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What does ‘tens of thousands of businesses dying’ really mean?

VietNamNet Bridge - More than 20,000 businesses were dissolved or stopped operation within one quarter. 
VietNamNet Bridge - More than 20,000 businesses were dissolved or stopped operation within one quarter. 


Businesses are also burdened by a lot of conditions set by ministries and branches, or ‘sub-licenses’.

“Local newspapers show the numbers of dissolved businesses, but they do not give in-depth analyses on the numbers,” said Nguyen Dinh Cung, head of the Central Institute of Economic Management (CIEM). “Why has the figure increased so sharply?”

According to Cung, 2007-2011 was the period when the national economy had serious difficulties. However, the number of dissolved businesses in the period was just 15-20 percent of the number of newly set up businesses.

Meanwhile, the latest report by the General Statistics Office (GSO) showed that in the first quarter of 2016 alone, 20,000 businesses dissolved or halted operation, increasing by 23.9 percent over the last year’s same period. 

The figure was a bit lower than the number of newly set up businesses – 23,767. As such, the number of dissolved businesses was equal to 84 percent of newly set up ones.

“I have heard some people say business dissolution is a normal thing in the market economy. But I believe that the high number is not ‘normal’,” Cung said.

The economist believes that businesses have died en masse because of production cost increases and revenue decreases.  If enterprises could perform well and make profit, they would not give up business.

More than 20,000 businesses were dissolved or stopped operation within one quarter. 
Bank loan interest rates, labor costs (insurance premium, trade union fee), taxes of different kinds (excise, environment tax), and transport costs (road and highway toll) all have also increased.

Heavy taxes, high fees, sub-licenses burden businesses

“I cannot see any fee or tax decrease which could encourage the production and business to facilitate businesses’ development,” Cung commented, adding that the budget deficit and overspending have forced the Ministry of Finance to try to collect all kinds of taxes and fees so as to increase the budget revenue.

“Some new fee items, which did not exist in the past, have appeared,” he said. “This has blocked the progress made by the Enterprise Law, Investment Law and the openness of the government’s Resolution No 19”.

“Meanwhile, it now should be the time to nurture, support and create a ‘start-up spirit. The policies should be designed in a way to help improve domestic businesses’ capability,” he said. 

Businesses are also burdened by a lot of conditions set by ministries and branches, or ‘sub-licenses’.

“There are still 267 conditional business fields. The figure is too high for a market economy,” Cung commented. 

“This impedes creativity and the diversification of products and services,” he said, adding that it is necessary to change the management way from ‘licensing’ into ‘post-licensing management’ mechanism.



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