Experts pointed out the abnormalities and analyzed the reasons leading to the sharp increase in the number of businesses ceasing operations in the first 3 months of the year.

Discussing the obstacles that have been hindering the development of domestic enterprises in recent times, Director of the Central Institute for Economic Management (CIEM) – Dr. Nguyen Dinh Cung expressed many concerns about the number of enterprises facing difficulties and forced to temporarily suspend operations in the first quarter of this year, up to 20,044 enterprises, an increase of 23.9% compared to the same period last year.

In the first quarter of this year, 20,044 enterprises dissolved or ceased operations, an increase of 23.9% over the same period last year.

According to Dr. Nguyen Dinh Cung, in the past, in the period of 2000 - 2007, the rate of enterprises temporarily ceasing operations compared to the number of newly established enterprises was only about 15 - 20%. However, in recent years, this rate has been relatively high, especially in the first quarter of 2016, the number of enterprises ceasing operations in all forms compared to the number of newly established enterprises is an extremely high number. If we compare the two indexes of enterprises ceasing operations and newly established enterprises, which are equivalent, we can see that the number of Vietnamese enterprises has almost not increased.

“Why are there so many businesses dissolving and ceasing operations? I don’t think this number is normal at all. If we just console each other that it’s normal, then that’s an irresponsible way of speaking. If we, as experts, see the abnormality when comparing our country in the past with surrounding countries, we must have a deeper look at specific industries and localities,” said Dr. Nguyen Dinh Cung.

Referring to the reasons why many businesses have stopped operating recently, Dr. Nguyen Dinh Cung clearly pointed out that overall, the costs of businesses are increasing, leading to profits decreasing to the point of loss, forcing businesses to stop operating.

“People only quit when they lose money. No one who is doing a profitable business will stop. One is that costs increase, two is that revenue decreases, and here it could be both. Perhaps the main reason lies in increased costs, as it is clear that increased interest rates increase financial costs; labor, insurance, union costs... increase. Especially, there is the possibility that tax costs will increase,” Dr. Nguyen Dinh Cung raised the issue.

Analyzing more deeply the issue of business costs, Dr. Nguyen Dinh Cung said that many costs are "surrounding" businesses on "every front" when only seeing costs increase and increase, not seeing any place to reduce costs or reduce risks for businesses. "3 million VND in business license tax may not be anything for large businesses, but for small businesses, it is a problem. Or like the increased road tolls, large businesses are fine, but small businesses have to pay an additional cost which is very large", Dr. Cung said.

Commenting that the budget deficit and the difference in spending have caused revenues to increase in a "collective" manner, causing businesses to have to increase many costs recently, Dr. Nguyen Dinh Cung said that this is an unusual and very worrying phenomenon.

“There are items that were previously considered not to be collected, but are now collected; there are items that were previously considered reasonable and valid expenses, but are now said not to be and must be changed. There are items that need to be collected and will be collected immediately and considered as temporary payments to be deducted later… these things are hindering the progress of the Enterprise Law, Investment Law as well as Resolution 19 of the Government,” Dr. Nguyen Dinh Cung pointed out.

Considering the pressure to increase revenue to reduce budget deficit, Dr. Nguyen Dinh Cung stated that this is the root cause of many enterprises having to dissolve in recent times. Especially when this cause is combined with the period from 2007 to 2013, almost a long period of time when the strength of domestic private enterprises was eroded and greatly damaged, due to macroeconomic instability.

Although economic instability has gradually been overcome in recent years, the health and financial capacity of Vietnamese private enterprises are still being greatly eroded. Dr. Nguyen Dinh Cung believes that this period should be a time to nurture, support and create a spirit of entrepreneurship and business start-up, but the enterprises themselves do not see such motivations. Meanwhile, in response to the current requirements for economic development, it is necessary to enhance the strength of Vietnamese private enterprises to be able to take advantage of integration opportunities.

Assessing the role of the Enterprise Law and Investment Law for enterprises, Dr. Nguyen Dinh Cung said that this is a step to create momentum for reforming business conditions. The Law creates a step forward by gathering and announcing 267 conditional business lines, but in fact this is still too large and too many numbers in a normal economy.

Because, business conditions in reality mean restricting business freedom, restricting market entry. This is limiting creativity, product diversification and diversifying the supply of better products.

Therefore, according to Dr. Nguyen Dinh Cung, it would not be important to remove all business conditions for all industries. It should be replaced by managing product output by post-inspection, by quality standards and regulations that Vietnam already has, while business conditions are only conditions for businesses as well as for entering the market./.

According to VOV