The shortage of long-term capital coupled with low competitiveness should be blamed for the rising number of firms going bankrupt and temporarily halting operations in the first quarter of 2016.

A bike assembly factory.

According to Tran Hoang Ngan, a member of Ho Chi Minh City National Assembly Delegation, there were increases in new firms and shut-downs, reflecting a trend of firms being founded for seasonal business rather than for long-term investment.

The General Statistics Office (GSO) revealed that the number of firms closing down reached more than 2,900 in the first quarter of this year, representing a rise of 13.8 per cent over the same period last year. Of note, 93 per cent of them were small enterprises with registered capital below 10 billion VND (446,500 USD).

Struggling firms that were forced to temporarily halt operations in the quarter totaled more than 20,000, rising by 23.9 percent against the same period.

The shortage of long-term stable capital makes it difficult for firms to survive for long periods, according to Ngan.

He pointed out that many firms did not dare to invest in technology and equipment due to the shortage of capital and unstable borrowing interest rates.

“Interest rates must be kept stable. If rates rise, firms will barely survive,” he said.

Cao Si Kiem, President of the Vietnam Association of Small and Medium Sized Enterprises, said it was important to improve the health of businesses with strengths based on technology and high-quality resources.

Kiem said local firms must reduce their dependence on imported raw materials while paying attention to improving their technology and quality of human resources to enhance their competitiveness in this era of rapid global integration.

On the plus side, in the first quarter of this year, more than 23,700 firms were founded with total registered capital of VNĐ186 trillion, a rise of 24.8 percent and 67.2 percent over the same period last year, respectively.

VNA