Vietnam - Firms pushed back against the wall

Businesses continue to run into head winds with no sign of the economic storm easing.

>> Bankruptcy looms large for firms

According to Ministry of Planning and Investment’s (MPI) Business Registration Management Department, businesses registered for dissolving nearly doubled in February 2012 against March (1,001 against 663 firms).

The department admitted for the first time since the Enterprise Law came into force in 1999, firms dissolving sharply hiked in 2012 against previous years.

In 2011, 7,611 businesses were registered to go bust whereas 53,792 were categorised in the group of those having to temporarily cease operations or delay tax payments.

However, these figures were just regarded as the tip of the iceberg. In fact, many firms did not report on their going out of business to relevant state agencies.

Ho Chi Minh City Handicraft and Wood Industry Association (HAWA) deputy chairman Tran Quoc Manh said: “That was why actual figures may outrun declared ones.”

Manh said HAWA member units having to temporarily halt operations kept growing in number on the back of constantly augmenting input costs.

“Banks are experiencing restructuring with stricter lending procedures. This made it tough for firms to get loans,” said Manh.

Vietnam Chamber of Commerce and Industry (VCCI) 2011 annual report on businesses released in mid-March 2012 showed that firms in surveyed fields including food processing, leather and footwear, logistics, tourism and motorised vehicles incurred big losses have increased from 2008 until present.

Accordingly, firms bogged down in losses in tourism sector mounted to 45 per cent in total while 46 per cent of firms manufacturing motorised vehicles were found underperformed in 2010.

VCCI’s general secretary Pham Thi Thu Hang pointed out escalating production costs and grey export and domestic market perspectives as main causes behind this poor scene.

“Firms expect revenue to contract, indicating possible high losses,” said Hang.

The Vietnam case is not unique as according to the Organisation for Economic Cooperation and Development (OECD) figures in its member countries the rate of new businesses survived after one year in operation was 80-85 per cent in services and 85-90 per cent in manufacturing fields in 2011. In the UK, just 70 per cent of firms remained alive after three years in operation while in the US, less than 50 per cent of firms kept on running after five years in existence.

Khanh An | vir.com.vn

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