Business dissolution increases sharply: Is it a paradox?

Although the Government has taken many concrete actions to improve the investment and business environment in recent times, the business environment is considered to have improved significantly. However, in the first quarter of 2016, the number of enterprises that dissolved or temporarily suspended operations increased sharply.

In Vietnam, the rate of businesses surviving after 3 years of operation and the rate of businesses withdrawing compared to newly registered businesses remain at normal levels.

According to data from the Department of Business Registration Management (Ministry of Planning and Investment), the number of enterprises dissolved or ceasing business operations in the first 3 months of 2016 nationwide was 2,919, an increase of 16.5% compared to the fourth quarter of 2015 and an increase of 13.8% compared to the same period last year.

The number of businesses facing difficulties and forced to temporarily suspend operations nationwide is 20,044, an increase of 23.9% over the same period last year.

This figure seems to contradict the Government’s efforts to create the best conditions for businesses in recent times. However, in discussions with some economic experts, they assessed this as completely normal.

According to economic experts, international practice shows that businesses entering and withdrawing from the market is an objective characteristic of competition in a market economy.

The statistics of some EU countries are specific evidence to show that the situation of enterprises entering and withdrawing from the market in our country is completely normal. In the UK, in one year (2014 data), there were 533,000 newly established enterprises but at the same time there were 332,000 enterprises withdrawing from the market, accounting for 62.2%; the rate of enterprises surviving after 3 years of operation is 70%. In New Zealand, the rate of enterprises surviving after 3 years of operation is below 50%. In 26 countries in the EU region, the rate of enterprises surviving after 5 years is 46%.

Compared with Vietnam's figures, it can be seen that the rate of businesses surviving after 3 years of operation and the rate of businesses withdrawing compared to newly registered businesses are still at a level that is not worrisome.

Also according to the data of the Department of Business Registration, in the first quarter of 2016, there were 23,767 newly established enterprises with registered capital of 186,013 billion VND, a decrease of 10% in the number of enterprises and an increase of 3% in registered capital compared to the fourth quarter of 2015.

The average registered capital per enterprise in the first quarter reached 7.8 billion VND, up 1.5% compared to the fourth quarter of 2015 and up 34.5% compared to the same period in 2015.

The number of registered employees of newly established enterprises in the first quarter of 2016 was 322,200, an increase of 21.5% compared to the same period in 2015. On average, each newly established enterprise created jobs for more than 13 employees. This figure also shows that most newly established enterprises are micro-enterprises with limited labor and capital.

According to Online Investment