Vietnam - Business registrations head south

Industry insiders are worried over a sharp decline in new businesses in 2012.

In January 2012, just 4,117 new businesses were registered to set up with around 18.2 trillion ($866.6 million) total registered capital, down 36 per cent in number and 56 per cent in capital amount against the same period in 2011, according to a Ministry of Planning and Investment (MPI) recent report.

The MPI attributed sharply sliding new businesses to a cold climate for firms’ production and trading activities on the back of flat world economic performance which had detrimentally affected Vietnam’s export market and financial market, a mainstream capital raising channel to firms.

“Besides, enforcement of tight fiscal policies to tame inflation has also hindered firms from getting loans. These are key reasons behind shrinking new businesses and augmenting numbers of firms going dismantled or having to shut up shop,” the report read.

Senior economic expert Hoang Xuan Quyen, however, held a different view.

Quyen assumed new firms’ retreating numbers caused no surprise to economists when the world and local economies were in the doldrums with stagnant production, soaring lending rates and unemployment, and sagging demands.

“Newly established firms factor is just a raw indicator. The quality of firms is more important,” said Quyen, adding that propitious macro-economy often entails a boom in the number of new firms parallel to risks associated with firms’ losses and bankruptcies. This was evidenced by booming presence of property and securities firms in some recent years and their current negative business performance.

“From other angle, declining new businesses reflects firms’ cautious attitudes when the business climate is full of risks with shaky profits. This is deemed by some economists as a necessary correction and a ‘positive’ prudence,” Quyen asserted.

vir.com.vn

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