According to figures released by the General Statistics Office (GSO), the opening four months of the year saw the number of newly-established enterprises fall, making up only 86.8% of the figure from the previous year.
April alone saw more than 4,000 firms temporarily suspend business, an increase of 68% from the previous month, while the number of firms being dissolved or poised to close rose to over 3,000. Overall, the reviewed period saw the number of enterprises suspend activities, dissolve, or initiate plans to dissolve increase to 42,000.
The main cause for the increase in the number of firms waiting for dissolution can be put down to slow growth in both the local and global economy due to the COVID-19 epidemic. This has caused a series of difficulties which have forced firms to be declared bankrupt or face severe financial challenges.
With regard to this situation, Nguyen Bich Lam, GSO general director, said that it the current goal of reaching 1 million new businesses in 2020 will likely prove extremely difficult.
According to Lam, although the number of enterprises reopening enjoyed a surge of 2.1%, this number remains far lower than in previous years. As such, if record growth rate of more than 138,000 is maintained then the year’s overall figure will stand at only 900,000.
Taking an optimistic view of the problem, Dr. Nguyen Minh Phong, an economic expert, stated that the COVID-19 pandemic is proving to a large challenge in the goal of establishing 1 million new businesses in 2020 as has been set out in Resolution No 10 of the Party Central Committee.
Despite this, there remains plenty of potential to carry out breakthrough policies in order to achieve this goal, with the country now being home to between 5 and 7 million individual business households, with many of them operating as small and medium-sized enterprises (SMEs).
With this in mind, the Ministry of Finance has asked the Government to submit new policies aimed at providing financial support to SMEs, as well as other newly-established enterprises from individual business households to the National Assembly to receive approval during their May session. This will see incentive policies on corporate income tax reduction and exemption introduced, for example, a two-year tax exemption for firms established from individual households and SMEs will be able to enjoy tax rates of 15 to 17%, Phong said.
Once these policies come into force, Phong is hopeful that there will be a breakthrough in terms of the number of newly-established businesses this year and in subsequent years.
Simultaneously, the restart of the economy will see many firms that had previously ceased operations to resume business.
“Although we are not sure yet, there are plenty of expectations, meaning that we will strive to achieve the set target of 1 million businesses. It is believed that there will be new breakthroughs ahead in 2021,” he said.
In the context of the period following the COVID-19, economic recovery requires a new mindset for both the State, businesses, and citizens in order to achieve the dual goal of curbing the epidemic to protect people’s health, whilst also restoring and developing the national economy in anticipation of fresh market fluctuations.
Most notably, there will be an emergence of many modern business methods on the basis of the platform economy and e-commerce, as well as other traditional non-contact connections.
In order for enterprises to restore operations and develop in a sustainable manner, they must review their objectives, targets, strategies, as well as business activities as a means of creating a secure base whilst establishing new supply chains to adapt themselves to the new normal.
Phong also underlined the necessity of intensifying investment in order to upgrade technological capabilities as a means of ensuring product quality and competitiveness in the new context whilst also outlining scenarios for different situations. With the COVID-19 forcing countries to take very extreme measures, businesses must now take measures and set up scenarios aimed at adapting themselves to the general situation, Phong emphasised.