VietNamNet Bridge – Nguyen Van Cong, Deputy Head of the Economics Faculty under the National Economics University, explained to the Khoa hoc & Doi song (Science & Life) newspaper why so many Vietnamese enterprises declared bankruptcy in the first quarter of 2016.

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How do you respond to the report that in the first quarter of 2016, 22,044 enterprises stopped operating – an increase of 23.9 per cent compared to the same period last year?

I would say that the number 22,044 for enterprises that stopped operating or declared bankruptcy in the first three months of 2016 was a big number. But to find the key reason leading to such a problem, we must conduct some in-depth research to determine the causes. By reading that figure, I’m sure many people would feel shocked, including me. But we have to accept a naked truth that in a market economy, it is unavoidable that weak enterprises die out.

However, for the Ministry of Planning and Investment and the General Statistics Organisation, it is no surprise that such a high number of enterprises shut down in the first quarter of 2016. Do you support their argument?

As I have mentioned above, the premature death or bankruptcy of many enterprises is a normal phenomenon in the market economy. Competition is an important driving motivation in a market economy. Operating in this environment, all enterprises must regularly reform their market strategies, cut down their production costs and improve their products’ quality.

However, the number of more than 22,000 enterprises that either declared their devolvement or bankruptcy in three months is a big number. It raises a red flag for policy makers.

Do you think that one of the factors leading to the high number of shuttered enterprises is the tough business environment facing Vietnamese enterprises?

I would say since 2008 up to now, most Vietnamese enterprises have acknowledged the fact that they have been facing many difficulties and challenges in their businesses due to the world economic crisis and an unfavourable business environment.

Other causes, including corruption and cumbersome administrative procedures, have become major stumbling blocks for enterprises in the course of their business development.

A recent Viet Nam Report shows that many small and medium enterprises have to spend up to 10 per cent of their revenue (bribery money) to fortify their business.

The report also says that these “under-the-table envelopes” have become a major stumbling block for many Vietnamese small or micro enterprises.

Do you think that fees or charges have weakened Vietnamese enterprises?

In 2015, the price of crude oil dropped considerably, but many Vietnamese enterprises have complained that they have not benefitted much from such a price drop.

However, from the government’s perspective, due to the steep drop of the price of crude oil internationally, it has to find ways to increase fees or charges against petrol and diesel in the domestic market to compensate for the losses in crude oil revenue.

For transport enterprises, most of them refused to reduce their fares in due proportion with the drop of petrol/diesel prices.

This prevented Vietnamese enterprise from growing in a harsh economic environment.

Do you think that when State-owned enterprises play a dominant role in the national economy, other economic entities will become their shadow?

I have to admit that State-owned enterprises (SOEs) have not been operating effectively. Yet, they have received quite a few priorities from the government compared with the private sector. To create a level playing field, in my opinion, the government should give equal treatment to all economic sectors, be it public or private.

In the meantime, the government should also speed up the process of equitising SOEs.

In 2015, the government issued Resolution 19 focusing on administrative reform and improving the business environment, particularly the slashing of taxes, charges and tariffs. But why do taxes, fees and tariffs keep going up?

I would say that Resolution 19 is a good document. It offers many advantages to Vietnamese enterprises in the course of their business development. However, it must take time to turn everything in the document into a reality.

In real life, there is always a gap between what’s written in the laws or policy and the real situation. Many policies are good on paper, but their beneficiaries – the enterprises and people - do not fully benefit from them. Why? The implementation of these polices does not strictly adhere to the letter of the law.

So in my opinion, it is the task of the new government to do its best to lift any barriers that arise during the course of national economic development while promoting business production for all enterprises, be it State-owned enterprises or private enterprises.

VNS