State Versus Market: The Paradox of Vietnam’s experience with SMEs

Vietnam has been pursuing economic reforms to support the marketization process and the development of SMEs. This paper examines the extent to which Vietnam’s policies effectively support the development of market principles for the growth of SMEs. This paper also assesses issues affecting the sustainability of the measures taken by the government under its Doi Moi policy. The methodology entailed a qualitative interview field approach, applying a conceptual framework of ‘enabling’ and ‘hindering’ factors relating to the evolving relationship between the state and the market, and the impact of the factors on SME development. The findings indicate that in the context of Vietnam’s move towards a market economy, where defective market factors and inadequate institutional support mechanisms are evident, it is vital that the state pursues a more entrepreneurial role. Such a role, with adequate support policies and measures, is required to facilitate the development of SMEs. It is also found that the informal sector provided resources, such as social networks and private credit for the development of SMEs in the early stages of Vietnam’s journey towards a market economy. This informal support infrastructure still plays a key role.