Only a half of established companies can ‘survive’

Annual report of Vietnam Chamber of Commerce and Industry indicated that the number of registered enterprises in 2010 bounced to more than 544,000, however, only fewer firms are operating properly.

The statement was made in the chamber’s March 28 report that confirmed Vietnamese enterprises and institutions had performed well in good development trend amid many difficulties and challenges, even e economic inconveniences.

The brightest point we can see is that the companies met a lot of favourable conditions as the country jumped 14 grades in terms of enterprise corporation procedures in World Bank’s business environment report.

According to VCCI, this was the first year Vietnam launched the unique system of corporate establishment (establishment and tax registration held at the same time) so the duration to handle with market participation was shortened.

As a result, almost 90,000 new enterprises were set up in 2010 alone, growing 5.5% over 2009 (with total registered capital of 545 trillion dong averaging six billion dong each). In general, till the end of 2010, the country had 544,394 registered firms, 500,000 higher than the government’s target at that time.

Yet, according to the report group, although the number surged strongly, real operation was lower. The data on number of companies with real operation in 2010 has not come but a survey made in 5 years ago showed that the number only was a half of the registered volume at annual December 31. The statistic even reduced from 56.5% in 2005 to 54% in 2009.

Given explanation about the reality by Dr Pham Thi Thu Hang, head of VCCI study group, the fact was that Vietnamese enterprises were suffering high pressure from difficult economy conditions so their production and business might stand still or be cancelled. In addition, because of the restructure or reform process, some firms suspended operation which did not mean that they were bankrupt.

Due to the corporate restructure and reform, the number of new limited and joint stock companies in 2010 accounted for 91% while that of private firms decreased from 12% to 9% in 2009-2010, indicating that local firms were making big efforts towards a more transparent administration form that helped enterprises raise capital more easily through different channels amid the difficult environment.

VCCI previously reported, up to 85% of surveyed companies said that they had to borrow bank loans at 12-13% a year. Only 19% said this interest rate was reasonable while 33% said they could not afford the rate in long term.

Tags: Vietnam companies, Vietnam enterprises