Vietnamese businesses alarmingly get tinier
Vietnamese businesses alarmingly get tinier
Analysts have noted that the businesses established over the last two years have very small operation scale, while the big existing businesses tend to get narrower.
A report of the Business Registration Management Agency, an arm of the Ministry of Planning and Investment, 39,000 new businesses registered their operation in the first six months of 2013 which had the total investment capital of VND193.5 trillion.
While the number of newly registered businesses increased by 7.6 percent, the registered investment capital decreased by 19.9 percent if compared with the first six months of 2012. Meanwhile, the figures would be +15.5 percent and -14.24 percent, respectively, if compared with the last six months of 2012.
Analysts have found that the registered capital of newly set up businesses has been decreasing sharply.
Also according to the above said agency, in 2012, Vietnam had 69.874 newly set up businesses with the investment capital of VND467.2 trillion, decreasing by 9.9 percent and 9 percent in the number of enterprises and the investment capital, respectively, in comparison with the same period of 2011.
Cao Sy Kiem, Chair of the Vietnam Association of Small and Medium Enterprises, said the number of tiny businesses has been on the rise, which is really worrying.
“Small scale enterprises will generate fewer jobs and pay less money to the state budget,” Kiem said.
In fact, the Central Institute for Economic Management (CIEM) first discovered the tendency of narrowing operation scale some years ago already. A survey on 1,999 small enterprises showed that after two years of operation, only 31 enterprises grew into medium enterprises, while 133 small enterprises turned into tiny.
The 2012 annual report of the Vietnam Chamber of Commerce and Industry VCCI also pointed out that the number of tiny businesses in the national economy has been increasing.
VCCI found 4,600 tiny businesses in 2002, and 2/3 of them retained the same operation scale by 2011. Of the remaining 1/3, only 30 percent turned into small enterprises, while only 2 percent turned into medium ones.
Meanwhile, economists have found from a survey on 4,300 medium and big enterprises that 34 percent have scaled down their operation, and 39 percent of medium enterprises became small enterprises in 2011, while 5.12 percent turned into tiny enterprises.
Medium enterprises are believed to be the ones which saw the biggest changes in the operation scale. In 2010 and 2011 alone, 40 percent of the changes in the labor force scale were found.
The number of the workers in every enterprise decreased from 74 in 2002 to 34 in 2011.
The limited knowledge of the businesses’ owners, the weak competitiveness, the difficulty in market approaching, the lack of capital and the high interest rates all have been cited as the main reasons behind the underdevelopment of the businesses.
Analysts have warned that the “movement of getting tinier” would bring bad consequences to the national economy. Vietnam now faces the risks of lacking the medium scaled enterprises which can act as the bridges to join the global supply chains.
They also said that the operation scale narrowing should be seen as the warning about the worse business environment.
The newly set up businesses mostly operate in the fields of health equipment manufacturing, gas production and distribution, air conditioner products, or the service sector. Meanwhile, few investors have poured money into the important business fields encouraged by the government, such as electronics, mechanical engineering, seafood or forestry.
vietnamnet
