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Last updated: Thursday, December 13, 2018

 

Target of 1 Million Businesses by 2020: Will It Be Feasible?

Posted: Monday, October 15, 2018


In the statement about the target of reaching one million effective businesses by 2020, Mr Nguyen Bich Lam, General Director of General Statistical Office (GSO), said: "The goal of one million enterprises can be achieved if there are sufficient solutions to encourage and support enterprises to start a successful business. To do that, the basic solution must be to continue to stabilise the macro-economy and have a sustainable business environment.”

High rate of newly established and dissolved businesses
According to new statistics from the Business Registration Management Agency of the Ministry of Planning and Investment, in September, the number of newly established enterprises was 9,163 with registered capital of VND84,783 billion (US$36.4 million), decreasing 21.4 per cent in number of enterprises and 21.2 per cent in registered capital compared to August 2018. However, compared with the same period in 2017, the number of enterprises increased by 6.4 per cent, while the amount of registered capital went up by 5.2 per cent.

In the first 9 months of 2018, there were 96,611 newly established enterprises with registered capital of VND963,411 billion (US$413.3 million), up 2.8 per cent in number of enterprises and 6.7 per cent in registered capital compared to the same period last year. The number of enterprises returning to operation was 22,897 enterprises, up 8.5 per cent over the same period in 2017.

According to the statistics, in the first 9 months of the year, the number of enterprises registered to temporarily cease business activities in the country was 23,053 enterprises, up 24.6 per cent over the same period in 2017.

There are 50,050 enterprises temporarily suspended from registration or waiting for dissolution, up 62.3 per cent over the same period last year. The number of enterprises completing dissolution procedures in the first nine months of 2018 was 11,536 enterprises, up 32.1 percent over the same period in 2017.

All 17 major business lines are facing the situation, in which the number of enterprises suspending their business for a definite period of time, temporarily ceasing their activities without registration or waiting for their dissolution as well as completing the dissolution procedure, increased significantly in the first nine months of 2018, said the Business Registration Management Agency.

130,000 new businesses must be added each year
According to Government’s target, by 2020, the country strives to reach one million enterprises. The number of enterprises increased to reach this target mainly comes from newly established sources and encouraging individual business households to change their registration to the enterprise model.

Mr Nguyen Bich Lam said that to reach the target of one million enterprises from now until the end of 2020, the country must have an additional 120,000 newly established enterprises. This does not include the number of bankrupt and dissolved businesses. Therefore, the average number of newly established enterprises must rise over 130,000 enterprises from now to 2020.

According to the 2017 economic census data released by the General Statistics Office (GSO) in late September, as of July 1, 2017, there were 517,900 enterprises in the country. However, the actual operating businesses are 505,100. On average, while the capital of a company in 2016 is VND51.6 billion, the capital of one SOE is VND3 trillion, more than 97.5 times that of a non-State enterprise and 8.3 times compared with that of a FDI businesses.

In comparison with the pace of the new business establishment which is 126,900 enterprises in 2016 and 110,000 enterprises in 2017, the target of one million enterprises will be difficult to achieve. Even with the implementation of measures to encourage individual business households and large cooperatives to transform to the enterprise model, the number of business only increases by 103,000 enterprises (equivalent to 2.3 per cent of 5.14 million individual business households).

Great effort needed
In the recent time, Prime Minister Nguyen Xuan Phuc, ministries and sectors have made great efforts to remove business barriers and improved the investment climate in order to ease the administrative procedures for the business community. However, according to experts, basically the reform process is still on the plans of the ministries. The new reforms only stop the barriers and do not include institutional factors and real policies that promote the business community. Businesses, especially private enterprises, have been identified as important drivers for economic growth and "are expected to be the key drivers for economic growth in 2018." Nevertheless, the internal problems of the economy remain challenging with the low technology level, while the productivity, efficiency and competitiveness of the economy have improved but have not created a breakthrough. Only a breakthrough can create a good conditions for business development.

In particular, further simplification of business procedures is extremely important. According to Dr Nguyen Dinh Cung, President of the Central Institute for Economic Management, the goal of Decree 19/2018 is not easy to achieve. It is expected that the resolution would require the abolition and simplification of more than 1,968 business conditions; ministries will have to cut 500 in circulars and draft decrees. In the goal of 2018, the Government is determined to improve the business environment, strive to rank at 50-60, which is an increase of about 8 to 10 levels compared to today (ranking 68 among 190 economies). To do this, many indicators need to be improved with very high scores, especially with great effort. For example, in terms of business start-up, according to Mr Cung, Vietnam has to improve at least 40 levels from its current position at 123rd to 83rd out of 190 countries and territories. Construction permits must also be reduced by 47 days to 119 days; the time to pay social insurance must also be shortened to 168 hours instead of the current 498 hours per year. In particular, the authority needs to cut 50 percent in list of goods subject to specialised inspection. However, according to Mr Lam, the goal of one million enterprises can be achieved if the solution fully encourages and supports successful start-ups. To do that, the basic solution must continue to stabilise the macro-economy and have a sustainable business environment. In addition, they must continue to vigorously reform administrative procedures, more drastically cutting procedures that obstruct business conditions of enterprises. "It is important that policies to support loans for businesses to invest in science and technology development and labour training," Mr Lam said.

Quynh Chi








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