Reason behind the record number of newly established enterprises
Updated at Tuesday, 09 Jan 2018, 13:24
The Hanoitimes - Improving the business environment continues to be one of the priority in the government’s plan for socio-economic development in 2018.
According to the National Database of Business Registration, in 2017, Vietnam has a total of 126,859 newly established enterprises with registered capital of US$ 56.98 billion, an increase of 15.2% in term of the number of enterprises and 45.4% of the registered capital over the same period in 2016. The average registered capital of newly established enterprises was VND 10.2 billion (roughly US$ 449,000), up 26.2% compared to last year’s figure.
On the other hand, the number of dissolved enterprises were 12,113, a reduction of 2.9% compared to 2016, 38,869 enterprises suspended operation or waiting for dissolution, down 4.6%. Meanwhile, 21,689 enterprises temporarily suspended operation, up 8.9%, in which the majority has resumed operation afterwards.
Improving the business environment continues to be one of the priority in the government’s plan for socio-economic development in 2018.
As such, the rate of enterprises quitting the market over the number entering the market is 47.4%, which is quite low compared to countries with top business environment in the world, such as Hong Kong of 70.6%, New Zealand of 87.2%, and England of 67.7%. Comparing this rate to previous years, there is clearly a declining trend, with 2015 of 69.5% and 2016 of 53.5%.
The statistics on the number of newly established enterprises in 2017 also showed that not only the number of enterprises entering the market has increased, but also the increasing registered capital for which enterprises committed to their respective business operation.
The increasing in registered capital indicates high expectation on business opportunities from the market. As the market becomes more and more attractive, enterprises will be ready to pay a high fee of opportunity cost for investment in return for expected revenue.
The number of registered enterprises in period 2011 – 2017 showing a strong growth in both the number of enterprises registration and the committed capital, especially in 2016 and 2017. Comparing the numbers in 2017 and 2011, the number of newly established enterprises has increased 1.6 times, while the registered capital increased of 2.5 times, and the average registered capital of newly established enterprises also went up 1.5 times. The all time high number of newly established enterprises in 2017 indicated strong government’s effort in removing business barriers and creating favorable conditions for more social resources pumped into the economy.
The role and orientation of the government are considered key factors for a transparent and stabilized business environment, thus building trust among citizens and enterprises. The growing number of enterprises in Vietnam is seen as result of the government in supporting start-ups and enterprises, with an aim to become the driving force for the economy. Specifically, under the instruction No. 26/CT-TTg dated June 06 of the Prime Minister, with the spirit of government accompanying enterprises, and based on the current situation of the currency market and macro-economy, since July, the State bank of Vietnam (SBV) has reduced the interest rate for small and medium enterprises (SMEs) by 0.5%, from 7% per year to 6.5% per year. Besides, series of events connecting banking – enterprises at provinces are implemented with the committed disbursement fund of hundreds of trillion VND in 2017.