Businesses Leave Hot Fields

Worse, these industries have the least number of new business registrations this year. Meanwhile, according to the national business registration information centre, the number of business registrations in education, training and healthcare tends to increase significantly.

 

Mr Bui Anh Tuan, Deputy Director of the Business Registration Department under the Ministry of Planning and Investment, said at the Vietnam Investment and Business Development Forum 2012 on December 11 that companies are actively shifting their business industries. It is clear that resources of business involved in speculative, high-risk fields are weakening.

 

This is the reason why he believes that there will be no possibility of mass collapse of enterprises as feared earlier. "The suppleness of Vietnamese businesses, especially small and medium-sized enterprises, is an important contribution to economic restructuring," he said.

 

Looking back on the process of shifting operating lines of Vietnamese enterprises in the past 10 years, the shift of resources into hot economic fields is clear in specific periods.

 

In particular, the 2002 - 2010 period witnessed an impressive growth in enterprises involved in asset products and advisory services with an average annual growth of up to 35.12 per cent.

 

Mr Luong Minh Huan of Enterprises Development Institute under the Vietnam Chamber of Commerce and Industry (VCCI) said that the number of enterprises in these sectors increased by over 10 times from 3,200 in 2002 to over 36,000 in 2010. The construction industry saw an average annual growth of 23 per cent from 8,000 companies in 2001 to more than 47,000 units in 2010.

 

Clearly, the shift of Vietnamese enterprises heavily depends on impacts of business environment as well as business policies in different stages. The past explosion of real estate businesses is the result of a period of easygoing credit and investment, said Nguyen Dinh Cung, Deputy Director of the Central Institute for Economic Management, .

 

“Heating economic growth and unreal demand from the so-called "market bubble" encouraged and inveigled businesses to run after and feed on economic stimulus policies at that time, especially in real estate industry and related ones," he analysed. In 2007, credit growth, M2 growth and investment reached records, with corresponding rates of 43.6 per cent and 53.8 per cent.

 

Without a doubt, the shift in business picture in 2012 is largely drawn by inflation-curbing and macroeconomic stabilisation policies applied at the beginning of the year, especially credit squeeze policies on non-productive fields.

 

However, Dr Le Dang Doanh, a senior economist, raised his concerns that the current existence of many businesses does not necessarily rely on their good competitiveness and good health. “Many weak companies managed to live through while good-performing unfairly died because policies were adopted without factual and updated information,” he said.

 

Evidently, the shift of businesses now importantly needs policy guide, especially in resource allocation policies in order to achieve new growth paradigm objectives.

“Policies need to encourage the generation of new production resources and new supplies that match real social demand instead of quantitatively expanding old structures and fields which are already in excess of supply.

 

The centre of solutions necessarily focuses on fundamental changes of institutions to modify driving systems and importantly change behaviours of organizations, businesses and individuals," said Cung.