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Economists doubt Vietnam will have 1 million businesses by 2020

VietNamNet Bridge - While government officials believe that the goal of developing 1 million businesses by 2020 is within reach, economists disagree.
VietNamNet Bridge - While government officials believe that the goal of developing 1 million businesses by 2020 is within reach, economists disagree.


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“Vietnam now has 600,000 businesses and has only two years ahead to implement the plan to have 1 million businesses. The plan may be unattainable,” said Nguyen Duc Thanh, director of the Vietnam Institute for Economic and Policy Research (VEPR).

VEPR, in its latest report about economic performance in the fourth quarter of 2018, pointed out many problems: the general inflation rate in Q4 fell but the core inflation continued rising, and the number of businesses that stopped operation increased significantly while the number of new jobs fell slightly.

In 2018, Vietnam had 131,275 newly set up businesses, a slight increase of 3.5 percent compared with 2017. The total registered capital was VND1.478 trillion, up by 14.1 percent, and the average capital per business was VND11.3 billion, up by 10.2 percent.

Meanwhile, 99,885 businesses halted their operation in the year, a sharp rise of 51 percent over 2017.

While the number of newly set up businesses in 2018 did not increase sharply, the number of dissolved businesses rose by 50 percent. If the government doesn’t help businesses cut production costs by simplifying administration procedures, the number of dissolved businesses will continue in 2019.

Thanh pointed out that while the number of newly set up businesses in 2018 did not increase sharply, the number of dissolved businesses rose by 50 percent. If the government doesn’t help businesses cut production costs by simplifying administration procedures, the number of dissolved businesses will continue in 2019.

He said the scale of small and medium enterprises (SMEs) has not expanded over the years. Meanwhile, many enterprises want to stay small to be able to enjoy investment incentives.

According to Thanh, Vietnamese want to do business but do not want to go through business registration because of complicated procedures and bureaucracy.

National Assembly deputies at the latest session held in October 2018 discussed the plan for 1 million businesses by 2020.

Tran Van Tien, a member of the National Assembly’s Economics Committee, after citing statistics about the number of newly set up and dissolved businesses in the first nine months of 2018, concluded that for every 100 newly set up businesses or businesses resuming operation, 77 businesses stopped operation or were dissolved. This raised concern that the goal of obtaining 1 million businesses by 2020 was unreachable. 

Vu Tien Loc, chair of the Vietnam Chamber of Commerce and Industry (VCCI,) said the growth in the number of newly set up businesses is slowing down, and that 5 million business households do not want to register to become legal entities, though they make up 30 percent of GDP.


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