Vietnam - What's behind the 6700 dead businesses?

Sixty eight new businesses get the "certificates of birth" every day in HCM City, while 74 businesses reportedly stop operation every day in the city.

The reports about the situation of businesses have been updated every day with the figures of the businesses that get dissolved, bankrupted or stop operation in the whole country and every locality.

Le Manh Ha, deputy Chair of the HCM City People's Committee once asked competent agencies to analyse the figures about the dead businesses

to find out the reasons behind the deaths.

However, to date, no agency has provided a detailed analyses.

More dead than newly born businesses

The HCM City Planning and Investment Department has reported that 7,500 businesses in the city had been set up by April 19, 2012. Though the number of newly set up businesses increased by 1.2 percent only, the investment capital registered by the businesses increased by 19 percent in comparison with the same period of the last year. Sixty eight businesses are established every day.

Meanwhile, the HCM City Taxation Agency reported that 6,700 businesses declared their operation suspension in the first quarter of the year. This means that 74 businesses stop operation a day.

Analysts said that if comparing this year's figures with last year's figures (69 businesses born and 81 businesses dead a day), the current situation seems to be more optimistic.

In 2011, nearly 25,100 enterprises registered their business at the HCM City Planning and Investment Department, while the city's taxation body reported the operation suspension of 29,600 enterprises.

Which businesses left the market?

According to Nguyen Trong Hanh, deputy Head of the HCM City Taxation Agency, though there has been no official analysis about the businesses that have left the market, it's obvious that most of the dead businesses were the ones operating in the real estate sector or property relating fields. As a result of the policy on tightening the public investment and the policy on tightening the lending to real estate developers, a lot of property firms have become jobless.

Meanwhile, relating careers such as real estate brokerage, design consultancy, project execution services have also suffered. Especially, construction material manufacturers and interior decoration material suppliers have also complained that the sales have been going very slowly.

Why did they die?

State management agencies have requested economists to analyse the figures in order to have better assessments about the national economy and lay down reasonable support policies. What management agencies can find in the death of big long lasting enterprises would be quite different from what they can see in the death of newly set up or small businesses.

In principle, when some businesses leave the market, they would leave the market share to the existing businesses, which can be reflected in the increases of branches of enterprises.

There's a noteworthy thing - that though the number of businesses does not increase significantly, the number of branches has increased rapidly. By April 19, businesses in HCM City had cut down 850 branches, but 1800 new branches had been established.

More than 800 new business locations had been set up for every 200 eliminated businesses locations, an increase of 64 percent over the same period of the last year.

The Business Registration Management Department under the Ministry of Planning and Investment has affirmed that the establishment of every new business shows the competitiveness of enterprises, and that the more businesses are born, the stiffer the competition in the fields gets.

The ministry has also affirmed that the opening of new branches show the high confidence in the market and their good business performance.

VietNamNet

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