Businesses in need of effective support policies to overcome difficulties

Businesses will find it increasingly hard to overcome difficulties if support policies are not introduced, as domestic and global economies are forecast to continue facing challenges, according to analysts.

For the first time in its history, the Agency for Business Registration Management at the Ministry of Planning and Investment recorded fewer newly-established enterprises and those resuming operations than those withdrawing from the market in the first quarter of 2023.

There were 59,946 businesses established and resuming operations in the period while 60,241 businesses closed their doors.

This reveals that businesses cannot survive amid the ongoing economic difficulties, which was also demonstrated by a decline in production and capital at many enterprises. Figures show that the average registered capital in a newly-established enterprise in the first quarter stood at only VND9.2 billion ($385,000), a year-on-year fall of 32.8 per cent.

CEO of the Phu Thai Group Pham Dinh Toan said the number of businesses that ceased operations and will close this year proves that the business sector is facing a host of difficulties. The government therefore needs to adopt policies to support businesses to quickly overcome the challenges.

Businesses ceasing operations trigger huge losses in the economy and affect existing enterprises because of their economic relations, according to Mr. Toan.

Economist Nguyen Dinh Cung, former Chairman of the Central Institute for Economic Management, said the difficulties in the economy have forced many businesses to suspend trading activities to minimize operational costs while waiting for opportunities to return to the market.

Meanwhile, Vietnam and the world are forecast to continue facing problems and challenges. Around the world, though inflation has eased it remains high, and growth in Vietnam’s key trading partners such as the EU, the US, and Japan is slowing, resulting in falling consumption demand that affects Vietnam’s export prospects, Mr. Cung said.

Consumption demand has also fallen strongly in Vietnam due to rising inflation and lower incomes. High bank interest rates also led to an increase of 5-10 per cent in production costs for businesses. In particular, businesses are facing difficulties gaining access to capital.

He noted that the difficulties may continue for businesses in the quarters to follow. Businesses are therefore likely to continue grappling with various issues and the number withdrawing from the market will rise without the introduction of strong and effective measures to recover the economy.

The Private Economic Development Research Board said that opinions from over 30 business associations reveal that the greatest difficulty facing businesses is capital flow. Apart from problems gaining access to capital, regulations relating to taxes as well as tax implementation have also posed challenges.

Former Head of the Vietnam Institute of Economics Tran Dinh Thien said many businesses are thirsty for capital, so what is needed now is to provide capital for them to continue production and trade activities.

In addition to difficulties relating to cash flow, businesses are also confused about following new growth models such as green growth and circular growth, or environmental, social, governance (ESG) standards, especially in the context of the US and the EU continuing to introduce new regulations affecting domestic supply chains.