More favourable institutional conditions is needed for small and medium-sized enterprises (SMEs) to strengthen their engagement in global production chain, said Director of the Vietnam Chamber of Trade and Commerce (VCCI) Vu Tien Loc.

Loc noted that currently, large- and medium-sized firms account for only about 2 percent each of the total enterprises in Vietnam, while the rest 96 percent are small and super small ones, which cannot compete on the international market.

As a result, the involvement of Vietnamese firms in global production chains remains far below those from Southeast Asian countries, said Loc, adding that only 36 percent of Vietnamese firms join the chains, while that of Malaysia is 60 percent. The rate is only 21 percent among Vietnam’s SMEs, while that in Thailand is 30 percent and Malaysia, 46 percent, he noted.

The VCCI leader attributed the situation to ineffective market support policies, leading to limited access of the private sector to resources.

At the same time, internal capacity of domestic enterprises remains low, with poor human resources quality, thus gaining low trust of foreign partners, said Loc.

However, he asserted that there is still hope of growth opportunities for domestic firms, as the country’s FDI attraction and exports remain high.

He noted that Vietnam has attracted several electronic giants, including Samsung, LG and Panasonic. In 2013, electronics exports reached about 32.2 billion USD, he said, adding that while it would be difficult for domestic firms to become direct suppliers for major producers, there are opportunities in providing services and cooperating with first and second tier suppliers in the electronic industry.

In order to boost the involvement of SMEs in global production chains, Loc suggested that it is necessary to consider the building of a law on SMEs support as well as a legal framework to assist small and super small firms to grow into medium and big ones by broadening their markets.

Meanwhile, along with encouraging FDI sector, stronger investment should be poured into the private sector, focusing on human resources, science and technology, and finance.

Besides, it is necessary to improve the effectiveness of the fund for SMEs development, so as to provide long-term and preferential loans to private firms.

Loc also emphasised the need for enterprises themselves to enhance their competitiveness by renovating technology and cutting cost, while building their own human resources.-VNA