What’s behind the high number of dissolved businesses?
The barriers that exist in state management as well as high operation costs have contributed to the high number of dissolved businesses.
 |
|
GSO reported that 153,100 businesses were established in the first 11 months |
Meanwhile, 83,108 businesses suspended their operation during the same time, an increase of 49.3% over the same period last year. The number of enterprises completing the procedures for dissolution in the first 11 months was 14,861, increasing by 37.4%.
The high proportion of unprofitable businesses has raised a concern that the business environment is not good enough, and that the goal of having 1 million businesses by 2020 may be unattainable.
State management agencies all affirmed that there is no need to be worried about the increase in the number of dissolved businesses, and that the figures were small compared with New Zealand, where the number of bankrupt businesses amounts to 80%, and the UK with 60%.
They also pointed out that most dissolved businesses are small or micro which do not have experience and financial capability to survive the fierce competition in the market.
Cao Sy Kiem, former governor of the State Bank, now chair of the Vietnam Association of Small & Medium Enterprises, agreed that most Vietnam’s businesses are small and weak at technology, productivity and corporate governance.
As Vietnam has been integrating more deeply into the global economy, the weak points have become more critical. That is why the number of dissolved enterprises is on the rise.
However, he pointed out that the barriers in the business environment also contribute to the closure of businesses.
Vietnam’s businesses are small, but the burdens on their shoulders are heavy. The fact that the Ministry of Finance (MOF) tried to increase the revenue for the State budget partially explains why businesses’ costs have been increasing .
Meanwhile, economists commented that the efforts by MOF to increase revenue from tax collection cannot help ease the state budget deficit because of the state apparatus, which is getting excessively large.
The business costs include official and under-the-table costs. Of official costs, the expenses on logistics services are the biggest item.
A VCCI survey found that the cost to carry one container of goods from Hai Phong Port to Hanoi (100 kilometers) is 3 times higher than the cost to carry one container from China or the Republic of Korea to Vietnam.
All ministries said they have cut certain numbers of required business conditions in an effort to accelerate the administration procedure reform.
However, economists have pointed out that in many cases, the removed licenses have been replaced by new regulations which are even stricter and more difficult to be satisfied.