According to data released by the General Statistics Office, the number of businesses dissolving or ceasing operations in the first quarter of this year continued to remain very high. Specifically, 3.268 businesses completed dissolution procedures, a 12% increase compared to the same period last year. At the same time, 20.636 other businesses ceased or temporarily suspended operations. This figure is only slightly lower than the 26.478 newly established businesses.
Given that the number of businesses forced to close is roughly equal to the number of new ones established, coupled with a significant slowdown in economic growth recently, it is clear that Vietnam's business environment still has some underlying issues. To identify these problems and find effective solutions, the government should conduct surveys of the businesses that have gone bankrupt or ceased operations, and thoroughly analyze the environmental causes that led to their dissolution and bankruptcy.
The government has made significant efforts to create a healthy business environment and has been somewhat successful in stimulating the startup movement throughout society. Evidence of this is the sharp increase in the number of newly established businesses over the past year. Unfortunately, the number of businesses closing down and leaving the industry is equally high. This shows that, while quite successful in stimulating the startup movement, the government has not yet succeeded in improving the survival rate of businesses. The reason is likely that reform efforts have not yet addressed the crucial barriers to their survival.
According to the General Statistics Office, 92% of dissolved businesses were small and medium-sized enterprises (SMEs) with registered capital under 10 billion VND. We know that SMEs are a crucial foundation of the economy, yet they are the group most at risk of failure in the face of changing business environments. If these are newly established businesses, their chances of survival are even lower.
Vietnam is pursuing the goal of having one million effectively operating businesses by 2020. This will be a distant goal if the number of businesses failing and leaving the market each year remains roughly equal to the number of new businesses. Conversely, if the government can successfully help the group of businesses at highest risk of failure increase their chances of survival, it will be the most effective solution to reignite the startup movement, and the goal of one million businesses within the next four years will become very close.
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