Vietnam targets 1 million businesses by 2020, but will they survive?
Vietnam is expected to have 1 million businesses by 2020 as targeted by the government, but economists warn that companies won’t be able to grow in a stifling business environment.
Both Hanoi and HCM City would have 500,000 businesses each by that time. About 525,000 businesses were registered with taxation bodies by May 2016.
Some analysts doubt that the goal in four years can be reached.
There are 280,000 businesses in HCM City. Official reports show that 16,800 new businesses were set up from early 2016 to June 15 and 11,700 businesses stopped operation. This means that seven out of every 10 newly set up businesses stopped their operation in the first six months of the year.
In Hanoi, 10,800 new businesses had been set up by June 21. The number of businesses which have stopped operation has not been made public.
Therefore, analysts have reasons to question how Vietnam can reach 1 million businesses if the majority of new businesses die.
However, the general director of the General Statistics Office Nguyen Bich Lam said that business dissolution is normal in a market economy.
He also noted that most of the dissolved businesses were tiny ones. “93.1 percent of the dissolved businesses had capital of less than VND10 billion,” he said.
Commenting about the scale of newly set up businesses, Vo Tri Thanh, deputy head of the Central Institute of Economic Management (CIEM) said Vietnamese businesses tend to be smaller, and therefore, would find it difficult to catch up with the pace of modernization and industrialization.
Le Duy Binh, director of Economica, a consultancy firm, said that the number of private businesses in Vietnam is 112 times higher than the number of state-owned enterprises and foreign invested enterprises. But the productivity of the SOE and foreign invested companies are half and 1/5 of private businesses, respectively, while the profit is less than half.
Binh said that the target of having 1 million businesses was attainable. The proof is that in 2005-2013 alone, i.e within eight years, 600,000 businesses were registered.
However, he noted that of 600,000 registered businesses, only 273,000 have become operational, or 45 percent.
“This shows a big gap between the number of registered and operational businesses which needs to be narrowed,” he commented.
At least 2.32 percent of private businesses are large-sized, 1.36 percent area medium, 38.8 percent are small and 57.5 percent are micro businesses.