Small and medium enterprises (SMEs) in Vietnam need to improve their legal understanding so that they can improve their response to problems, an industry insider says.

Le Anh Van, Deputy Director of the Centre for Legal Assistance and Human Resource Development under the Vietnam SMEs Association, said at a recent conference that this would increase the competitiveness of Vietnamese enterprises.

Van said that the number of enterprises in the country surged sharply after the introduction of the Enterprise Law in 2005 but their quality and competitiveness were still poor, partly because of insufficient legal understanding and low management skills.

At present, SMEs account for over 95 percent of total enterprises in Vietnam. Most of them are family run and over 97 percent of SMEs don't have staff specialising in legal matters or take lawyers' advice regularly.

They usually ask for legal advice only when they get involved in lawsuits or conflicts, Van said, adding that in such cases, the enterprise owners were very worried and confused.

He said that because of limited legal understanding, Vietnamese enterprises usually felt less confident in negotiating international trade contracts and this sometimes ended up in accepting unfavourable conditions for themselves.

There were also cases where Vietnamese enterprises suffered losses or breached contracts because they did not know the basic principles of who can sign contracts to make them legal.

"It's time to add more conditions for people who want to become a company director or legal representative of a company," Van said, adding that such candidates must be required to undergo a company management training course or a course on the Enterprise Law.

Lecturer Phan Thi Thanh Thuy of the Hanoi National University's Law Department said many enterprises did not pay proper attention to legal advice and legal information. This exposed them to higher risks, especially as Vietnam integrates deeper with the international economy, she said.

For example, a company that creates a new model of its product but does not register its intellectual property with authorised agencies faced the risk of having it stolen by other companies, she said.

Lawyer Pham Hong Hai, who is also an assistant professor, said that although Vietnam had policies encouraging co-operation between lawyers and entrepreneurs, this was yet to happen.

Meanwhile, in many countries, most enterprises consulted regularly with lawyers or law firms, as did foreign companies operating in Vietnam, he noted.

He said that it was necessary to raise awareness of enterprises about the role of lawyers and the value of their advice.

Moreover, the bar should more actively join legal aid programmes for enterprises and advocate for the establishment of legal aid funds in cities and provinces to strengthen connections between entrepreneurs and lawyers, he said.-VNA