glossary.pdf

Executive Summary

A disaster-resilient enterprise is one that has the capacity to survive and recover from a disaster that affects it, in a way that enables it to continue to grow and develop, and even improve.

This report presents the results of a survey on the disaster resilience of small and medium enterprises (SMEs), and provides a strategic policy analysis of the enabling framework for SME disaster resilience in Viet Nam. It is the result of cooperation between the iPrepare Business facility, and its key country partner, the Ministry of Planning and Investment, in particular the Agency for Enterprise Development and The Assistance Center for SME-North Viet Nam (TAC-Hanoi).

The country report is also part of a Regional Project, “Strengthening the Disaster Resilience of Small and Medium Enterprises in Asia”, which is being implemented by the iPrepare Business facility and country partners in Indonesia, the Philippines, Thailand, Viet Nam, with the support of the Asian Development Bank (ADB) Integrated Disaster Risk Management Fund, a fund financed by the Government of Canada, and the German Ministry for Economic Development and Cooperation (BMZ) through the Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ) within the framework of the Global Initiative on Disaster Risk Management (GIDRM).

Specifically, the report is based on desk research on relevant laws, policies, institutions and secondary literature, consultations during a country mission in January 2016, and the Viet Nam SME Resilience Survey undertaken as part of the project. It is divided into 6 parts:

Part 1 looks at what we mean by disaster-resilient SMEs, then frames the discussion in terms of the two main categories of risk that SMEs face – (1) shared community disaster risk, and (2) business continuity disaster risk. It proposes that the existing national system(s) for climate change adaptation (CCA) and disaster risk management - in Viet Nam translated as the system for ‘natural disaster prevention and control’ (NDPC) – provide the most effective and efficient legal, policy and institutional basis for improving SME resilience to shared community disaster risks. For business continuity disaster risks, the national laws and institutions targeted to broader SME development provide the best vehicle for policy intervention. The two guiding questions then asked for the Viet Nam policy analysis are:

1. To what extent do the climate change adaptation and ‘natural disaster prevention and control’ systems either include SME representatives at national level, or integrate SMEs into local institutions, risk awareness campaigns, emergency response and recovery operations at local level?

2. To what extent is climate and disaster resilience factored into the picture of an economically healthy SME through policy schemes targeted at SME development and promotion?

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Part 2 examines what we know about Vietnamese SMEs’ economic structure from national statistics, and what this can (and cannot) tell us about their disaster risk. A key characteristic is that the vast majority of enterprises in Viet Nam are micro or small – 96% - and almost all of these are in the private sector rather than being government-owned. Of the 368,844 registered enterprises in Viet Nam in 2013, 70% were micro, 26% small, 1.9% medium and 2.1% large. SMEs thus accounted for 97.9% of all enterprises in Viet Nam. Even the formal economy is the thus dominated by small and medium enterprises. In addition, there are many household businesses in the agricultural sector and low-income trading that are recognized but not required to register as enterprises.

Part 3 presents the results of the SME Resilience Survey. The majority of the 442 SMEs surveyed were micro or small, and also mostly young private enterprises established since 2009, with the vast majority also owned by men (71%). The respondents came from a range of sectors and from across the nation. Wholesale and retail trade made up over 40%, construction 17%, ‘other’ (non-classified or multi-sector) 26%, and the remaining sectors 17%. While this relatively small random sample taken across the country cannot reflect all the variations amongst Viet Nam’s 360,000 SMEs, it is broadly representative and gives an insight into the key disaster resilience issues for them.

The survey indicated that both the use of Business Continuity Plans (BCP) and awareness on natural hazard risks, were low. This may be partly attributable to the fact that most of the SMEs began operation since the last major disaster in Viet Nam, in 2009, suggesting lack of direct experience may have led to a lack of awareness or preparedness for future natural hazards and climate change stresses:

Each SME was requested to indicate the 3 hazards with the greatest potential to disrupt their business operations, with 5 hazards emerging overall. These were: power blackout, regional/global economic crises, fire, typhoon, and flood;

More than 90% of the respondents confirmed that they have never experienced a business operation disruption due to a hazard or disaster (which may be because they are young business and there have been no major disaster since 2009);

Almost 80% of the respondents said they have not yet developed a BCP, although 14% said they were preparing one;

The top 3 reasons for not preparing a BCP given by the respondents were that: they had not heard of BCP before; they lacked a budget to prepare a BCP; and they lacked information on how to prepare a BCP.

There is a need for SME awareness and training on both natural hazard risk and BCP:

90% of the respondents had not attended any training related to BCP;

88% of the respondents had not participated in any training related to disaster risk management;

Almost 80% of the respondents confirmed that they would like to participate in activities to support SMEs in Viet Nam to enhance their disaster resilience;

The top 3 incentives identified by respondents were that the government could provide to SMEs to encourage them to be more disaster resilient were: tax credits, deductions, and exemptions; subsidies, grants, and soft loans for disaster preparedness; and provision of technical assistance, consultancy services, or training in BCP preparation and disaster preparedness.

Part 4 and Part 5 of the report overview the laws, policies and institutions underpinning disaster and climate risk management and SME development and promotion. Part 4 looks at the companion systems of ‘natural disaster prevention and control’ (NDPC), which is under the stewardship of the Ministry of Agriculture and Rural Development (MARD), and climate change adaptation (CCA), under the stewardship of the Ministry of Natural Resources and the Environment (MONRE). This analysis examines opportuntities for SME participation and awareness-raising, and mechanisms for cooperation on SME disaster-resilience within the mandates of the high-level national committees and the ministries of MARD and MONRE concerning NDPC and CCA respectively. It indicates that SME and private sector needs are not considered specifically in the policy and implementation processes for climate and disaster risk management, although some projects with partners are moving in this direction. It also notes that the Law on Natural Disaster Prevention and Control 2013 (Law on NDPC) provides a set of obligations for enterpises that can serve as a good basis for their awareness-raising on disaster risk managment. Part 5 then considers the system for SME promotion, support and development as business enterprises, which is under the stewardship of the Ministry of Planning and Investment (MPI). The analysis looks at the elements of the system established to support SME development, and the extent to which it takes account of disaster risk for SME business continuity, as well as avenues for cooperation with MARD and MONRE. It finds that disaster risk is not currently a central concern in this system for SME development.

The picture that emerges from Parts 4 and 5 is that, although the legislative and policy mandates of the NDPC and CCA systems, and the SME promotion system are cross-sectoral in intent – the key high-level committees in each include all of MARD, MONRE and MPI - these systems do not currently interact to any significant extent at either a policy or operational level. However, the development of a new law on SME support that is currently being undertaken by MPI provides an opportunity for Viet Nam to lead the region in creating a new focus on disaster resilience as a key component of business continuity for SMEs.

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Part 6 uses the report’s findings and analysis to propose a method of tackling a Viet Nam road map for SME disaster resilience. As this will be a Government-led process, these are not specific recommendations, but rather issues for consideration identified throughout the report as “road map issues”. It highlights the fact that SMEs and the industry bodies that represent them need to be seen as the key stakeholders, even though the Government has the central role in determining the legal and policy framework and managing the process. In engaging with SMEs during the road map process it may also be important to conduct specific consultations to ensure views and information are obtained from different industries, a range of provinces and geographical risk profiles, urban and rural settings, and women SME owners. The process itself could also be used to strengthen SME organizations as part of an ongoing mechanism for capacity building, policy implementation and communication between SMEs and Government.

Although it is presumed that MPI would lead a roadmap process, the roles of MARD and MONRE are also identified as central to supporting SME resilience to disasters and climate change. The roadmap process, along with the development of the new law on SME support, in fact provide an opportunity to institutionalize stronger cooperation between these ministries in supporting SME disaster resilience. Engagement of INGOs, development partners, experts and technical institutions already working on SME support in Viet Nam can also add to Viet Nam’s capacity to design and implement effective support programs, given the innovative approaches already demonstrated.

The development of the new law on SME support is an opportunity for Viet Nam to lead the region in a number of ways, including by mainstreaming disaster and climate risk into SME development policy, institutionalizing participation of the private sector in policy implementation and programmes, and reviewing and updating financial incentives for SMEs to reduce risk and prevent damage and loss from disasters. The legal and policy framework could also benefit from revising the SME definition to allow more targeted policy interventions, including the needs of household businesses that are recognized but not currently required to register as enterprises, as well as to provide stronger statistical reporting on SME characteristics.

The other substantive issues mentioned for inclusion in the roadmap process include: development, promotion and support for SME implementation of multi-hazard Business Continuity Management (BCM); support for SMEs and local planning authorities in hazard mapping, disaster risk reduction and climate change adaptation; a review of barriers to SME uptake of insurance or other risk financing mechanisms; institutional cooperation mechanisms for SME response and recovery support; and using and strengthening existing private sector capacity in disaster resilience and BCM.

Introduction

This report is a strategic policy analysis of the enabling framework for disaster-resilient small and medium enterprises (SMEs) in Viet Nam, which also includes the results of a 2015 SME Resilience Survey undertaken as part of the same project.

The report takes into account relevant laws, policies, and government institutional frameworks of Viet Nam, as well as private sector and NGO initiatives that interact with government policy. The focus is on SME business continuity in the face of the major natural hazards that often cause disasters in Viet Nam - especially floods and storms - including a projected worsening of these weather hazards due to climate change, which will also lead to a rise in sea levels. However, the report adopts a multi-hazard approach that encompasses technological and mixed hazards to the extent these are identified as risks for SME business continuity.

The approach also recognizes the importance of general or economic resilience of SMEs and the policies to support this, as the underlying economics affecting SME profitability and development also impact their disaster resilience. For example, SMEs need access to

financing for basic business development in normal times. They may also need access to disaster risk financing to cope with devastating disaster losses, but risk financing alone will not ensure their long-term business continuity. Many aspects of SME disaster resilience are an interaction between the underlying economic health of the enterprise, and measures taken to reduce disaster risk and manage disaster shocks. This brings together two policy pillars that are present in Viet Nam, and indeed in most other ASEAN countries, but which rarely interact. The first is the policy framework to develop and promote SMEs as business enterprises. The second is the national framework for ‘natural disaster prevention and control’ or DRM, along with the framework for climate change adaptation (CCA).

The purpose of the report is to identify the main disaster risks for SMEs in Viet Nam, to report on the SME Resilience Survey findings, and then consider aspects of the enabling environment for SME disaster resilience that are working well, areas that could be enhanced through stronger policy support or resources, and new approaches that might be considered as part of a Viet Nam road map for SME disaster resilience. It is based on:

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desk research on laws, policies and secondary resources

an SME survey undertaken by ADPC and partners in Viet Nam in late 2015; and

a country mission by the international consultant in January 2016 that included discussions with partners and other stakeholders concerning implementation of policy responsibilities, government, private sector and NGO initiatives.

This report is just one part of a government and stakeholder process towards developing a roadmap for increasing Vietnamese SMEs’ resilience to disasters. It is also part of a much broader regional project being implemented by the iPrepare Business facility, called “Strengthening the Disaster Resilience of Small and Medium Enterprises in Asia Project,” (the Regional Project), which includes Indonesia, the Philippines, Thailand, and Viet Nam. The project aims to build disaster-resilient enterprises by: 1) identifying actions to strengthen resilience of SMEs; 2) providing technical assistance in strengthening resilience to selected SMEs on a demand-driven basis; 3) supporting governments in strengthening the enabling environment that promotes risk-sensitive and informed investments by SMEs; and 4)

facilitating knowledge sharing at the regional level.

A key component of the regional project is an SME survey in each project country of SME perception of risk, disaster experience, preparedness for likely hazard events, and business continuity planning for disaster risk reduction and recovery. The learning from the country policy analyses and SME surveys were shared in a regional forum in April 2016, which now feeds into a national roadmap process for SME disaster resilience in each project country. Finally, a project synthesis report later in 2016 will bring together the project findings as a regional resource.

In Viet Nam, the iPrepare Business facility is working with a government partner, the Ministry of Planning and Investment (MPI), in particular the Agency for Enterprise Development and The Assistance Center for SME-North Viet Nam (TAC-Hanoi).The Regional Project is supported by the Asian Development Bank (ADB) Integrated Disaster Risk Management Fund (IDRM Fund), which in turn is financed by the Government of Canada, and the German Ministry for Economic Development and Cooperation (BMZ) through the Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ) within the framework of the Global Initiative on Disaster Risk Management (GIDRM).

SMEs play a vital role in all the ASEAN economies, making up the vast majority of enterprises (between

88.8 and 99.9 percent), and contributing significantly to national employment (between 51.7 and 97.2 percent), across all economic sectors and in both rural and urban areas.3 They also provide significant economic opportunities for women and youth, and account for a substantial slice of GDP, between about 30-35 percent on average.4 In contrast to their numbers and share of employment, however, their share of total exports remains small, at between 10.0 and 29.9 percent,5 and they have thus been identified as requiring additional

3 ASEAN. 2015. “ASEAN Strategic Action Plan for SME Development 2016-2025”. P.1. (In fact these ASEAN figures refer to Micro, Small and Medium Enterprises (MSMEs) – but for these purposes MSMEs are equated with SMEs.)

4 Narjoko, Dionisius. 2014. “Turning Dream Into Reality? Achieving the Goal of Small and Medium Enterprise Development in ASEAN Economic Community.” Taipei: Economic Research Institute for ASEAN and East Asia.

5 ASEAN. 2015. P.1.

Towards Disaster-Resilient SMEs

support for development and promotion. Regional policy support for SMEs through APEC, ASEAN and other organizations will be considered in a regional project synthesis report to be completed later in 2016.

In addition to purely economic and business challenges, SMEs in Southeast Asia also face business disruption, economic loss and sometimes complete closure as a result of the impacts of natural hazards, such as floods and storms. In countries such as Viet Nam, which has a long coastline where much economic activity occurs, the threat of sea-level rise due to climate change is also a very real one that needs to be addressed well in advance. Hence this report aims to identify some of the best ways to support Viet Nam’s SMEs to become more disaster resilient, to both sudden-onset events such as floods and storms, as well as slow-onset stresses such as drought (a temporary situation) and sea-level rise (a permanent change).

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TOwARdS diSASTER-RESiLiENT SMES 3

What is disaster resilience?

The concept of resilience is used extensively in this report and deserves a brief explanation. A useful definition is that resilience is:

The ability of a system and its component parts to anticipate, absorb, accommodate, or recover from the effects of a hazardous event in a timely and efficient manner, including through ensuring the preservation, restoration, or improvement of its essential basic structures and functions6

A disaster-resilient enterprise is therefore one that has the capacity to survive and recover from a disaster that affects it, in a way that enables it to continue to grow and develop, and even improve. Obviously this includes not suffering such huge losses that the enterprise ceases operation, but it also relates to smaller shocks and stresses that can affect the long-term viability and growth of an enterprise. But the fact that this definition talks about systems and their component parts is also a reminder that SMEs are not simply a number of independent entities; they are part of international, national and local systems of commerce and trade, finance and insurance that are governed by laws, policies and institutions. Therefore their resilience is partly determined by their own capacities and partly by the business environment in which they work.

It should also be noted that although the word ‘disaster’ is widely used to refer to large-scale natural hazards, when used in the context of disaster risk management, it refers not to the hazards themselves, but to the effect that they have on communities, including SMEs. A widely accepted definition of disaster is:

6 IPCC. 2012: “Glossary of terms. In: Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation.” Available at http://www.ipcc.ch/pdf/special-reports/srex/SREX-Annex_Glossary.pdf

A serious disruption of the functioning of a community or a society involving widespread human, material, economic or environmental losses and impacts, which exceeds the ability of the affected community or society to cope using its own resources.7

Thus, the disaster risk of SMEs is partly determined by their actual exposure to natural hazards, and partly by their capacity to reduce the risks through taking preventive action and developing better coping capacities. So a key part of becoming disaster-resilient is the idea of disaster risk reduction (DRR),8 as resilience includes the ability to anticipate and prepare for foreseeable hazards so that they do not become disasters. It includes actions to prevent hazards occurring where possible, to reduce physical exposure to them based on business location, and to reduce vulnerability by taking protective and preventive measures to mitigate the effects of hazards. It also means having the capacity to cope with disasters when they occur, through preparedness and effective emergency response, including contingency plans, as well as access to post-disaster mechanisms to support full recovery. Thus, disaster-resilience for SMEs is not just about how they respond to hazards and recover from disasters, it is also about SMEs assessing their underlying disaster risks and reducing them to an acceptable level, as part of business continuity management (BCM).

The aim of the regional project is to address, so far as possible, the full range of physical hazards and their consequences that SMEs are likely to face, and which may affect their development, profitability or survival.

Although the title of Viet Nam’s law on disaster risk management is usually translated as The Law on Natural Disaster Prevention and Control 2013

7 The following terms are defined according to UNISDR Terminology 2009, available at http://www.unisdr.org/we/inform/terminology: disaster risk reduction, emergency response, exposure, mitigation, preparedness, recovery, vulnerability.

8 The italicized words in this paragraph are commonly used terms in the field of DRM. Definitions are found in the UNISDR Terminology 2009 (undergoing review from August 2015), at http://www.unisdr.org/we/inform/terminology

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(No. 33/2013/QH13) (“Law on NDPC”), and the law in fact considers only the risk from natural phenomena, the terms ‘hazard’ and ‘disaster’ are not generally restricted to natural phenomena and their effects. Hence, the above definition of disasters also encompasses technological or human-made hazards, especially as these often compound the effects of natural events to create mixed hazards that result in worse disasters. For example, flooding may result in the spread of dangerous pollutants if industrial or agricultural premises have not adequately protected chemical supplies from floodwaters.

Analysis of SME disaster risk also needs to consider the extent to which potential long-term changes in disaster risk as a consequence of climate change are taken into account, both by SMEs themselves and by government policies intended to support SME resilience and development. Thus, the terms ‘disaster risk’ and ‘climate and disaster risk’ are both used in this report to describe the natural and human-made hazards that SMEs need to consider, while noting that climate risk alone does not describe all relevant natural hazards (e.g. earthquakes).

Characterizing SME disaster risk in the policy context

The underlying question of this report is how policy interventions can promote and support SMEs to attain disaster resilience. In this regard it is therefore helpful to divide the disaster risks faced by SMEs into two broad categories: (1) shared community disaster risks and (2) business continuity disaster risks.

1. Shared community disaster risks

SMEs, even more so than large enterprises, are physically embedded in urban and rural communities (although some are now part of industrial estates and special economic zones). This means that their exposure to natural and other large-scale local hazards is, by and large, the same as that of the communities in which they

operate. Thus, many aspects of promoting disaster resilience for SMEs can be done through the same policy tools as are used for the general population. The main such tools are the national and local DRM systems, known in Viet Nam as ‘natural disaster prevention and control’ (NDPC), made up of the laws, policies and institutions addressing disaster risk management. In this report the system of laws, policies and institutions addressing climate change adaptation is also considered a part of the system of risk management against natural hazards, albeit in this case permanent changes to which SMEs, their communities and government frameworks need to adapt.

As will be seen, SMEs in Viet Nam tend to be micro and small enterprises that are very much part of their local communities. Owners and employees therefore need to be aware of the hazards in their locality and how to reduce their risk from them. This may include SME participation in local disaster risk assessments, community based disaster risk reduction programmes, or public awareness campaigns on local risks that are targeted to or inclusive of SMEs. SMEs may need to participate actively in early warnings systems, or opt in to a system to ensure they receive such warnings.

In addition to the major natural hazards of flood and storm, disaster preparation for SMEs also needs to include fire, earthquake (where relevant) and other emergency drills as necessary, to ensure employees’ safety in the face of all likely hazards. Preparation may also need to include contingency plans to move stock and/or plant and equipment to a safe location in the event of flood or storm warnings.

Many of these are the same measures as are needed for the surrounding community, and micro enterprises operating in community hubs may be well served by broad community based disaster risk management (CBDRM). However, small and medium enterprises, especially those situated outside settlements, may not always be regarded as part of the ‘community’ for such purposes, and yet may also not be part of industry organizations that focus on larger enterprises. It cannot be assumed that SMEs have access to the relevant information or expertise on disaster risk reduction

4 ENABLiNG ENViRONMENT & OPPORTUNiTiES • VIET NAM

TOwARdS diSASTER-RESiLiENT SMES 5

and emergency response, so efforts may need to be made to include them in community level risk reduction, preparedness, response and recovery.

This concern was borne out by a 2011 in-depth survey in three provinces of Viet Nam (Nghe An, Da Nang and Khanh Hoa), which indicated that, despite experiencing frequent and devastating natural hazards, the vast majority of businesses surveyed had not accessed any of the local authorities’ information on disaster preparedness, nor worked actively with local governments to get concrete guidance and plans in times of disaster.9 This was one of the questions tackled in the 2015 ADPC SME Resilience Survey, discussed in Part 3.

2. Business Continuity Disaster Risks

In addition to shared community disaster risks, SMEs may have particular vulnerabilities due to their industrial sector, type of activities or enterprise characteristics, as well as the nature of their supply chains and markets.10 These can be described as business continuity disaster risks. For example, the agricultural sector can suffer losses due to drought, late arrival of the monsoon, or crop pests, which have little effect on the communities where they are based. Small retail businesses may lose uninsured stock due to floods or fires, an economic impact lasting well beyond the hazard itself, or they could face loss of business due to prolonged power cuts caused by emergencies elsewhere. Many businesses may face major disruptions if road access is blocked or roads washed away, affecting their ability to receive supplies and take produce or merchandise to markets; and in manufacturing they may have difficulty obtaining raw materials

9 USAID (United States Agency for International Development), TAF (The Asia Foundation), CED (Center for Education and Development) and VCCI (Vietnam Chamber of Commerce and Industry). 2011. “Assessment of Disaster Preparation by Vietnamese SMEs.” (Executive Summary, English). USAID, TAF, CED, VCCI: Hanoi, p. 12.

10 There are now many resources available on these questions. Starting points include two special journal editions: ADPC. 2014. “Engaging the Private Sector in Disaster Risk Reduction”, Special Edition, Asian Disaster Management News, June 2014. P 52-54. Bangkok, Thailand: ADPC; and APEC-ACMC (SME Crisis Management Center). 2014. APEC SME Monitor, Issue 16, June 2014. Taipei, Taiwan: APEC-SCMC [special edition on MSE business continuity planning in the face of disasters].

or parts if their own suppliers are devastated by a disaster.

The very fact of being business enterprises makes SMEs vulnerable to different types of economic loss and damage, even from hazards that also affect their local communities. Not only do they risk losing goods and assets, as do residents, but both owners and employees face the risk of short or long term loss of employment/income if a disaster seriously disrupts their ability to operate in their normal premises (e.g. due to flooding or blocked physical access, loss of communications, disrupted water or electricity supply), or if it negatively impacts their supply chains, distribution or service networks, or demand for their goods or services in a disaster-affected area. Loss of SMEs from a community following a disaster also impacts livelihoods and prosperity in the wider community.

These business continuity disaster risks arise from the same types of hazard as shared community risks, but they are not necessarily restricted to the immediate locality. Hazards that cause disasters in other areas can also affect SME supply chains or distribution networks. Preparation for such eventualities requires a more business-oriented approach to risk assessment and contingency planning.

Policy approaches to support resilience through business continuity management are likely to be the most effective for disaster risks related to the particular disaster vulnerabilities of business activities, in particular supply chain issues... For this reason the policy tools used to encourage SME development and to support their broader economic resilience may be the best starting points to support SME business continuity management (BCM) and especially the development and implementation of business continuity plans (BCP) that enhance disaster resilience.11 Other mechanism such as BCM capacity building, tax concessions, access to finance and general reform of the business environment can also support disaster resilience. These systems are aimed at business support, and such systems also have multiple entry points to access SMEs to provide information about disaster risk and to

11 As discussed in Part 5.

provide incentives for SMEs to become disaster-resilient. However, while such frameworks focus on SME economic wellbeing, they can sometimes fail to take account of SME economic losses from disasters, or the reasons for such losses, including the extent to which these are preventable through DRR, contingency planning and disaster recovery support.

This categorization of SME risks leads to two guiding questions for the Viet Nam country policy analysis, due to the possibility that SME disaster resilience may fall between two pillars:

1. To what extent do the climate change adaptation and ‘natural disaster prevention and control’ systems either include SME representatives at national level, or integrate SMEs into local institutions, risk awareness campaigns, emergency response and recovery operations at local level?

2. To what extent is climate and disaster resilience factored into the picture of an economically healthy SME through policy schemes targeted at SME development and promotion?


Vietnamese law defines SMEs according to criteria set out in Decree 56/2009/ND-CP (Decree

56) on Support for Development of SMEs.12

Under Decree 56, SMEs are defined as registered establishments and divided into the following sub-categories: very small (also often described as micro), small, and medium, according to the size of their total capital (equivalent to the total assets identified in an enterprise’s accounting balance sheet) or the average annual number of employees. Total capital is the key criterion.

Viet Nam’s categorisation of enterprises as SMEs is complex, because of the nature of the business assets test and the way national statistics are tabulated. Statistical analysis of enterprises based on the SME

12 This replaced the single definition of an SME in Decree 90/2001/ND-CP of 2001 - as a business with registered capital up to 10 billion VND or up to 300 employees.

size criteria is not always readily available, or must be interpolated from other figures. In Viet Nam, for most statistical purposes, the General Statistics office (GSO) primarily reports on enterprises under the following categories: State-owned Enterprises (SOEs), Private Sector Enterprises, Foreign Invested Enterprises (FIEs), Cooperatives (often translated as collectives), and non-farm Household Business (HHB). HHB’s are defined in law as single premises businesses operated by one person or household, with up to 10 employees, and every adult has the right to establish such a business.13 They thus fit within the category of very small or micro enterprises as far as employee numbers are concerned. However, the above definition also refers to registered businesses, and not all HHB’s need to register. Those engaged in agriculture, forestry, fishing or salt production, or who are low-income traders (street vendors, long-distance or itinerant

13 Decree N°88 of 29/08/2006 on Business Registration, Articles 36,37.

02SMEs in Viet Nam –

characteristics and risks

Figure 1 Legal definition of very small (micro), small and medium enterprises in Viet Nam under Decree 56

Enterprise size Very small enterprises

Small-sized enterprises Medium-sized enterprises

Number of labourers

Total capital Number of labourers

Total capital Number of labourers

Agriculture, forestry & fishery

10 persons or fewer

VND 20 billion or less

Between over 10 persons & 200 persons

Between over VND 20 billion & VND 100 billion

Between over 200 persons and 300 persons

Industry & construction

10 persons or fewer





Trade & service 10 persons or fewer





Table graphic by Business-in-Asia.com 2016.

traders), are not required to register unless they have more than 10 employees.14 Thus, the aggregate statistics on SMEs will generally reflect only the non-farm HHBs, and not the HHBs that are primary producers or low-income traders. And yet the HHB sector as a whole remains an extremely important part of the national economy.

Based on the employee-numbers criteria only, and including all forms of ownership (Figure 2 below), in 2013 there were 368,844 registered enterprises in Viet Nam, of which 70% were micro, 26% small, 1.9% medium and 2.1% large. SMEs thus accounted for 97.9% of all enterprises in Viet Nam. Even the formal economy is thus dominated by small and medium enterprises.

As noted in Figure 2, in 2013 the SME sector consisted of:

state-owned enterprises (0.86% of total active MSMEs),

private enterprises (97.42%), and

14 Art. 40 CMPI Circular 54435-01-2013-TT-BKHDT.

foreign-invested enterprises (2.72%).

The vast majority of enterprises are thus privately owned. However, it should also be noted that the public sector enterprises are mostly large or medium, and that the vast majority of the smaller businesses are private sector - with 99% of all micros and almost 94% of all small enterprises being privately owned.15 As the Viet Nam Chamber of Commerce and Industry (VCCI) has pointed out, this is ‘a point to be noted by policy makers in order to provide more appropriate support for micro and small enterprises.’16

VCCI has also undertaken an analysis of the consistency of the Decree 56 labor-force criteria and the assets criteria in categorizing enterprises by size. This indicates that at the two ends of the spectrum these criteria give consistent results, in that most enterprises with a small capital size also have small or micro employee numbers, and those with large capital size also have large labor forces.17 But there is something of a mismatch in

15 VCCI. 2014. Vietnam Business Annual Report 2014 p.30. Actual figure for small is 93.77% privately owned.

16 Ibid.17 VCCI. 2014. P. 32.


SMES iN ViET NAM – ChARACTERiSTiCS ANd RiSkS 9

technology, accommodation, and food services) at 20.5%; and manufacturing at almost 16%.18

SMEs employ almost 47% of the total workforce (5.1 million workers in 2012), and that number is increasing. Most of the SME employment is in labor-intensive industries, such as manufacturing (almost 32% of total SME employees) and construction (almost 24%), while wholesale and retail trade accounts for almost 22% and the service sector 13% of total SME employees. The total net income of SMEs was D 5,033 trillion in 2012 (approximately USD 225 billion), a growth of 7.7% from 2011, but the growth of profits in the overall SME sector has been slowing since 2009.19

SMEs are clearly the economic backbone of Viet Nam, and their development has received policy

18 ADB.2015. Asia SME Finance Monitor 2014. p. 239.19 Ibid.

the medium enterprise categories, as 92.78% of those with medium capital actually have a micro size labor force, and up to 44.7% of those with medium labor force size actually have large capital size. This suggests that, at least for certain types of enterprises, the labor force is very low compared with the capital investment required for operation. This appears to require some fine-tuning of the business size criteria, if policy initiatives are to be well targeted.

SMEs in Viet Nam’s Economy

The dominant industry group amongst SMEs is wholesale and retail trade, which accounts for almost 40%; then the service sector (including

Figure 2 Classification of enterprises based on size of labor force and form of business ownership 2013

Form of ownershipTotal

State Private FDI

Micro

Number (Enterprises) 112 255,747 2,462 258,321

By rows (%) 0.04 99.01 0.95

By columns (%) 3.53 71.91 24.59 70.04

Small

Number (Enterprises) 1.257 89,622 4,694 95,573

By rows (%) 1.32 93.77 4.91

By columns (%) 39.57 25.20 46.87 25.91

Medium

Number (Enterprises) 504 5,653 830 6,987

By rows (%) 7.21 80.91 11.88

By columns (%) 15.86 1.59 8.29 1.89

Large

Number (Enterprises) 1,304 4,631 2,028 7,963

By rows (%) 16.38 58.15 25.47

By columns (%) 41.04 1.30 20.25 2.16

TotalNumber (Enterprises) 3,177 355,653 10,014 368,844

Proportion (%) 0.86 96.42 2.72

Source: VCCI. 2014. Viet Nam Business Annual Report 2014. Based on GSO 2014 business survey.

economic sectors – predominantly located on coastal plains and river deltas, the country has been identified by the World Bank as highly vulnerable to the effects of climate change.21

The National Strategy on Climate Change is also notes, for example, that the Mekong Delta is one of the world’s three most vulnerable deltas to sea-level rise and that a projected 1 meter sea-level rise by the late 21st century would affect 40% of that delta (the country’s ‘rice bowl’), 11% of the Red River Delta, and inundate 3% of coastal provinces (including 20% of Ho Chi Minh City). Such a rise would affect 10-12% of the population and decrease GDP by around 10% - unless primary production and business is able to plan and adapt in advance.

21 GFDRR. 2011.”Vietnam: Vulnerability, Risk Reduction and Adaptation to Climate Change.” World Bank. P.14. http://sdwebx.worldbank.org/climateportalb/doc/GFDRRCountryProfiles/wb_gfdrr_climate_change_country_profile_for_VNM.pdf

priority for some years. However, in addition to business development issues and economic environment impacts, SMEs in Viet Nam also experience disruptions from both natural and human-made hazards.

SME Disaster and Climate Risk in Viet Nam

The main natural hazards Viet Nam faces are floods tropical cyclones, and drought. In terms of future risk, there is also concern that these hazards will become more extreme with climate change, and that the country’s long coastline and river deltas will be very vulnerable to sea level rise.20 In fact, with industry and agriculture – its two most important

20 CE-DMHA. 2015.Vietnam Disaster Management Reference Handbook. Hawaii: US DoD. Pp. 26-33.

Figure 3 Number of SMEs in Viet Nam 2007-2013(R

p Bi

l.)

400,000 97.7

5.3

100

80

60

40

20

Perc

enta

ge

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0 2007 2008 2009 2010 2011 2012 2013

MSMEs (Number) MSME to total (%) Trade MSME growth (%) Manufacturing (% share)

Service (% share) Construction (% share) Others (% share) Primary industry (% share)

Data include micro enterprises. Primary industry includes agriculture, forestry & fisheries.

Source: ADB. 2015. Asia SME Finance Monitor 2014 (based on MPI 2012 data).


SMES iN ViET NAM – ChARACTERiSTiCS ANd RiSkS 11

SMEs in Viet Nam tend not to be based in separate industrial parks or zones, and as such they largely share the surrounding community’s physical exposure to hazards and the same immediate dangers to personnel. So although they have additional business continuity risks from disasters, these shared community disaster risks need to play a significant role in their risk assessments for business continuity management (BCM), as these risks are largely based on exposure by location or geographical area, coupled with the effectiveness of the community’s efforts in disaster risk reduction, preparedness, and emergency response, which can all reduce damage and loss. SME strategies for managing disaster risk should therefore place an emphasis on engagement with and understanding of local disaster prevention and control mechanisms.

As the geographical location of an SME will often determine its initial hazard risk (exposure), adequate BCM often needs to be underpinned by local area risk mapping. National statistics on SME locations can potentially be matched with national and local risk mapping data, to indicate priority areas for capacity building and BCM initiatives for SME disaster resilience, if this data is available.

Retail and service sector enterprises, by their nature, tend to be embedded within their communities, and primarily serve local clients. For many of them, their immediate disaster risk will also be very localized, or shared community disaster risks, in addition to supply chain issues and customer

access. However, SMEs in manufacturing are more likely to be physically separate from residential and light commercial areas in settlements, even if they are not in separate industrial parks, so they may need to have more specifically targeted initiatives on disaster risk assessments and resilience, even within Viet Nam’s system for ‘natural disaster prevention and control’.

SMEs in manufacturing, retail and wholesale trade, are also likely to be affected significantly by supply chain and distribution blockages originating from disasters in both their own and other areas. Similarly for those in the tourist service sector, if tourists are unable to access their facilities due to travel restrictions or breakdown in services as a consequence of a disaster in another other locality. There are specific vulnerabilities in business continuity that can affect enterprises reliant on remote supply chain and distribution networks, and/or on movement of clients from other countries or other parts of Viet Nam. Of course local supply and distribution networks are also disrupted by local disasters, and these threats to business continuity need to be part of BCM and other contingency planning.

The survey group

The survey was conducted by an independent firm using the SME contact lists of country partner TAC-Hanoi (via post and email), as well as being administered to participants in TAC-

Figure 4 The relative frequency of natural hazards in Viet Nam

High Medium Low

FloodTyphoonCycloneFlash floodTornadoLightningDrought

RainHailLandslideSalinityIntrusion

EarthquakeFrost

Hanoi SME training events. There were 442 respondents, a significant sample size, albeit small in comparison with 360,000 plus SMEs in Viet Nam. Annex 1 provides further details of the sample group and survey methodology.

The majority of the SMEs surveyed were micro or small. They were also mainly young private enterprises, and the vast majority were owned by men:

The respondents came from a range of sectors and from across the nation.

39% of the respondents reported 1 to 9 employees (micro, subject to assets test) and over 50% of the respondents had 9 to 99 employees (small, subject to assets test);

76% of the surveyed SMEs reported a total asset value less than 10 billion Viet Nam Dong (micro), 12 % had total asset value of between 10 and 20 billion Viet Nam Dong (small), and only 2% of them

had total assets valued over 100 billion Viet Nam Dong (medium);

Over 62% of the total respondents reported that their enterprises were established in the previous 6 years, between 2009 and 2015;

There was a marked gender difference in business ownership, with 71% percent reporting they were owned by men and 27% by women (2% no replies). Currently there are no national statistics published on gender of SME owners to compare with the survey sample;

Most of the respondents reporting they were individual privately owned enterprises; and

Only 7% reported premises located in an industrial/economic zone.

While Annex 1 provides more detail, it is worth noting some of the survey group

How disaster-resilient are SMEs?

– The SME Survey

03

hOw diSASTER-RESiLiENT ARE SMES? – ThE SME SURVEy 13

03

characteristics in more detail at this point in order to understand how the survey results relate to SME policy. Figure 5 (below) shows the sectoral distribution, with 41% from wholesale and retail trade, 17% from construction, while ‘others’ accounted for 26% (this refers to companies that fit within more than listed sector, or whose business type is not listed; the size of this group indicates that many of the respondents did not identify as clearly falling within one of the recognized business sectors used for statistical collection in Viet Nam). None of the remaining sectors accounted for more than 5%. No directly comparable published statistics were identified for SMEs, although across Viet Nam’s enterprises as a whole, almost 70% are in commerce and services, just over 30% in construction, and just under 1% in the agricultural sector.22

Figure 6 shows that most of the surveyed SMEs reported fewer than 100 employees, classifying them as either micro or small according to the definitions of SMEs under Government of Viet Nam Decree No. 56/2009/NĐ-CP on supporting SMEs.

39% were micro enterprises, reporting fewer than 10 employees;

22 VCCI. 2015. Vietnam Business Annual Report 2014. p. 38

over 51% were small enterprises, reporting between 10 -100 employees;

6% were medium, reporting 100 - 200 employees; and

4% were large, reporting over 200 employees.

Figure 6: Distribution of respondents according to number of employees

In terms of asset value criteria for size, the results were similar to those based on number of employees:

76% reported a total asset value of less than 10 billion Viet Nam Dong;

12 % reported a total asset value from 10 to 20 billion Viet Nam Dong; and

only 2% of them reported a total asset value over 100 billion Viet Nam Dong.

Decree No.56/2009 defines SMEs differently in different sectors. For the wholesale and retail trade sector, micros become small enterprises when they have a total capital value of 10 billion VND, whereas the threshold is more than 20 billion VND of total capital for other sectors. The total capital equivalent

Figure 5 Distribution by major industry sectors

Wholesale & retail trade 41 %

Others 26 %

Construction 17 %

Industry & quarrying 5 %

Agriculture, forestry & fishery 4 %

Transportation & storage 2 %

Accommodation service activities Food service activities 2 %

0 20 % 40 % 60 % 80 % 100 %

to total assets is determined by the balance sheet of the enterprise.

Findings on Risk Exposure and Impacts of Previous Disasters

Figure 7 shows the results of a question asking respondents to choose the top 3 hazards they believed would have the potential to disrupt their business operations. The top 5 choices were: power blackouts (listed by 41%), regional/global economic crises (40%), fire (35%), typhoon (32%) and flood (21%).

However, when asked to consider the hazards that caused actual disruptions, 399 out of 442 (more than 90%) of the respondents responded that they had never experienced a business operation disruption due to disasters. Of those who had experienced business disruption, 36 respondents reported this was mainly due to human made

hazards such as foreign currency fluctuation, regional/global economic crises, power blackouts, and accident, and only 2 respondents said this had occurred due to flood. This can be accounted for by the fact that most of the respondents were young SMEs that had started since 2009, and as it happens Viet Nam has not experienced any severe natural events during that time. However, even during that period there has been an increase in urban flooding, so this result could reflect the geographical location of respondents and/or different perceptions about what is meant by a ‘major disruption’ to business.

Although the proportion reporting business disruptions due to hazards was low, the main disruptions that were experienced included the inability of employees to go to work, not being able to deliver products to customers, damages to facilities, equipment and raw materials, and delayed deliveries from suppliers.

Figure 6 Distribution of respondents according to number of employees

39 %

6 %

2 %2 %

51 %

1-9 persons

10-99 persons

100-199 persons

200-300 persons

> 300 persons



Figure 7 Hazards that can potentially affect business operations by the respondents

Power blackout 41 %

Regional or global economic crisis 40 %

Fire 35 %

Typhoon 32 %

Accidents 31 %

Data loss 30 %

Foreign currency fluctuations 30 %

Civil unrest 27 %

Flood 21 %

Transportation system breakdown 18 %

Earthquake 16 %

Theft 16 %

Disease 13 %

Water shortage or contamination 11 %

Cyber attacks 11 %

Lightning 8 %

Tornado 8 %

Landslide 7 %

Terrorism 7 %

Drought 6 %

Tsunami 5 %

Pandemic/Epidemic 5 %

Wildfire 2 %

Insect infestation 1 %

None 2 %

0 10 % 20 % 30 % 40 % 50 %

Findings on Business Continuity Plan Adoption

In response to the question of whether they have developed a BCP (or similar) to ensure their business survives the types of hazards and shocks they are likely to experience in their localities and type of business:23

almost 80% of the respondents indicated they did not have written a BCP

14% confirmed that they are in the process of preparing a BCP

4.5% responded they already had a BCP

Within the 4.5% with a written BCP, 15% of them were small, 35% were medium, and 45% of them were micro enterprises (based on the definition of SMEs under Decree No.56/2009).

From responses by the surveyed SMEs, it can be seen that almost all the SMEs with a BCPs had developed them based on self-searching information on the internet, or due to help from NGOs.

For those without a BCP, the top 3 reasons for not preparing one were: they had not heard of BCP before (52%); they lacked a budget for preparing a BCP (40%); and they lacked of information on how to prepare a BCP (30%), (see Figure 8).

23 BCP is not an established term in Vietnamese. Although it was not defined separately, the phrase used in the Vietnamese language survey questionnaire described a plan to support SMEs to be able to continue/maintain their business: KẾ HOẾCH DUY TRÌ HOẾT ĐẾNG KINH DOANH.

In responding to the question on their top 3 motivations for developing their BCPs, those with BCPs said the main reasons were: to protect employees (33% listed in their top three reasons); to avoid economic losses (32%); to enhance their reputation (22%); respondents believed BCP is a good business practice (19%); they thought BCP would help them gain a competitive advantage (19%); and 14% thought it is needed for those enterprises located in disaster prone areas. Around 7% of respondent SMEs said they do not know the reason why they needed to have a BCP for their businesses, (see Figure 9).

Findings on Incentives and Training Needs

Figure 10 shows that more than 40% of respondents felt that the government should make it compulsory for SMEs to prepare a BCP to avoid or reduce the impacts of disasters, while 28% said no, and 17% did not know. Those who replied that BCP should not be compulsory believed that the government should help the SMEs increase their awareness on BCP and its benefits and then let the SMEs choose whether or not to have a BCP, but that the government should not force SMEs to have BCP at this stage.

In reply to the question what are their preferred three types of incentives that the government should provide to SMEs to encourage them to be disaster resilience, surveyed SMEs responded as follows:

Figure 8 Top 3 reasons for not preparing a BCP so far

had not heard of BCP before 52%

Lack any budget for preparing a BCP 40%

Lack information on how to prepare a BCP 30%

0 20% 40% 60% 80% 100%



61% listed tax credits, deductions, and exemptions for SMEs with a BCP in their top three incentives

53% selected subsidies, grants, and soft loans for the preparation of a Business Continuity Plan

15% nominated certification schemes (e.g., certified SMEs will be preferred suppliers)

19% listed awards and recognition for disaster resilient SMEs

35% said there was a need for provision of technical assistance, consultancy service, or training in BCP preparation and disaster preparedness

29% thought legislation, policies, and institutional arrangements that encourage SME participation in disaster risk management would be effective (e.g., membership in local DRM councils and committees); and

Figure 11 shows that more than 90% of the respondents confirmed their enterprises had not attended any training related to BCP, and 5% said they had (the remainder 5% did not answer).

Similar to BCP training, 88% of the respondents confirmed that they have never participated in a training related to disaster risk management (disaster prevention, hazard mitigation, disaster preparedness, emergency response, disaster recovery, etc.), 7% said yes and the remaining 5% with no answer as shown in Figure 12.

Findings on disaster preparedness

327 out of 442 respondents (74%) answered that they were not participating in a Local Flood and Storm Control Committee, while a significant minority of 89 respondents (20%) said yes they were (6% no answer).

There were similar responses to the question of whether their SMEs had established a mutual aid agreement with another organization to help each other during and after emergencies (examples given were privately-run emergency teams, fire brigades, search and rescue teams, mutual help associations, etc.). Almost 70% of the respondents answered with no and less than 20% with yes (10% no answer).

Figure 9 Motivations for SMEs that had developed BCPs

To protect employees 33 %

To avoid economic loss 32 %

To create a good reputation 22 %

BCP is a good practice 19 %

To create a competitive advantage 19 %

Is needed for enterprises located in the disaster prone areas 14 %

Do not know 7 %

0 10 % 20 % 30 % 40 % 50 %

Figure 10 Whether BCP should be compulsory

42 %

28 %

17 %

13 %

yes

No

do not know

No answer

Figure 11 Attendance at BCP-related training

90 %

5 % 5 %

Not yet

yes

No answer



174 out of 442 respondents (almost 40%) had no written disaster preparedness plans for their business protection, 129 respondents had emergency response plans, 79 respondents had evacuation plans, and 107 respondents had emergency communications plans. Regarding system down manuals, system recovery manuals, risk assessment and risk reduction measures, less than 10% of the respondents confirmed that they have them for their businesses.

The top 4 coping mechanisms that respondents reported using in dealing with business disruptions and emergencies were (i) using their own savings (209/442); (ii) accessing support from family and friends (177/442); (iii) using bank loans with interest (168/442); and (iv) reducing expenses (159/442). 105 respondents confirmed that they claimed insurance when facing with business disruption or emergency cases. However, only 13 out of these 105 had natural catastrophe insurance cover, only 13 out of these 105 chose natural catastrophic insurance, the rest were using other insurance products such as insurance for employees, fire insurance and motor/car insurance.

Figure 12 Attendance at disaster risk management-related training

88 %

5 %7 %

Not yet

yes

No answer

Figure 12 shows that 347 out of 442 (almost 80%) of respondents confirmed that they would like to participate in activities to support SMEs in Viet Nam to enhance their resilience from hazards and disasters, 15% said no and 6% gave no answer for this question.

Findings on financial coping mechanisms

The top 3 disaster risk financing mechanisms that respondent SMEs reported they currently have were: insurance for employees (261 out of 442 or equivalent to 59%); fire insurance (172 out of 442 or 39%); and motor/car insurance (149 out of 442 or 34%). These types of insurance are generally compulsory by law, so this result could reflect either a lack of compliance and/or a lack of precise knowledge about enterprise insurance policies by the individual respondents. In addition, 60 out of 442 - almost 14% - responded that they are using natural catastrophe insurance for their businesses. However, when responding to the question of what

are their main coping mechanisms for dealing with business disruptions and emergencies, only 13 out of these 60 chose as one of their top three options ‘by claiming insurance’. It seems possible that many respondents did not understand one of these two questions, or else that they do not yet have experience of claiming insurance, as natural catastrophe insurance is still a new concept in Viet Nam (and is not compulsory by law) and recent years have seen few major natural hazards in the country. This finding also most likely reflects limited financial literacy and low trust in insurance products amongst SMEs in Viet Nam.

Survey overview and conclusions

A large portion of the respondents (around 90%) were micro and small enterprises, which were mainly privately owned businesses that were not located in any industrial park or economic zone (presumably meaning they are located within communities). These types of enterprises are less likely to have large building structures or

mitigation works in place to physically protect them from hazards, and normally have few financial reserves or access to risk financing to help their recovery after a severe disaster. As a result they need more support from the government and other organizations to help them build resilient businesses.

SMEs in Viet Nam have to deal with both natural and human-made hazards. In terms of risk perception, actual experience influences the views of responders. In this sample many respondents had experienced different types of human-made hazards such as power blackout, regional/global economic crises, fires, etc. Natural hazards such as typhoon and flood were also there, but with lower experience and lower concern about their potential effects. This can be partly explained by the fact that most respondents were young enterprises set up since 2009, a period during which Viet Nam has not experienced any large or severe natural hazard events. However, as noted above, even during that period there has been an increase in urban flooding, so this could reflect the geographical location of respondents and/or different perceptions about what is a ‘major disruption.’ In fact, typhoons or/and

Figure 13 Willingness to participate in activities to support SMEs

79 %

6 %

15 %

yes

No

No answer



floods can also cause power failures, disruption of transport systems/networks and interruptions in communication systems, which were also identified as potential threats and as experienced hazards. Therefore, promoting disaster resilience for SMEs should build on frequently experienced hazards and also on raising understanding of related impacts of natural hazards in a changing climate.

In terms of impacts, disaster affects almost all aspects of business operations. Only around 10% of respondents reported disruptions due to hazards, but of these the main impacts were the inability of employees to go to work, not being able to deliver products to customers, damage to facilities, equipment and raw materials, and delayed deliveries from suppliers. In addition to the immediate effects on operations, most of these issues relate to supply chain security.

In terms of business ownership by gender, it can be seen from the survey results that women make up only 27% of owners. This may indicate a large gender imbalance in SME ownership, although the survey results represent a relatively small sample and need to be calibrated against national statistics. Currently there are no national statistics published on gender of SME owners. Nevertheless, this gender imbalance in the survey sample is surprising, given that World Bank statistics show that there is little gender difference in workforce

participation in Viet Nam, with around 9 women for every 10 men in the workforce (in the majority lower income bracket, women’s workforce participation rate is around 73% compared with around 85% by men; women’s workforce participation drops in the higher income levels).24 More importantly for SME policy, there are significantly more women classified as self-employed than men, with 70.9% of the women in employment in Viet Nam being self-employed, compared with 60% of men. When matched with the low representation of women as SME owners in the survey sample this suggests that, although most working women are self-employed, this may principally be in micro sized farming-related household businesses and low income trading, rather than in registered enterprises. Therefore, it is likely there is a great deal of scope in Viet Nam for the support and development of women entrepreneurs who wish to expand and grow from micro sized household businesses into registered small and medium businesses in separate premises. Aside from questions of gender equality, targeted support for women entrepreneurs this could therefore be an important element of growing and developing Viet Nam’s SME sector as a whole.

24 World Bank Gender Data Portal: Vietnam (March 2016). http://datatopics.worldbank.org/gender/country/vietnam

Figure 14 Distribution of disaster risk financing mechanisms used by respondents

Insurance for employees 59 %

Fire insurance 39 %

Motor/car insurance 34 %

Natural catastrophe insurance 14 %

Theft insurance Paramount 9 %

Insurance for profit losses 3 %

None 12 %

0 50 100 150 200 250

Improving SMEs awareness on risk transfer, in particular disaster risk insurance, may also be explored in a roadmap process to contribute to resilience building. The survey shows that emergencies and business disruptions are commonly dealt with by using their own savings, accessing support from family and friends, reducing expenses, and using loans with interest. Though these coping mechanisms worked in the past, it might not be sufficient to deal with large magnitude or severe hazard events.

It can also be seen from the survey that most of the respondents have not had access to information, knowledge and tools for BCP development. Many respondents thought that the government should promote the benefits of BCP’s to SMEs. In addition,

many respondents believed that the government should provide incentives to SMEs to encourage them to be disaster resilient, such as providing tax credits, deductions and exemptions for SMEs with a BCP, or supporting SMEs to prepare their BCP through technical assistance, consultancy services, BCP training or financial assistance.

Most of the respondents confirmed that they have not been trained in BCP. They also confirmed that they would like to participate in activities to support SMEs in Viet Nam to enhance their resilience from hazards and disasters. This shows that they are both in need or, and receptive to, receiving trained and support for increased awareness on BCP and resilience.


Inclusion of SMEs in legal, institutional and policy frameworks for climate change adaptation and ‘natural

disaster prevention and control,’ or DRM, is important in addressing their shared community disaster risks, as well as many of their business continuity disaster risks related to physical damage, supplier and market access and public infrastructure and service support.

SMEs and the ‘natural disaster prevention and control’ system

Institutional and legislative framework

The Law on Natural Disaster Prevention and Control 2013 (33/2013/QH13), (“the Law on NDPC”), came into force from 1

May 2014.25 Although its scope is limited to consideration of natural hazards, it is a comprehensive law that gives a great deal of emphasis to risk reduction (included under ‘prevention’, as the term DRR is not used) as well as emergency response. It also considers the full range of natural hazards, whereas the previous regulatory framework was focused only on floods and storms.26

The Law on NDPC allocates responsibilities across all ministries, although the Ministry of Natural Resources and Agricultural Development (MARD) is the coordinating body and principal implementing agency. MARD has filled this role for many years as it also had charge of the ordinance on flood prevention and control before

25 English language version available at: https://www.ifrc.org/Global/Publications/IDRL/Law%20on%20Natural%20Disaster%20Prevention%20and%20Control_No%20%2033_IFW.pdf

26 Ordinance No. O9-L/CTN on Prevention and Control of Floods and Storms (20 March 1993) (Repealed by Law on NDPC).

04Including SMEs in the systems for ‘natural

disaster prevention and control’ and climate change adaptation

the new law27 MARD is responsible for rural development, governance, and the promotion of agriculture, fisheries, forestry, and irrigation in Viet Nam, as well as ‘natural disaster prevention and control’. It is the standing chair of what was formerly titled the Central Steering Committee for Flood and Storm Control (CCFSC),28 since March 2015 re-established as the Steering Committee for Natural Disaster Prevention and Control (SCNDPC), headed by the Minister of MARD.29 The Steering Committee is a thirty-two member cross-sectoral group, representing all the main ministries (including MPI and the trade and finance ministries, as well as key disaster responders and technical institutions).30 MARD has very strong local level structures for implementation, as it has a nationwide network of 63 provincial offices and a relatively large cadre of field staff.31 Provincial and Local People’s Committees also have a role in local implementation under the law.

The key units for NDPC within MARD are the Department of Natural Disaster Prevention and Control (DNDPC) and the Disaster Management Center (DMC), both established under the Directorate of Water Resources. DNDPC is a state management agency, which focus only on management aspects such as proposing laws & policies, and supervising their implementation. It also includes the permanent secretariat for the Central Steering Committee. DMC is a state business unit that focuses more on technical aspects, and also has a function to provide consultancy services. DMC supports both the Central Steering Committee and the DNPC, as well as having a special role in community based disaster risk management (CBDRM).

27 IFRC.2014. “Viet Nam: How Law and Regulation Support Disaster Risk Reduction. Country Case Study Report.” http://bit.ly/1pyYVKj

28 ADB (Asian Development Bank). 2013. “Viet Nam: Environment and climate change assessment.” Mandaluyong City, Philippines: ADB. Pp. 12, 15.

29 MARD. 2015. Steering Committee for natural disaster prevention and control established.’ Press Announcement 20 Mar 2015. MARD website monre.gov.vn. Available at http://bit.ly/1ocR5Lk

30 Government of Viet Nam. 2015. Decision No. 1/QĐ-TWPCTT. Central Committee on Natural Disaster Prevention and Control (unofficial translation). Hanoi 27 March 2015.

31 ADB (Asian Development Bank). 2013. “Viet Nam: Environment and climate change assessment.” Mandaluyong City, Philippines: ADB. Pp. 12, 15.

Article 35 of the Law on NDPC also sets out rights and obligations of enterprises (translated as “economic organizations”). Their rights include compensation for any supplies or equipment commandeered for emergency response operations, and to invest in and enjoy the benefits of projects and works to prevent disasters that are in accordance with government planning (presumably including public-private or PPP investments). In summary, enterprises are legally required to become disaster resilient through: taking the initiative to protect their own physical premises and “production and business activities” during disasters; to formulate and implement DRM plans; to apply national safety regulations in construction; to participate in DRM awareness-raising, knowledge and training; to have emergency drills linked ort o official government response plans; to comply with instructions and commands of competent agencies and obey urgent orders on mobilization of personnel, supplies, and equipment during emergencies; to take the initiative in conducting environmental sanitation, epidemic and disease prevention and control in disaster-hit areas where they operate; and to participate within their capacity in disaster response, emergency assistance and recovery. Enterprises are also required to make contributions to the government ‘natural disaster prevention and control fund’ (Article 35 (2) ((a) – (i)). It is unusual to find such specific obligations in a national law on disaster risk management, and although the consequences of non-compliance are not set out, they provide a good basis for SME education and awareness-raising about DRM.

In addition, the Law on NDPC also sets out a number of prohibited actions for all persons, in Article 12. Some of these relate to business activities, especially 14(4):

Carrying out activities, which increase natural disaster risks without taking treatment or remedial measures, especially cutting down protection forests, encroaching river banks and river beds, placing obstacles and obstructing the water currents or illegally exploiting sand, gravel or minerals, causing riverbank or coastline erosion.


iNCLUdiNG SMES iN ThE SySTEMS 25

This is essentially an obligation to reduce or mitigate disaster risk in exploitation of natural resources, which is highly relevant to the many SMEs engaged in agriculture, fishing, salt production and other primary production. Many such enterprises would in fact be classified as household businesses in the agricultural sector, a type of micro enterprise that is not required to register as enterprise.32

NDPC Policies, Plans and Initiatives

The National Strategy for Natural Disaster Prevention, Response and Mitigation to 2020, issued in 2007, predates the Law on NDPC but is still technically current.33 Its implementation plan was approved in 2009.34 It has the stated general goal to minimize human and economic losses from disasters, through mechanisms that include: improved early warning systems (EWS) for natural hazards; improved building safety and development planning in areas exposed to hazards; training of public officials and communities in high risk areas; completion of existing plans for relocation of settlements from areas prone to flash floods; improvement in coordination amongst first responders; reinforcement of the safety of seas dykes; construction of storm shelters for boats and ships; and establishment of a fishery communication system for offshore boats. It can be observed that most of these objectives concern structural DRR measures, with less emphasis on non-structural measures such as the role of affected communities or components within them, such as SMEs and the private sector. It is also very focused on floods and coastal storms, so in some ways it reflects the older thinking before the new Law on NDPC. However, hazard mapping is also a key element, and this is an essential underpinning for development planning that reduces exposure to hazards, for both residential and business precincts. Also, one of its objectives was to review the institutional framework and resources for DRM,

32 As described in Part 2.1 above.33 PM Decision No: 172/2007/QĐ-TTg. National Strategy for

Natural Disaster Prevention, Response and Mitigation to 2020. http://www.isgmard.org.vn/VHDocs/NationalPrograms/National%20Strategyfordisasterprevention2020.pdf

34 Government of Viet Nam. 2009 (Sep). Implementation plan of National strategy for natural disaster prevention, response and mitigation to 2020.

and formulate the new law, and this has been implemented successfully.

Also since 2009 the policy framework has included the Community Awareness-Raising and National Community Based Disaster Risk Management (CBDRM) Project,35 now an important part of the DMC’s responsibilities. This policy mentions broad responsibilities of each element of society but does not concern SMEs or the private sector specifically as part of CBDRM. However, a 2011 Action Plan on Promoting Public-Private Partnership for Disaster Risk Reduction in Viet Nam36 was followed by a joint DMC and VCCI project in which areas of action for the private sector were identified to support implementation of the Action Plan of the National CBDRM Program (1002/QD-TTg).37

A more specific focus on SME business continuity management in the face of natural hazards has also come from projects with development partners and private sector organizations. For example, the regional project of which Viet Nam was a participating country, concerning “natural disaster risk assessment and area business continuity plan formulation for industrial agglomerated areas” done in ten countries in the ASEAN region.38 This included a pilot study in the industrial agglomerated area in Haiphong City and surrounds (located on the far northern coast). In all these countries the project piloted a practical methodology to develop area business continuity management, including area BCPs as one tool, in a participatory way. Although the process was piloted successfully, the report noted there was still insufficient private sector participation and suggested a need for incentives for participation, and also emphasized

35 Approved by PM Decision 1002/QD-TTg issued 13 July 2009 http://www.ifrc.org/docs/idrl/916EN.pdf

36 Prepared for DMC by ADPC, developed through consultations and workshop carried out under the Joint Advocacy Network Initiative (JANI) (which was supported by DIPECHO). http://www.dmc.gov.vn/Uploads/Thu%20vien%20tai%20lieu/Rep04%20Promoting%20PPP%20for%20DRR%20in%20VN%20%28ADPC%29%20EN.pdf

37 DMC, and VCCI. 2011. Promoting Public-Private Partnership for Disaster Risk Reduction in Vietnam.

38 JICA, OYO International Corporation, Mitsubishi Research Institute, Inc., and CTI Engineering International Co., Ltd. 2015 (June). “Natural Disaster Risk Assessment and Area Business Continuity Plan Formulation for Industrial Agglomerated Areas in the ASEAN Region. Final Report, Main Volume.” http://open_jicareport.jica.go.jp/pdf/12235677.pdf

the importance of the outcome being recognized by non-participants, potentially through a government approval process.39

It appears that, on the whole, the NDPC system in Viet Nam has not so far focused on the distinctive needs of SMEs in terms of disaster resilience, or sought to engage them (or the private sector more broadly) as a specific stakeholder in community level resilience-building, such as CBDRM. However, some partnerships between the Government and other organizations have demonstrated practical approaches to better integration of the private sector into area BCM and CBDRM.

SMEs and climate change legislation and institutions

Institutional and Legislative Framework

Viet Nam has been identified by the World Bank as one of the countries most vulnerable to climate change.40 Climate change initiatives and responsibilities are spread across all ministries. 41 The overall policy, approved by the Prime Minister, is the National Target Program to Respond to Climate Change (NTP-RCC), and the 2011 National Strategy on Climate Change.42

The Prime Minister heads the National Steering Committee on Climate Change (NSCCC), which includes the ministers of: Ministry of Natural Resources and the Environment (MONRE); MARD; Ministry of Planning and Investment (MPI); Ministry of Finance; Ministry of Foreign Affairs. The NSCCC thus provides a high-level policy umbrella for coordination between the key ministries related to SME climate change and disaster resilience: MARD, MONRE and PMI.

39 JICA et al. 2015. P. viii.40 GFDRR. 2012. Country Profile Vietnam. https://www.gfdrr.org/

sites/gfdrr/files/region/VN.pdf41 ADB (Asian Development Bank). 2013. “Viet Nam:

Environment and climate change assessment.” Mandaluyong City, Philippines: ADB. Pp. 12-16.

42 Issued by Prime Minister Nguyen Tan Dung in Decision 2139/QĐ-TTg on December 05, 2011.

MONRE provides secretariat functions for the Climate Change Steering Committee, and is also the coordinating ministry for the NTP-RCC, including its implementation, management, and monitoring of progress.43 MARD also assists the Steering Committee in supervising, guiding, and facilitating agencies to implement climate-change-responsive agriculture and rural development projects. Areas under MARD’s responsibility include irrigation, water management, forest and marine biodiversity management, and flood control—all of which are vulnerable to climate change.

The Vietnamese Government is a party to the UN Framework Convention in Climate Change (UNFCCC) and its Kyoto Protocol, and MONRE is the national focal point for its implementation. MONRE and associated institutes such as the Institute of Meteorology, Hydrology and Environment are the repository of significant technical information and capacity on climate change in Viet Nam.

Other laws relevant to climate change adaptation and mitigation, which cannot be considered in detail within the scope of the present report, include the Law on Environmental Protection 1998 (as revised in 2014, which provides for national and local environmental planning, strategic environmental assessments and environmental impact assessments for new developments and natural resource exploitation, all of which are relevant to climate and disaster risk reduction),44 the Law on Forest Protection 2002, the Law on Water 1999, and the Law on Land Use 2011. These are not specific to SME resilience, but they provide key mandates for the government to both reduce emissions and manage the impacts of climate change on the general population, including through flood mitigation works and land zoning.

Policy and Strategy

The climate change risks that are the context for the National Strategy On Climate Change are: the Mekong Delta is one of the world’s three most vulnerable deltas to sea-level rise; projections are for greater frequency and intensity of natural

43 ADB. 2013. p.12.44 Law On Environmental Protection No. 55/2014/QH13.


iNCLUdiNG SMES iN ThE SySTEMS 27

hazards; and there are threats to food security and agricultural development, as agricultural lands expected to be narrowed, especially in the low-lying coastal areas, while the Red River Delta and the Mekong Delta will likely be subject to salt intrusions due to sea-level rise. The policy targets for the strategy are to:

1. guarantee food security, energy security, water security, poverty reduction, gender equality, social security, public health, and better livelihoods as well as to protect natural resources in the context of climate change;

2. turn low-carbon economy and green growth into the main orientations for sustainable development;

3. improve relevant parties’ awareness, responsibility and capacity to cope with climate change etc.; and

4. work with international organizations to improve adaptation.

Based on the above, it is evident that climate change adaptation for SME resilience requires a combination of government and private sector efforts. Government actions may need to include structural mitigation measures for existing developments, land zoning informed by climate change projections for future developments, and education and awareness-raising of SME owners concerning Viet Nam’s climate change risk to the local level. Adaptation efforts and decisions by SMEs themselves may be needed to improve the resilience of existing premises and methods of production, contingency planning, mitigation measures for existing business operations, and choice of location for new premises based on climate change data.

As the lead ministry on framework standards for inserting climate change into socio-economic development strategies, under the National Strategy on Climate Change, MPI is also has a strong policy mandate to take account of SME exposure and vulnerabilities in government development planning with regard to climate change projections.

Some specific climate change resilience concerns for SMEs are:

Coastal and river delta areas: SMEs in the agricultural sector in river deltas and coastal tourism are especially exposed to the consequences of sea-level rise. However, all SMEs in coastal areas, river deltas and islands are likely to be affected, along with their communities, if the land becomes inundated or unusable due to water salination.

Permanent or repeated inundation in urban centers: SMEs in all sectors will be affected if they are located in urban centers and industrial parks that are vulnerable to inundation from sea-level rise or increased flooding and storm activity due to more extreme climate events. Adaptation measures may require government structural mitigation works against inundation in existing urban areas. Choices of sites for new developments need to take climate change projections into account, both from the point of view of SMEs making these choices, and zoning and enforcement of land use planning by government.

SMEs in areas prone to flash floods: With the projected increase in floods and storms, SMEs need to receive early warning notifications, where feasible, in time to take remedial measures for business continuity, and not only to evacuate. Again, site choices and land zoning for new developments should seek to avoid areas that already experience flash floods, or should include mitigation measures and potentially specific building codes if development is permitted.

Roadmap Issues for SME inclusion in CCA and NDPC system(s)

The National Steering Committee on Climate Change includes the ministers of MONRE, MARD and MPI, and thus provides a high-level policy umbrella for coordination between the key ministries related to SME climate change resilience. The Steering

Committee for Natural Disaster Prevention and Control, headed by the Minister of MARD, also has a mandate for interdisciplinary coordination (Law on NDPC Art.44) and includes MPI and the trade and finance ministries as well as key disaster response agencies.

Some issues for exploration during the roadmap process concerning climate change and disaster resilience for SMEs include:

How to enhance implementation coordination across sectors. Although the legal and policy frameworks for both NDPC and CCA mandate cross-sectoral coordination, including through the high-level committees, the preliminary findings of the current project indicate that this does not occur significantly in practice. The roadmap process on SME resilience could therefore explore how more concrete mechanisms can be put in place to ensure that the NDPC and CCA systems both interact with each other, and with the system for SME promotion, to ensure the issue of SME climate and disaster resilience is considered

holistically. Such a mechanism would aim for coordination of technical level implementation at least between MARD (as Secretariat of the Steering Committee for NDPC, as well as its Department of NDPC, and Disaster Management Center), MONRE (as Secretariat of the Climate Change Steering Committee, as well as relevant technical institutes), and MPI (agencies described in Part 5 below).

How to engage private sector organizations, such as the Viet Nam Chamber of Commerce and Industry (VCCI), as well as smaller SME organizations and local business, in the policy, planning and implementation by local institutions for both NDPC and CCA.

How both local government planners and the private sector can have better access to local disaster risk information (risk assessments and hazard mapping) and to downscaled climate change projections and advice on their implications - for existing business operations and for decision-making about siting of new industrial parks and individual enterprises.


The SME Development and Promotion System

Ministry of Planning and Investment

The Ministry of Planning and Investment (MPI) has a very broad mandate in the business sector, with over twenty separate departments and a number of special offices and agencies, including oversight of foreign investment, cooperatives, business registration, enterprise development and general statistics.45

Decree No. 56/2009/ND-CP on Assistance to the Development of SMEs (Decree 56) both defines SMEs, as described above, and gives MPI a general mandate to coordinate government efforts on SME development.

The lead agency for SME development within MPI is the Agency for Enterprise

45 The MPI website sets out structure and mandates in English translation (provided for reference only): http://www.mpi.gov.vn/en/Pages/cctcbkhdt.aspx

05Disaster resilience in

Viet Nam’s support for SME development

Development, (AED-MPI), as set out in Ministerial Decision No. 1908/QD-BKH dated November 08, 2010. AED-MPI’s duties include (Article 2, unofficial translation):

1. To preside over or participate in drafting legal normative documents on the arrangement, innovation of state-owned enterprises, the development of Small- and Medium-sized Enterprises, and mechanisms, policies, solutions to the development of types of enterprises to submit to competent levels for promulgation.

2. In regards to Small- and Medium-sized Enterprise (SME) Development:

a. To consolidate, set up orientations, plans, programs on assisting SME Development; to instruct Ministries, sectors, localities in building plans and solutions to the assistance of SME Development in areas;

b. To consolidate reports on SME Development situation;

c. To research the pilot construction and instruct the implementation of SME Development promotion models and methods; offer advice to support SME Development through SME Support centers;

d. To act as a permanent secretary of the Small- and Medium-sized Enterprise Development Encouragement Council.

There are also a number of units under AED-MPI, including the Small- and-Medium-Sized Enterprise Development Division, and Small-and-Medium-Sized Enterprise Support Centers for each of the three regions – Northern, Central and Southern (Decision 1908 Article 3(2)). SME-TAC Hanoi, a key project partner in the current research, is the SME support center for the Northern region, and provides training, capacity building and business incubation, among other initiatives.

SME Development Encouragement Council

The SME Development Encouragement Council (SME-DEC), for which AED-MPI was the Secretariat, is established under Decision No. 1918/QD-TTg on the functions and duties of the Small and Medium Enterprises Development Encouragement Council, 2010. The key function of the SME-DEC is to advise the Prime Minister on mechanisms and policies to encourage and support SME development nationwide. The Council advises on the following, as well as any particular issues assigned to it by the Prime Minister from time to time:

Alignment of the SME Development Plan with the national and strategy on socio-economic development.

Proposals to amend, supplement or finalize mechanisms and policies on SMEs development.

Measures, solutions and programs to support SMEs to strengthen their capacity and competiveness.

The Council is chaired by the Minister for Planning and Investment, with the Vice Minister of MPI as a standing member and the head of AED-MPI as Council Secretary. Other government members of the council are from the Ministries of: Finance; Trade & Industry; Justice; Agriculture and Rural Development (MARD) Construction; Transport; Science and Technology; Natural Resources and Environment; Education and Training; Labour, Invalids and Social Affairs; Steering Committee on Enterprises Innovation and Development; State Bank of Viet Nam; representatives of city people’s committees of Hanoi, Ho Chi Minh, Hai Phong, Da Nang, and Can Tho cities. It also includes representatives of VCCI, the cooperatives alliance, the SMEs Association, Science and Technology Associations, the Young Business Association and a number of experts on economic, science, technology and education. It is thus a very broadly representative Council, and the inclusion of MARD in particular creates an institutional link between Viet Nam’s systems for SME promotion and for ‘natural disaster prevention and control’ (or DRM) and climate change adaptation.

SME access to Finance

There are two main channels of credit guarantees available for enterprises, which are a critical tool to enhance their development. These are: (i) the Viet Nam Development Bank’s credit guarantee fund, and (ii) local credit guarantee funds supervised by the Ministry of Finance.46

SME Development Fund

The Small and Medium Enterprise Development Fund (SMEDF) was established by a Prime Ministerial Decision No. 601/QD-TTg in 2013 (Decision No. 601).47 It is a state financial institution placed under MPI, and it is MPI that decides the list of priority sectors for SME support under the fund for a given period. The fund’s purposes include creating capital

46 ADB. 2015. P. 24147 Decision No. 601/QĐ-TTg dated April 17th 2013 by the Prime

Minister.


diSASTER RESiLiENCE iN ViET NAM’S SUPPORT fOR SME dEVELOPMENT 31

for SMEs from both Government and other sources, and providing financial support to SMEs that meet the criteria, using the mechanism of guaranteeing loans through the Viet Nam Development Bank or eligible commercial banks. (Decision No. 601, Articles 4, 6, 7.) Loan interest rates are to be no higher than 90% of commercial lending rates and a maximum of 70% of the business’ total capital (Article.8). This mechanism is intended to ensure SMEs that have sound business structures, products and markets can access the necessary capital for business development at subsidized rates.

Local Credit Guarantee Funds for SMEs

Decision No. 58/QD-TTG on Setting up, Credit Guarantee Funds for SMEs 2013 provides for the establishment of provincial and local credit guarantee funds. As at the end of 2014 there were 21 local credit guarantee funds, operated by provincial authorities and supervised by the Ministry of Finance (SME White Paper 2014). This number had reportedly increased to 27 by early 2016, although some credit guarantee industry providers have reportedly stated that there has been low uptake of credit guaranteed loans by lending institutions, despite high demand from SMEs.48 These critiques include a perception that bank lending regulations are too restrictive.

In addition to helping develop robust SMEs, government avenues for access to finance can also be used to encourage greater SME resilience. For example, if having a BCP that takes account of natural hazard risks improves an enterprise’s chance of being assessed as credit worthy, this can operate as an incentive for them to take account of all relevant risks in BCM. Finance mechanisms can also be useful contact points to provide SMEs with information about BCM and to offer capacity building for preparation of BCP or other types of business and disaster risk reduction and contingency planning.

48 ‘Credit guarantee funds operate inefficiently’, 14 Mar 2016. Saigon Times. http://english.thesaigontimes.vn/46224/Credit-guarantee-funds-operate-inefficiently.html

Viet Nam Chamber of Commerce and Industry figures

Based on discussion during the country mission, the VCCI survey figures indicate that around 60% of enterprises access bank loans, but only 30% of micros do so, 40% of small and mediums, and 70-80% of large. The smaller enterprises still tend to rely on family lending. There is a provision for banks to lend 10% to SMEs, and some banks support SMEs well, with low interest loans (e.g. 6% compared with normal 9-10%).

Military Bank of VietNam (MBB) SME lending

The MBB is a joint stock bank that provides retail and commercial banking. The lending program of its SME Division provides an example of how the legal frameworks can be used to provide SME finance on a commercial basis. It currently lends around 40% of total lending to SMEs, has 72,000 SME clients and on average lends to 11,000 new SME clients every year, mainly those engaged in trading agricultural products for export (a mix of raw and value-added). The SME Division of the Bank is concerned at SMEs high risk from supply chain disruptions and the lack of insurance products for them, or credit guarantees from insurance companies for banks lending to SMEs (especially for agricultural production, which is high risk). The Bank undertakes its own risk assessments, which take into account natural hazard risks, especially for the agricultural sector. However, there is not yet sufficient actuarial data to make risk assessments based on climate change projections.

MBB is cooperating with the Department of Industry and Trade (DIT) in Ho Chi Minh City to develop SME financial products. The Bank also works with development partners, especially at provincial level where the banking sector is less developed.

New Law on SME support in preparation

Under its capacities in Article 1 of Decision 1908 (above) that AED-MPI is currently preparing new law on support for SME development, which is scheduled to be submitted to the Viet Nam National assembly in mid 2016. It will expand upon and replace Decree No. 56. While as yet there is no draft law available, it is understood from discussions during the January mission for this report that the new law aims to update the SME legal definitions. It may also consider quite a wide range of policy initiatives for SME support, such as access to finance, capacity building, national and local level supports, and enterprise incubation.

When the question of including SME disaster resilience in such a law was raised in discussions during the January mission, a view commonly expressed was that this would increase the burden and cost of doing business for SMEs, with little to gain. However, the economic impact on SMEs of the disaster losses in Thailand during the 2011 floods provides an example of why disaster resilience needs to be a concern for SMEs in Viet Nam, which is also a country subject to flooding as well as sea-level rise. The National Strategy on Climate Change also notes, for example, that a 1 meter sea-level rise could decrease GDP by around 10% if effective adaptation measures are not taken. This risk requires public infrastructure and business locations and methods to be adapted in advance, particularly those industries based in the Mekong and Red River Deltas, and all coastal areas, such as primary production and tourism, as well as those in the low-lying 20% of Ho Chi Minh City’s land area. Inclusion of disaster risk assessments in BCM, along with using climate change projections about where to locate new businesses, can have as much impact on SMEs’ bottom line as their expertise in management, or global economic downturns. Inclusion of such concerns as an integral part of good BCM promoted in the new law would make Viet Nam a regional leader in achieving integration of disaster-related business losses with the system of SME development and support.

Private Sector & NGO Support for SMEs

Organizations such as the World Bank, the ADB, and many foreign governments through bilateral arrangements have implemented a variety of programs supporting SME development in Viet Nam. Private sector and non-government organizations in Viet Nam also contribute, and some example are noted below.

Industry Organizations

The VCCI is an active advocate for SME development in Viet Nam. It is working to support its 10,000 members (including 100,000 indirect members through organizational affiliations), by protecting legal rights of enterprises, providing assistance through training and capacity building, and policy advocacy including on legal regulation. Other local industry bodies also support SMEs, such as the Hanoi Trade and Industry Association, whose members are mainly small and medium enterprises.

VCCI undertakes an annual survey of members, with 10,000 respondents, the next edition of which is due for publication at the time of writing in March 2016.

Some particular initiatives and projects outlined by VCCI during the mission consultations were:

VCCI is working with MPI on developing the Law on SME support and policy, and is on the drafting committee for the law. Some of the regulatory issues they have identified as priorities to support SME development include: the need to reduce the time and costs for business registration; raising the income/tax threshold; access to capital; credit guarantees; more government planning information being made available to investors; better and more accessible information on government disaster risk mapping; and implementation of the environmental protection law that was updated in 2015.

VCCI has identified the agricultural sector as a priority for support, given the sector’s importance in the economy and its low capacity



in business skills due to the traditional nature of much farming. It is seeking to improve use of technology in the sector, and to support farmers in accessing markets through a business-matching scheme.

Since 2011 VCCI has hosted a programme funded by USAID to reduce SME disaster risk by providing DRM training for SMEs (fully subsidized), and promoting public private partnerships on DRM. The training curriculum includes: information about Viet Nam’s projected climate change, especially for enterprises in coastal regions; how SMEs can prepare for natural hazards; as well as how to include DRM in business planning (mitigation of damage, continuity during a disaster and post-disaster reconstruction and recovery).

Under the USAID programme, VCCI is also working with some insurance companies on disaster risk insurance. However, their experience so far has been that Vietnamese insurance companies have not been interested in disaster risk insurance, which is a small market because, in turn, very few SMEs in Viet Nam have shown interest in disaster insurance. In addition, in provinces with very high disaster risk, private insurers are unable to offer products at an affordable price.

VCCI is also seeking to develop feasible and concrete programmes to support SME disaster resilience, not to rely only on general training. It is seeking new approaches, exploring ideas such as working in the field to develop resistant building structures. In these efforts it is also exploring partnerships with development partners, and with international NGOs on pilot projects to support low income SMEs, such as the Oxfam pilot study described below.

During the country consultations, the Hanoi Trade and Industry Association also indicated its concern about SME supply chain security, lack of access to insurance, the difficulty private SMEs experience in competition with government enterprises, the continuing low level of DRM awareness and capacity amongst SMEs, and the need for more timely and well broadcast early warnings, especially for heavy

rain events and droughts, so that businesses can prepare or adjust their plans.

The Vietnam Association of Small and Medium Enterprises (VINASME) was established administratively under MPI in 2005. Its latest Charter was approved by the Government in 2011 by a Decision of the Ministry of Home Affairs. Although government-resourced and facilitated, its leadership is elected by industry members, and it is an independent socio-professional association with its own legal personality. Its membership is made up of: (1) Official Members, being Vietnamese SMEs with 100% domestic capital, (2) Associate Members, being those based in Viet Nam that do not meet the 100% capital requirement, including foreign-invested enterprises, and (3) Honorary Members, who are scientists, managers, and civil society organizations, which have experience in and contribute to SME development in Viet Nam.

International NGOs

Although Viet Nam’s economy has grown rapidly, and it is now a lower middle-income country in which poverty levels are dropping, still 13.5% of the population lives below the national poverty line (World Bank 2014). SMEs in Viet Nam are also predominantly micro and household level enterprises, many of them producing very low-income returns. Some international NGOs (INGOs) have therefore initiated projects to support SME development as a way to help reduce poverty through development. For example, as part of the NGO Resource Center, there is a Corporate Engagement Working Group and a Climate Change Working Group. Some new INGO projects provide good examples for practical implementation of SME support projects. For example:

Oxfam International is undertaking a regional scoping study to support SME development in the agricultural sector. It aims to identify the most disaster prone areas, as well as which markets and which types of agri-business will be most affected by climate change, and to include developing and implementing broadly focused BCPs. It looks at both legal and policy frameworks and local implementation. It will focus on DRR (not just emergency response)

and on raising awareness of climate change impacts, as well as conducting risk assessments and disaster impact assessments. This initiative is in the planning stages, and includes Indonesia, the Philippines and Viet Nam, among others. In Viet Nam, Oxfam will partner with VCCI on a small pilot project in a specific market – honey bees. This will include BCP training for SMEs (by VCCI) introducing standards for resilience in the particular type of business, undertaking detailed risk assessments, working with financial services institutions on micro-credit and other products to improve resilience, and ways to develop women-led SMEs in agriculture.

World Vision is beginning a new three-year project with Australian Government support that focuses on: (1) public private partnerships (PPP) to build SME resilience in DRM/CCA through raising awareness; and (2) innovative practice in DRR, for example, green energy and recycling. They are in discussion with the Disaster Management Center on how to better integrate SMEs into community based disaster risk management (CBDRM), given that SMEs are so often badly affected by disasters, rather than seeing the private sector only as a donor and aid provider during a disaster. They see local People’s Committees (PCs) as key to improved local level DRM for SMEs, and one of their own roles is to facilitate local cooperation on this issue between industry associations such as VCCI and SME associations and the local PCs. They are taking an area approach rather than selecting a sector, initially focusing on 3 urban districts, with 6 industry groups within each.

Gender and SME Development and Resilience

Given the survey findings on gender imbalance in SME leadership, an SME disaster resilience roadmap process could engage with women owners and managers in SMEs to ensure that any separate concerns they have are taken into account in the policy framework, and to provide them with direct support and encouragement in their roles,

as well as recruiting some women leaders as SME disaster resilience champions. If after calibration with national statistics it is found that the survey sample findings of only 27% women-led SMEs is broadly representative, this could be the basis for policy interventions aimed at (a) supporting more women to grow their micro-enterprises from household level, and (b) identifying and reducing social or economic barriers that might account for the very small proportion of women entrepreneurs running registered enterprises.

It also indicates a need to conduct specific consultations on an SME resilience roadmap with women-headed SMEs, potentially through women entrepreneur clubs as well as VCCI and industry bodies, to ensure that any different issues women face are identified and included in the policy framework. For example, the following organizations could be invited to participate in policy development on SMEs: (1) Government – the Viet Nam Women’s Union, and the National Committee for the Advancement of Women in Viet Nam (NCFAW); (2) private sector - women’s entrepreneurs clubs such as the Ho Chi Minh City Women Entrepreneurs’ Club, and the Da Nang Women Entrepreneurs Club, and other similar bodies.49

Roadmap Issues

The development of the new law on SME development provides an opportunity for Viet Nam to lead the region in achieving integration of disaster-related business risk management with the broader system of SME development and support. This could be a best practice example as the first comprehensive approach to BCM for SMEs in a region where natural hazards are recognized as having a major impact on economic development.

49 These were two of the groups that participated in the 2006 study: IFC-MPDF and GEM. 2006. “Voices of Vietnamese Women Entrepreneurs.”



New law on SME support

In the context of the new draft law on SME development, as a key part of the SME policy roadmap in Viet Nam, MPI could consider inclusion of the following issues relevant to SME development and support and their need for greater disaster resilience:

The extent to which the current legal definition(s) of SMEs provide a good basis for targeted policy intervention, including for SME disaster resilience, taking particular consideration of the fact that (a) almost all micro and small enterprises are privately owned, and (b) for many medium sized business there is currently much higher capital investment than employment numbers would indicate.

Whether new approaches to GSO statistical collection and analysis of SME data could provide more readily accessible data on SME characteristics, contributions to the economy in different sectors and regions, and disaster and climate risk in different industries and localities.

How the SME development and financial institutions could provide incentives to encourage SMEs to include natural hazard and other disaster risk factors, as well as climate change projections (especially sea-level rise), as essential components of their BCM. For example, through inclusion of disaster resilience BCP as part of the criteria for access to credit, or by providing tax incentives for conducting risk assessment and BCP.

Whether the credit guarantee system for SMEs could more effectively increase SME access to capital for general business development including investment in disaster and climate risk management as part of BCM, such as investment in risk assessments, physical disaster mitigation measures, emergency training and BCP.

How to increase SME capacity and expertise in disaster risk management through engagement with MARD, in particular the technical advisory expertise of the DMC, in risk assessments, hazard mapping and BCP training on natural

hazard risks, in line with the Law on Natural Disaster Prevention and Control.

How to improve SME awareness of climate change risks by engaging with the Ministry of Natural Resources and the Environment (MONRE) add the National Committee on Climate Change (NCCC), to undertake medium to long term risk assessments for businesses likely to be affected by climate change, such as coastal tourism and fishing, and river delta agriculture, to support them in planning for adaptation, relocation, or in making choices about new sites, in line with the National Strategy on Climate Change.

How to address the apparent gender imbalance in SME ownership by identifying economic or social barriers to women becoming entrepreneurs in the formal sector, despite the high workforce participation of women in Viet Nam and the very high rates of self-employment. Starting points, as part of the roadmap process, could be to (a) engage with women SME leaders, perhaps through private sector women entrepreneurs’ organizations and clubs in different cities and regions, recognizing that women are a minority stakeholder group within the SME sector who may have a different perspective, and (b) involving government organizations focusing on women’s policy, such as the Viet Nam Women’s Union, and National Committee for the Advancement of Women in Viet Nam (NCFAW); and (c) potentially inviting women entrepreneurs into leadership roles on SME disaster resilience, such as SME disaster resilience champions.

Generally how to encourage and support a move from micro size household businesses to registered small and medium enterprises in different premises, particularly for self-employed women, including access to land or premises beyond the household, access to capital and disaster risk financing, and capacity building on BCM that includes disaster and climate risk.

How to build momentum on climate and disaster resilience amongst SMEs, through mechanisms

such as nominating SME disaster resilience champions, representing both men and women from the SME sector, who might receive special training and ongoing support as peer educators.

Institutionalizing cross-sectoral cooperation on SME resilience

The roadmap process could also review mandates to establish more formal and sustained institutional cooperation between the systems for SME promotion and both NDPC and CCA. For example, the momentum for improving SME disaster resilience could be supported through more formal and sustained technical cooperation between the Government´s systems for SME promotion and for NDPC, particularly in areas such as risk assessments and hazard mapping as the basis for mitigation and preparedness measures, awareness raising of SMEs, contingency planning and emergency drills, effective dissemination of early warnings, and SME capacity in emergency response. Many of these elements can be factored into BCM if the enterprises have the relevant risk data and access to expert materials and advice, in particular during the development of enterprise level or area BCPs. The needs of local SMEs can also be more effectively integrated into local DRM by including them in CBDRM programmes.

Approaching a roadmap process for SME disaster resilience

In moving towards a roadmap to promote SME disaster-resilience it will be important to engage the relevant stakeholders, including private sector organizations or other groupings that can represent SMEs across all key sectors, and also to link with Government institutions’ legal mandates, planning, policy and budgetary processes, as well as to access their expertise. Accordingly, this report does not make specific recommendations but, rather, raises issues for consideration during the process, some of which have been identified in the foregoing report as “roadmap issues”. These are intentionally open-ended, as it is not the purpose of this report to provide answers, but to identify SME disaster resilience needs, based on the survey, to give a strategic policy analysis, and to identify issues for framing a roadmap process.


In thinking about how to disaggregate “SME disaster-resilience” into practicable elements for a roadmap, it is helpful to

consider:

Who needs to be concerned with SME disaster resilience: Who are the SME target groups? Who are the wider stakeholders? Who are the experts who can support the process, and help to fill the knowledge gaps? Who can implement the different policies, strategies or activities that may emerge from a roadmap process?

How can all those concerned be engaged: What mechanism or processes can be used to ensure that rural and regional SMEs, different industry sectors, different size SMEs, women-led SMEs and other relevant government and non-government organizations can participate in a roadmap?

Which policy mechanisms or actions can best support SMEs to become more disaster-resilient: Is it any or all of disaster risk information, training/capacity-building on including DRM/CCA in BCM, better integration into the NDPC system at local level, tax incentives, loans, insurance or other disaster risk financing?

What are the identified needs: What do we know about the extent and type of SME disaster losses, their risk of exposure to hazards, and their vulnerability to different types of hazard? Do different categories of SME have different risk factors? What do we know about the current level of knowledge, disaster-preparedness and disaster risk management of SMEs? What support do they need to become more resilient to disasters? Do SMEs in different sectors or regions, or of different size or type of business structure have different support needs? What else do we need to know?

06Towards a Road Map for

SME Disaster Resilience in Viet Nam

Who are the stakeholders and experts?

Assuming that the SME roadmap process will be led by MPI, it will also be important to include: SME and private sector business organizations; the Government and technical organizations whose expertise is needed for improving SME climate and disaster resilience; the other ministries, departments and institutions that underpin SME support in terms of business registration, standards accreditation, tax incentives, finance, disaster insurance, BCM training and capacity building; and INGOs and development partners already engaged in SME development and disaster resilience projects in Viet Nam.

Private sector

SMEs and the industry bodies that represent them need to be seen as the key stakeholders in an SME resilience road mapping process. This may include, for example:

organizations such as the Viet Nam Chamber of Commerce and Industry (VCCI), the Vietnam Association of Small and Medium Enterprises (VINASME – an SME organization, albeit Government sponsored and place under MPI) as well as other city based and sectoral based industry organizations.

large corporations willing to invest expertise and resources in BCM for SMEs in their supply chain.

industry cooperatives or industry clusters, such as in the agricultural sector

organizations that promote and support women managers in the private sector, including local women entrepreneur clubs

Government

As described in the report, the enabling environment for Vietnamese SMEs’ disaster resilience encompasses two main groupings of laws, policies and government institutions. These are, on the one hand, the closely-related systems of ‘natural disaster prevention and control’ (under

the stewardship of MARD) and climate change adaptation (under the stewardship of MONRE) and, on the other hand, the array of policy and financial support mechanisms in place to encourage and support SME development, described in the report as the SME development system (under the stewardship of MPI).

The NDPC and CCA systems focus on hazards, risk reduction, early warning, response and recovery, as well as longer term planning for mitigation and adaptation to the projected impacts of climate change. MARD and MONRE and their technical units are the reservoirs of current knowledge in these areas, as well as having technical information and capacities in training, awareness-raising and risk mapping that are essential for SMEs to take adequate account of natural and other hazards, and climate change projections, in BCM. However, PMI and its associated institutions and mandates are needed to bring the DRM and CCA issues into the mainstream, to ensure that disaster resilience is as a key component of SME development.

INGOs and Development Partners

Given the existing programme and project partnerships between Government, development partners, INGOs and VCCI it would be useful to engage with them as part of the roadmap process. This would be a way to incorporate lessons learned from a range of local pilot projects that demonstrate good practices in developing SME disaster resilience.

Experts and technical institutions

A range of government, private sector, NGO, development partners and academic expertise can potentially be engaged in the roadmap process to support and advise on the content and feasibility of proposals, as well as to deliver projects and programmes such as: undertaking or interpreting risk mapping and localized data on natural hazards and climate change risk; developing and delivering standards and training on multi-hazard BCM and BCP; and undertaking pilot projects to test methods for supporting SME disaster resilience in different sectors and regions.


TOwARdS A ROAd MAP fOR SME diSASTER RESiLiENCE 39

How stakeholders can be engaged

1. The Government is in the best position to determine appropriate mechanisms for engagement of stakeholders during the roadmap process. However, some suggestions include:

a Undertake specific SME consultations to ensure that SMEs in different industries and different regions, urban and rural, can contribute to identifying their disaster resilience needs and to propose the most effective means of government support.

b. Include in the roadmap process a strategy for consultation with women headed SMEs and organizations that support women in business.

2. Consider providing ongoing government support and capacity building for national, regional and local SME organizations, such as VINASME, or local city bodies, or SME chapters within existing umbrella organizations such as VCCI. This could be a way to include SME concerns in institutional structures that address SME disaster resilience and business support, as well as providing a structure for SME capacity building and communication between government and SMEs.

Which policy mechanisms or actions might be addressed

As noted above, as yet there appears to have been little engagement as between the other government institutions supporting SME development on the cross-cutting issue of SME disaster resilience, especially in the areas of disaster risk reduction and prevention for SMEs, and targeted awareness and training for SMEs on NDPC. The issue for SMEs is that, at a government policy level, the specific question of their disaster resilience can easily be seen as both everybody’s business, and nobody’s business.

Risks from climate change also need to be addressed for SMEs medium and longer-term business continuity and growth. Some of these risks are locality-based, such as coastal areas subject to seal level rise, while others are more generalized, such as drought and flood extremes affecting agricultural production.

What issues might be considered

The SME Resilience Survey identified a need for SMEs to have much greater awareness of the costs of disasters when they occur, and of the need to factor this into BCM, requiring training on both BCP and disaster prevention and control. It also identified the need to take a multi-hazard approach, given SMEs own preoccupations with the broader economic and business environment, in order to engage with them more effectively. The survey results indicate the importance of demonstrating to SMEs that BCM which improves disaster resilience also improves the bottom line. SMEs surveyed were also interested in receiving support and advice from the government, as well as tax relief and other financial incentives based on BCP and demonstrated disaster resilience capacity.

In terms of existing government support for SME disaster resilience, the key finding was that so far the institutional and legislative systems for disaster prevention and control, climate change adaptation and business development have not joined hands to provide the necessary support. However, the current review of the Law on SME support provides a unique opportunity to mainstream disaster and climate risk into the legal framework for SME development and promotion.

Some specific roadmap issues arising from this report, which can be used as a starting point, are summarized below.

Legislative base for government SME support

The development of the new law on SME support is an opportunity for Viet Nam to lead the region in a number of ways. Some suggestions are outlined:

1. Defining SMEs in a way that facilitates more targeted policy interventions, especially given that almost all micro and small enterprises are in the private sector, and that the employment/assets criteria do not currently provide consistent results for medium enterprise classification. In addition, consideration could be given to including low-income household businesses that are not required to register as enterprises in the mandate for SME development;

2. Establishing a concept of BCM that takes an all-hazards approach based on objective assessments of all the different factors that can cause business disruptions and stresses;

3. Institutionalizing cooperation between the government-led systems for SME development and promotion, and the specialist agencies coordinating disaster prevention and control and climate change risk; and

4. Institutionalizing participation of the private sector, especially national bodies, industry organizations and existing or newly established SME organizations on an ongoing basis in national mechanisms for implementing SME development and disaster resilience support.

5. Reviewing and updating financial incentives for SMEs to reduce risk and prevent damage and loss from disasters, including though measures such as tax deductions for expenditure on preparing BCPs, and reduced insurance premiums or lower interest loans based on evidence of strategies for disaster resilience and broader BCM.

Statistical base for government SME policy targeting

Review current statistical collection and analysis of SMEs in Viet Nam to determine whether more quantitative and qualitative data on enterprise characteristics is needed to ensure that policy interventions can address their disaster resilience. Currently little data is broken down by enterprise size, as the dominant classification is as between government-owned, foreign-invested and private sector enterprises. For example, it may be useful to have available data sets that show economic contributions by enterprise size – especially separating private sector SME data - SME ownership by gender, age of enterprises, SME data by location, geographical risk factors from exposure to hazards, and industry sector in detail.

Multi-hazard BCM for SMEs

1. Strengthen SME capacities in all-hazard BCM, including risk assessment for all risks and the development of BCPs to increase their resilience to natural hazards, technological hazards and economic shocks

2. Review BCM and BCP standards and training materials to ensure they provide an adequate basis for SMEs to assess and incorporate natural hazard and climate change risk, along with technological hazards and economic risks.

3. Establish mechanisms for government, private sector industry organizations and technical experts to work together, to assess SME disaster resilience needs on a sectoral basis and potentially develop tailored all-hazard BCM approaches by industry.

4. Support SMEs to develop area, cluster, and enterprise level BCPs, through direct training support and tools, as well as incentives such as tax deductions, or preferential terms of loans and insurance for enterprises with BCPs.


TOwARdS A ROAd MAP fOR SME diSASTER RESiLiENCE 41

Disaster prevention and climate change adaptation - reducing underlying risk

1. Conduct awareness-raising and natural hazard risk mapping at provincial, city and local levels, to provide the necessary technical data for (a) enterprise and area BCPs, and (b) improved local land use planning regulation, focusing initially on the localities already known to be at high risk, and where there are concentrations of exposed and vulnerable SMEs.

2. Undertake climate change awareness-raising and specific risk mapping to develop technical advice for SMEs by province and area as to the projected effects of climate change. This could focus on enterprises in coastal cities and river deltas, as well as on agricultural production, and include advice and training on enterprise-level adaptation measures. The mapping process would also form the basis for broader government policy on land use planning, for building climate-change-resilient infrastructure, and planning for specific mitigation infrastructure in high risk provinces, cities and areas.

Disaster Insurance and Risk Financing

Review the extent to which SMEs have taken up insurance or other risk financing mechanisms to help shield them from disaster losses and maintain business continuity, and consider what incentives or restructuring might be needed to increase disaster insurance cover and associated risk-based premiums.

Institutional cooperation mechanisms for response and recovery support

1. Consider how the formal planning processes of MPI and the financial institutions can better integrate support for SME disaster resilience as a cross-cutting issue within their main sectoral planning priorities and implementation strategies.

2. Institutionalize support for SME emergency response and initial recovery by mechanism such as engagement of SMEs in local disaster prevention and control mechanisms, including community based disaster risk reduction

3. Institutionalize SME disaster recovery support through mechanisms such as standard operating procedures (SOPs) for institutional cooperation.

Private Sector and SME Capacity

Consider ways in which Government institutions can both access existing private sector capacity and improve organizational structures for SMEs. For example:

1. strengthen emerging SME organizations, or the capacity of umbrella industry organizations to support SMEs, by providing funding or secretariat support, so that the government can more readily access SMEs own concerns, and as a means of strengthening SMEs capacity to raise awareness and offer tailored training and information for improved disaster resilience; and/or

2. work with large enterprises and industry cooperatives to address supply chain issues and economies of scale for SME implementation of BCM that includes disaster resilience.

A. Purpose

The survey aimed to gather information that would contribute to a deeper

understanding of the current state of disaster resilience amongst

SMEs in Viet Nam, to assess the status of the adoption of

Business Continuity Plans (BCP) amongst SMEs, and

to identify capacity gaps and training needs.

Aside from gathering information, the

survey is also a tool to encourage

ref lect ion and s e l f- a s s e s s m e n t

amongst the survey respondents about the

various risks they face, their preparedness plans,

and their current and intended future level of disaster resilience.

These survey findings, along with the policy review, are intended as key

inputs in the formulation of a national roadmap for strengthening SME resilience

and identification of good practices that will be shared in the Business Forum on Risk

Reduction and Resilience Building in April 2016.

Detailed Objectives:

Understand the SME resilience situation, including the status of business continuity planning (BCP) adoption, in Viet Nam

Identify the training needs and capacity gaps of SMEs in order to recommend an appropriate training program for them

Identify good practices and case studies that can be showcased as exemplars for use by other SMEs as benchmarks or models in disaster resilience

Provide inputs for the formulation of a national roadmap and policies for strengthening SME resilience

Encourage reflection and self-assessment among the survey respondents about the various risks they face, their preparedness plans, and their current and intended future level of disaster resilience

Provide information to the survey respondents who have completed the survey on where to find more resources related to disaster resilience and BCP for SMEs (the survey is also a kind of outreach activity)

SME Survey Methodology and Sample

Annex 1


ANNEx 43

B. Methodology

The survey was mainly carried out by a Vietnamese survey company named HTV training and consulting Co. Ltd. with the support of SME TAC- Ha Noi. Respondents were initially contacted through the network of country partner, TAC Hanoi, through their SME training courses, workshops, and their postal and email lists for SMEs. A total of 1250 surveys were distributed, and there were a total of 442 responses.

The survey respondents had four options or modes for participating in the survey, depending on their preference and the availability of internet connection:

MODE 1: Through E-mail - A soft-copy (Word file) of the questionnaire was emailed to survey respondents. They could answer the questionnaire and then return the completed questionnaire also through email, either to the National Consultant or to the national partner, TAC.

MODE 2: Through Survey Monkey - For survey respondents with a fast internet connection, they could complete the questionnaire via Survey Monkey. The responses were automatically recorded into a spread sheet.

MODE 3: Through the postal service - For survey respondents with no internet connection, a printed copy of the questionnaire was mailed to them then the answers were collected by TAC.

MODE 4: At Events - A printed copy of the questionnaire was handed out to participants in SME seminars, workshops, training courses, meetings, and other events organized by the national partner organizations. The survey respondents completed the questionnaire at the venue and submitted it to the event organizers then to the National Consultant.

The total number of respondents from all these sources was 442.

Survey period

The survey was carried out from October 1, 2015 to November 15, 2015.

Survey areas and sectors

The survey targeted SMEs from all sectors at a nationwide scale covering all three regions, the North, the Centre and the South. The following sectors participated in the survey.

Agriculture, forestry, and fishery

Industry and quarrying

Construction

Wholesale and retail trade

Transportation and storage

Food and accommodation services Food service activities

Information and communication

Financial and insurance activities

Real estate activities

Others

Questionnaires

The questionnaires were tailored to suit with the particular characteristic of Viet Nam but also kept a similar structure and content to the other country surveys.

The survey questions were grouped into seven parts.

The first set of questions sought basic information about the business operations of the respondents, such as type of the business, gender of owner, year of establishment, location, number of employees and value of assets. These questions made it possible to classify the respondents according to sector and enterprise size (i.e., micro, small, medium, or large). Then, there were questions about perceptions of risk exposure and actual disaster experiences. The intent was to identify which among the many potential natural and human-made hazards are of concern to SMEs, including those which have actually affected them in the past including the extent of damage and how they impacted their business. The next category of questions sought to assess the status of BCP adoption and implementation by respondents. The questions also solicited inputs from respondents on what government can do to promote BCP amongst SMEs. The last group of questions dealt with existing risk reduction measures, previous relevant training and current training needs. These provide additional information on the level of resilience of respondents and their capacity to mitigate impacts of future disasters.

A copy of the full survey questionnaire is available from ADPC iPrepare Business facility, upon request.


ANNEx 45

C. Characteristics of the survey respondents

There were 442 respondents from various sectors in the 3 geographical regions of Viet Nam. The respondents came from the 3 regions as follows: (i) from the North region, the provinces of Ha Noi, Ha Nam, Ninh Binh, Phu Tho, Thai Nguyen, Cao Bang and Tuyen Quang cities/provinces; (ii) from the Central region, the provinces of Thanh Hoa, Nghe An, Ha Tinh, Hue, Da Nang and Lam Dong cities/provinces; and (iii) from the South region, the provinces of Ho Chi Minh City, Binh Duong, Dong Nai, Vung Tau, Logn An, Tien Giang, Hau Giang, and Bac Lieu.

41% of respondents were from wholesale and retail trade, 17% were from construction, and ‘others’ accounted for 26% (this refers to companies that fit within more than one major sector, or whose business type is not listed). None of the remaining sectors accounted for more than 5% as shown in Figure 1 in Part 2 of this report.

The respondents came from the 3 regions as follows: (i) from the North region, which includes Ha Noi, Ha Nam, Ninh Binh, Phu Tho, Thai Nguyen, Cao Bang and Tuyen Quang cities/provinces; (ii) from the Central region, that includes Thanh Hoa, Nghe An, Ha Tinh, Hue, Da Nang and Lam Dong cities/provinces; and (iii) from the South region, that includes Ho Chi Minh City, Binh Duong, Dong Nai, Vung Tau, Logn An, Tien Giang, Hau Giang, and Bac Lieu provinces.

42% of the survey respondents were applying ISO 9001 for Quality Management, 7% were applying ISO 14001 for Environmental Management, and 3% were applying ISO 22301 for Business Continuity Management.

The survey respondent SMEs were established between 1960 and 2015, however, most of the respondents – 62% - were very young enterprises, set up between 2009 and 2015.

Figure A1 shows the survey results on gender of business owners. It can be seen that more than two thirds of the SME owners are men and less than one third are women, a large gender gap in business ownership. This may indicate a large gender imbalance in SME ownership, but the survey results represent a relatively small sample and need to be calibrated against national statistics. Currently there are no national statistics published on gender of SME owners.

Figure A1 Respondents according to gender of business owners

71 %Men

27 %Women

2 %Not defined

During the January 2016 mission the ADB international consultant (Dr Mary Picard), the

ADB national consultant for Viet Nam (Ms Tran Hoang Yen), and a representative

of the project country partner TAC-Hanoi (Ms Nguyen My Anh, Head of

Training Division), met with a range of organizations as part of the

project consultation.

These were:50

Government

TAC Hanoi, MPI (project partner)

Academy of Policy and Development (APD),

MPI

Agency for Enterprise Development, Ministry of

Planning and Investment (AED-MPI)

Disaster Management Center (DMC), Ministry of Agriculture and Rural

Development (MARD)

Central Institute for Economic Management (CIEM),

50 Note: The team was unable to arrange a meeting with the Vietnam Association of Small and Medium Enterprises (VINASME), established under MPI with industry-elected officials, during the January mission, due to their prior commitments.

Businesses and Industry Organizations51

Vietnam Chamber of Commerce and Industry (VCCI)

Hanoi Industry & Trade Association

SME Support Division, Military Bank of VietNam

International

Oxfam Viet Nam

World Vision Viet Nam

United Nations Development Program (UNDP)

51 Note: The team was unable to arrange a meeting with the Vietnam Association of Small and Medium Enterprises (VINASME), established under MPI with industry-elected officials, during the January mission, due to their prior commitments.

Organizations consulted during January 2016 Consultant Mission

Annex 2


This publication is an output of the regional project ‘’Strengthening the Disaster Resilience of Small and Medium Enterprises in Asia’’. The overall objective of the project is to build disaster-resilient capacities in SMEs in Indonesia, the Philippines, Thailand and Viet Nam by undertaking the following activities: 1) Identifying actions to strengthen resilience of SMEs; 2) Providing technical assistance in strengthening resilience to selected SMEs on a demand-driven basis; 3) Supporting governments in strengthening the enabling environment that promotes risk sensitive and informed investments by SMEs; 4) Facilitating knowledge sharing; 5) Up-scaling, leveraging and formalizing business resilience tools, platforms and initiatives.

National Partners

Indonesia • Ministry of Cooperatives and SMEs (MoCSME) • Indonesian National Board for Disaster Management (BNPB)

Philippines • Department of Trade and Industry (DTI) • National Disaster Risk Reduction and Management Council (NDRRMC)

Thailand • Office of Small and Medium Enterprises Promotion (OSMEP) • Department of Disaster Prevention and Mitigation (DDPM)

Viet Nam • The Ministry of Planning and Investment (MPI)• The Disaster Management Center (DMC)

Viet Nam - ADPC · enabling environment & opportunities viet nam strengthening disaster and climate...

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