In the East Asian economies, the definition of an SME differs greatly depending on the phase and level of development. They also use different indices like the number of employees, invested capital, sales volume and production capability to define an SME. Although popular, the prevalence of SMEs in Vietnam remains focused in the range of business they are involved in unlike the case of Japan whose SMEs are an integral part of in various economic sectors from manufacturing to retail and have an economic impact to the whole economy. In comparison, while Japan’s SMEs manufacturing shipments account for 51% of total value of manufactured shipments, the percentage is very small in Vietnam as they are not active in the manufacturing sector. Despite a large number of companies, Vietnam’s SME sector plays a moderate role in the service sectors and in commerce as compared to Japan (Khang T. 2010).
Employment and profitability. The SMEs have contributed greatly to employment in both of the two countries although in different proportions. Because the population of Japan is higher at 126 million compared to that of Vietnam at 76.5 million, there’s a higher number of Japanese who are employed in the SMEs than the Vietnamese. Japan’s export as a percentage of GDP stood at 12% while that of Vietnam is 7%; this means that SMEs had a total share of 13.5% of exports in Japan while that of Vietnam stood at 20%. Partly, this is due to the fact that some Japan’s SMEs are located outside the country especially in East Asia especially to China.
In the employment sector, there is a greater percentage of Vietnamese who are directly involved in the SMEs than is in Japan as 85% workforce are employed by the SMEs compared to77.6% in Japan. But from definition, Japan has a broader definition of an SME than in the case of Vietnam as Japan is involved in mining, manufacturing, transportation and in construction with each SME having less than 300 employees while in Vietnam they are involved in manufacturing and non-manufacturing each having less than 30 employees.
The relative importance of SMEs in Japan and Vietnam also differs greatly, like the average GDP growth for Japan between the years 1992-1999 was 1.0% while that of Vietnam was 7.5% and this represented 10.4% of all the exports in Japan as compared to a 40% in Vietnam. The number of SMEs is very high in Japan with an average of 6.45million compared to only 14,000 enterprises in Vietnam indicating that Japan is more advanced in its SMEs than Vietnam and this makes a whooping 98.8% of all enterprises in Japan whilst it is 83% in Vietnam (Harvie C. & Lee B. 2002).
Therefore it is just clear that SMEs do create a higher percentage of employment (more than 70%) in the two countries. In the last five years for example, almost all the jobs created in Vietnam were in the SMEs, while in Japan the job destroyers were the large firms as they always downsize.