IT usage for indirect exports by SMEs in Vietnam Ngo Quang Hung Vietnam

Agenda  Vietnamese Enterprises: a Snapshot  IT for Indirect Export by SMEs  Case study: the Textile and Apparel Industry  Case study: the Tourism Industry

Part 1: Enterprises in Vietnam: a snapshot

Vietnam economic sectors

Enterprises in Vietnam, a snapshot

SMEs in Vietnam  Boom after the Enterprise Law was issued in 1999  SMEs as specified in Government Decree No.91/2001/CP-ND  registered capital = < VND 10 billion (USD 650,000) or  annual average number of employees =< 300 people  As of 2003: 132,000 SMEs, accounting for 96% of enterprises in Vietnam

SMEs share of Vietnam economy:

Part 2: IT for indirect export of SMEs

SME and IT applications  60%-70% of SMEs have no fax machines nor computers  Of the SMEs that have Internet connection, 48% use it only for ing and 33% for non- business purposes.  By 2004, 5000 enterprises have their own websites  < 50% of websites owners are SMEs

SMEs and export activities  Export revenue accounts for 16% of total sales of SMEs  14% of SMEs engage in export activities (both direct and indirect)  Low production capacity and limited access to foreign market -> mostly export through indirect channel, in partnership with large enterprises -> in some cases, SMEs form a horizontal cluster

Industries with substantial indirect export elements  Textile and garment  Footware  Handicrafts  Agriculture products  Electronic goods  Cars and automobiles  Tourism

Part 3: The textile and garment industry

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

Characteristics of the industry  Highly fragmented YarnFabricGarment Accessories & other State-owned Private FDI & joint venture Total  A few major enterprises ( ) dominate the textile export market  Significant technology gap between large corporations and SMEs

IT usage for export  Low use of IT in vertical integration of the supply chain  Low use of IT to promote export  Exhibitions and missions are main channels to establish business relations, the Internet is scarcely used to this end  Decentralized efforts by individual companies to tap export markets

IT usage for export (cont)  A national portal for textile and apparel transactions is under construction by the Vietnam Textile and Apparel Association (VITAS), Scheduled to be up and running by the end of 2004, for pilot test with 20 major enterprises Scheduled to be up and running by the end of 2004, for pilot test with 20 major enterprises Scheduled to be in full operation by 2006, with participation of all VITAS members Scheduled to be in full operation by 2006, with participation of all VITAS members

Problems for SMEs in introducing and utilizing IT  High cost of IT applications vs. tight profit margin of the textile industry and low capital flows of SMEs.  Lack of skills and limited training budget  Lack of awareness of the benefits IT would bring  Lack of an appropriate business model to efficiently utilize IT in supply chain management

Part 4: The tourism Industry

The industry: some statistics Number of tourist enterprises Number of hotels and dwelling establishments Turnover of services (Billion VND) 1,6791,5691,9752,272 - Room for rent Travel, transportation Other services Turnover of alimentation (Billion VND) Others (Billion VND)

Case:

Portion of SMEs in the hotel network CityTotalSMEs% Hochiminh Ha Noi Nha Trang Hue Da Lat Vung Tau Ha Long Sapa - Lao Cai Can Tho Da Nang Hai Phong Chau Doc

Some characteristics of the cluster  89% members of the hotel network are SMEs,  Only 3% of these SMEs have their own websites  72% have computers  63% have Internet, mostly for ing  Major marketing channel: through travel agents  81% see bookingvietnam as the single place for their Internet presence.

 Most of the small and medium hotels already have computers and use them for business purposes  Limited use of IT to generate direct export  Increasing role of IT in communication with the travel agents -> facilitate business transactions  IT application as the base of SMEs cluster -> broaden clients’ choice, improve competitiveness of the industry, and facilitate export of SMEs IT usage by SMEs in the cluster

IT usage in booking procedure Client/Agent Booking Vietnam Client/Agent's booking request is sent to Booking Vietnam via BookingVietnam.com Booking Cart, BookingVietnam sends to the Client/Agent a service agreement. The Client/Agent signs the service agreement and sends to BookingVietnam via or fax a copy of the service agreement and a copy of the bank receipt that proves the deposit has been executed. Upon all required documents are received by BookingVietnam, BookingVietnam sends to the Client/Agent a confirmation via or fax BookingVietnam then s or fax the booking form to the member hotel Member hotel confirms with Booking Vietnam (by phone, fax, s) Member Hotel

Problems for SMEs in utilizing IT  Technology involved: not complicated and available at affordable price  Space for improvement: use of IT for full integration of business transactions Automatic feedback system between the hotel and bookingvietnam Automatic feedback system between the hotel and bookingvietnam Introduction of EDI form to transmit booking details from bookingvietnam to the hotel Introduction of EDI form to transmit booking details from bookingvietnam to the hotel Integration of the online transmitted form and the internal room management system Integration of the online transmitted form and the internal room management system

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