4700 businesses got dissolved in difficulties

About 4700 enterprises have got dissolved, according to a report by the Ministry of Planning and Investment (MPI), a small figure if noting that enterprises are facing big difficulties due to the high inflation and low demand.

MPI has, for the first time, released a report on the number of dissolved businesses on the sideline of the annual government’s press conference held on September 26. The report has pointed out that 4700 businesses which have the total registered investment capital of 34 trillion dong have got dissolved so far this year.

The information has been released in the current big economic difficulties. According to MPI, the GDP grew only by 5.76 percent in comparison with the same period of the last year, while it is lower than the 2010’s figure of 6.25 percent.

Vu Duc Dam, Minister, Chair of the Government Office, also said at the press conference on September 26, that the inflation has been eased, but it is still high, which makes it unfeasible to force the interest rates down quickly.

“Very few businesses can borrow money at the interest rates of below 17 percent,” Dam said.

The world’s economic performance and the domestic tightened monetary and fiscal policies have all led to the stagnation of production and higher inventory volumes. Businesses’ associations have many times called on the government to loosen the monetary policies in order to help businesses more easily access to bank loans.

Commenting about the number of 4700 dissolved enterprises, analysts say this is really a small number if comparing with the current big difficulties. Also according to MPI, in the first nine months of 2011, Vietnam had 57,800 enterprises registering their new business with the total registered capital of 363.7 trillion dong.

Though the number of newly registered businesses and the expected investment capital decreased by 7.8 and 4 percent, respectively, in comparison with the same period of the 2010, one can see that the small number of dissolved enterprises show that the current difficulties are not overly big.

Chair of the Vietnam Chamber of Commerce and Industry (VCCI), Vu Tien Loc, in a talk with the local press, also said that he has learned from the businesses’ idea collection recently that the percentage of enterprises which have to stop their operation is not high.

An economist, who preferred to be anonymous, also said that over the last 20 years, since the enterprise law took effects, the proportion of “dead” enterprises is too modest, which shows the low competitiveness of the national economy.

“Legal business entities could be considered as business ideas. In principle, only good ideas can develop, while bad ideas should be eliminated. It would be bad if even bad ideas can exist,” he said. “The death of bad businesses should be seen as a joy, because when some businesses die, resources will be gathered to develop better business ideas.”

Meanwhile, the indexes about credit growth rate and the money supply (M2) growth rate tend to increase. By the end of August 2011, the credit growth rate had reached 9.16 percent, according to the State Bank of Vietnam. The National Finance Supervision Council has recently suggested that the credit growth rate limit should be 15 percent instead of the previously set 20 percent.

In recent days, some international institutions have warned about the possible bad consequences of the early monetary policies loosening. Tomoyuki Kimura, Vietnam Country Director of ADB, said that it is still too early to think of loosening the monetary policies, when the yearly inflation rate is still high at over 20 percent.

Source Vietnamnet

Tags: Vietnam companies, Vietnam enterprises, Vietnam SOEs