According to the agency, the number of businesses which dissolved or halted operation has been updated on the national business registration information system. The updated figures showed that in the first two months of 2012 alone, the number of dissolved businesses was double that of January (1001 vs. 663).
The officials of the agency say that this is the first time, since the day the 1999 Enterprise Law took effect, the number of businesses which get dissolved or halt operation increased so sharply.
However, the figure does not surprise anyone, because it truly reflects the difficulties businesses have been facing since 2011. If comparing with the number of 7611 dissolved businesses in 2011 shown on the national business registration information system, one would see that the speed of businesses leaving the market has been increasing considerably.
Especially, the officials have pointed out that many of the businesses which are listed as “halting operation” or “stopping fulfilling tax duties in 2011” (53,792 businesses, up by 24.8 percent in comparison with 2010) would be dissolved.
Meanwhile, opinions from well informed circles said that the released figures are just the “tip of the iceberg,” while the real number of dissolved businesses is much higher. Tran Quoc Manh, Deputy Chair of the HCM City Association of Fine Art Wooden Furniture, said that many enterprises have got dissolved, but they have not declared their deaths. As a result, they have been listed among the group of “halting operation temporarily.”
Manh said that the number of association’s members halting operation has been increasing steadily, because of the increasing input material prices, the narrowed export markets and the inability to access bank loans. Meanwhile, commercial banks themselves have to experience a restructure process themselves; therefore, they tend to set up stricter conditions on borrowers.
The annual business report 2011 released by the Vietnam Chamber of Commerce and Industry (VCCI) showed that the percentage of unprofitable businesses in the surveyed business fields (food processing, footwear, logistics, tourism and motor vehicles) has been increasing continuously since 2008.
In the 2010’s report (there has not been 2011 report yet), the figure in the tourism sector reached 45 percent, motor vehicle manufacturing 46 percent.
According to Pham Thi Thu Hang, Secretary General of VCCI, head of the research team, this has been attributed to the overly high production costs and the gloomy prospects of the export market. Businesses think the ratio of profit on a unit of production would be minus, even though the turnover is expected to be positive. There’s still a high possibility of businesses taking losses.
Hang went on to say that a lot of enterprises have not shut down, but they have to halt operation of some units in order to maintain operation at the minimum levels.
Commenting about the percentage of dissolved businesses, economists say that the figure is not too high if comparing with other countries in the world. An OECD’s report showed that in 2011, 80-85 percent of businesses in the service sector could survive after one year of operation, while the figure was 85-90 percent in the production sector.
In the UK, only 70 percent of businesses can keep operation after three years, while in the US, less than 50 percent of businesses can survive after five years of operation.
Source: TBKTSG
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