Developing the growth and capabilities of small- and medium-sized enterprises (SMEs), which make up most of the business sector, is crucial for the country to create sustainable economic growth, experts said at a recent conference held in Ho Chi Minh City.

Pham Hoang Tien, Director of the Vietnam Chamber of Commerce and Industry's Small and Medium-sized Enterprises Support Centre, said the proportion of small and micro businesses in the country has increased significantly.

Of the more than 347,000 enterprises in the country, medium-size and large firms account for only 1.96 percent and 2.25 percent, respectively. The remaining 95-96 percent include micro and small enterprises.

The country lacks leading enterprises and a sufficient number of medium-sized firms, who are capable of using new technology and becoming partners of transnational corporations.

SMEs are generally at a disadvantage in production networks compared to large firms, Tien said, adding that the growth quality of the private sector has not been sustainable, and productivity and cost-effectiveness has not been high.

He attributed the problems to ineffective support policies for the private sector, unequal access to land and credit, and poor development of support industries.

Major international manufacturing firms assemble and produce relatively advanced products for the international market, but most local firms remain oriented towards the domestic market only, or export commodities with little added value.

The domestic private sector, mainly SMEs, account for the majority of firms and employment in the country, but their participation in global production networks through linkages with multinationals and direct exports has been limited, according to Dominic Mellor of the Asian Development Bank.

The percentage of Vietnamese enterprises in the global value chain production networks is relatively low compared to other similar sized ASEAN economies, he said.

Vietnam needs to create companies that can fill in the "missing middle" by serving larger export-focused foreign investors and working with smaller companies to develop an effective "pyramid" of companies.

He said that greater participation of Vietnam 's domestic private sector in global production networks through closer linkages with multinational companies and direct exports could be a potent means of accelerating technology transfer.

Tien said the country should restructure institutions to be transparent, as well as develop a policy framework to help SMEs access land, credit and markets.

It is also necessary to develop a policy on support industry development that creates favourable conditions for the private sector to enable SMEs to be involved in that industry, he noted.

Many of the conference delegates said the Government should consider providing long-term loans to enterprises and build a training centre to train managers and workers.

Dang Duc Thanh, Deputy Chairman of the HCM City Union of Business Associations, said private companies should devise appropriate business strategies based on market research and upgrade their production technology.

They should also develop an advanced corporate managerial force as well as skilful human resources. The private sector will continue to be the major driver behind Vietnam 's economic development in the future.