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Causes of the exit of 89,000 businesses

Causes of the exit of 89,000 businesses

Friday 03, 01 2020
In 2019, there were about 138,140 newly established enterprises (up 5.2%), however, the number of businesses exiting the market was also quite high, reaching 89,282, an increase of 20.2% over 2018, showing that domestic enterprises are still facing many difficulties.

A report on business registration in 2019 of the Business Registration Management Department shows that out of tens of thousands of businesses withdrawing from the market this year, 28,731 registered for temporary business suspension (increasing by 5.9%), 43,711 enterprises were waiting for dissolution (up 41.7%), 16,840 enterprises have completed dissolution procedures (up 3.2%). On average, there were 7,440 businesses exiting the market each month.

Among 43,711 enterprises awaiting dissolution, more than 17,700 enterprises had their business registration certificates revoked; nearly 14,500 businesses posted dissolution notices and more than 11,500 businesses waited for the procedure to dissolve with the tax authorities. The number of enterprises waiting for dissolution in the field of wholesale, retail, repair of automobiles and motorbikes was 15,996 enterprises, accounting for 36.6%; that of construction was 6,058 enterprises, accounting for 13.9%; while processing and manufacturing industry had 5,376 enterprises waiting for dissolution, accounting for 12.3%.

Real estate industry had the highest dissolution rate (686 enterprises, up 39.4%). The dissolution rate of the health and social assistance industry witnessed an increase of 47.1% (103 enterprises) while that of finance, banking and insurance was 30.8% (208 businesses). In addition, in 2019, there were more than 46,840 businesses not operating at the registered address, an increase of 43.4% over 2018. These are businesses that no longer do business at the registered address and could not be contacted.

Enterprises not operating at the registered address are mainly in wholesale, retail, and repair of automobiles and motorcycles industry (16,035 enterprises, accounting for 34.2%), construction (7,181 enterprises, accounting for 15.3%), processing and manufacturing industry (5,561 enterprises, accounting for 11.9%).

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Major cause

Although dissolution or bankruptcy of enterprises is an inevitable part of a market economy when enterprises are weak and unable to compete. However, that the number of dissolved or decommissioned enterprises reached more than 89,200, much higher than previous years shows that it is necessary to review the current business environment. According to the results of VCCI's survey, although there have been many improvements in the business environment, there have been several problems. In the third quarter of 2019, VCCI received 333 recommendations of businesses which is mostly related to the law and the amendment of policies. This shows that the business law provisions are contradictory and overlapping.

This shows that the business law provisions are contradictory and overlapping.

Although the Government has been very aggressive in requiring ministries and branches to reduce business conditions in recent years, VCCI's survey results showed that business conditions are still a major obstacle to with businesses. Up to 18% of businesses said that it still takes more than a month to solve the procedures related to production and business activities.

At the seminar "Vietnam Competitiveness: Results and challenges for businesses" held by the Central Institute for Economic Management in Ho Chi Minh City in late October, experts and analysts said that although ministries and branches have eliminated many unnecessary business conditions over the past time, the cuts are still not substantial.

According to Ms. Nguyen Minh Thao, Head of the Department of Business Environment and Competitiveness Research, Central Institute for Economic Management, although up to 50% of nearly 6,000 business conditions have been removed, there still exist many obstacles to businesses. In fact, there have been many vague, meaningless business conditions that have been abolished, but main business conditions creating the unnecessary right for state management agencies have not been removed yet. Notably, according to Mr. Do Thien Anh Tuan, economics expert, lecturer at Fulbright University Vietnam, many departments and branches are still indifferent and insensitive to the difficulties of enterprises.

Related:  Industry analysis

Source: The Saigontimes

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