Vietnam - Company closures reach almost 50,000

The number of non-viable enterprises has increased sharply in 2011, due to macro-economic difficulties that have strained production and business, said experts.

According to the General Department of Taxation, the number of enterprises that dissolved, shut down or went bankrupt so far this year surged 22 per cent to 48,800 units, while the number of newly-established enterprises reached 63,920.

Nguyen Van Trung, Deputy Minister of Planning and Investment, said the number of dead enterprises had risen suddenly over the past 20 years, especially in Hanoi and Ho Chi Minh City .

In Hanoi this year, 14,500 new enterprises have been created and 3,000 have been dissolved, or have halted operations and have been awaiting bankruptcy, said Nguyen Van Tu, deputy director of the Hanoi Department of Planning and Investment.

The number of dead enterprises in fact was even higher than estimated by the department, at 4,000-5,000 units, Tu said.

The number of dead enterprises increased by six to seven times against previous years, which was a warning for the government, he said. The government and ministries should have solutions for the existing difficulties of enterprises.

In Ho Chi Minh City, there were 20,000 new enterprises and 1,663 enterprises in serious financial trouble, said a representative of the Ho Chi Minh City Department of Planning and Investment.

The representative said enterprises were struggling due to high input costs, high interest rates of loans and immovable stockpiles of industrial goods.

Economist Cao Ba Khoat, former member of the government task force on Enterprise Law implementation, said the high number of the dead enterprises reflected the fact that the domestic economy was still ailing. He said enterprises had faced challenges since 2008 and their operations had become progressively worse each year.

The enterprises lacked capital and, even if they got bank loans, they could not pay them off because of high interest rates, Khoat said. The high land use tax caused additional pressure, and the government's involvement in production and business for domestic enterprises was limited.

However, many other economists said the high number of dead enterprises in the first 10 months was normal, weeding out businesses with weakness in capital, competitiveness and management from the market.

VIR/VNA

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