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Number of newly set up businesses down, raising worries
The number of newly established businesses in January 2012 decreased by 36 percent over the same period the last year. This should be seen as a worry for the national economy?
A report of the Ministry of Planning and Investment showed that in January 2012, only 4117 businesses were set up which had the total registered capital of 18,200 billion dong, a decrease of 36 percent in the number of businesses and 56 percent in the registered capital, in comparison with the same period of the last year.
The foreign direct investment (FDI) picture in January 2012 was also gloomy. The FDI registered capital in the month was just equal to 2.5 percent of the same period of the last year, even though a huge project capitalized at 575 million dollars was licensed.
The low number of newly set up businesses reflects the current difficulties of the national economy and the problems it is facing. The two latest surveys have also pointed out that the business confidence of businessmen has decreased.
In the EuroCham’s report on the business confidence index (BCI), though the index increased slightly by four points, only 39 percent of businesses said “good” or “excellent” about their business prospects. Though the figure represents a 12 percent increase in comparison with the previous quarter, it remains too low if compared with the 72 percent level of the same period in 2011.
Alan Cany, Chair of EuroCham has noted that the confidence was still far below that of the last year, which shows the uncertainties of investors about their business in the future.
The worries about the macroeconomy in Europe and in Vietnam could be the reasons that make European businesses feel less optimistic. However, the worry of European businessmen could also be the worry of other investors from the US, Japan, South Korea or Taiwan.
The same low confidence has also been reported for domestic businesses. A survey conducted by WVB Vietnam, a finance information service company, showed that the BCI in the fourth quarter of 2011 dropped sharply to 116 points from 123 points of the third quarter of 2011.
The surveys have also shown that the number of businesses that kept optimistic about the Vietnam’s economic prospects in the next 12 months, has dropped by 10.5 percent in comparison with the third quarter of 2011.
“The BCI decrease shows the insecurity of businesses amid the continued changes in the economy in the last year,” WVN commented. Businesses believe that they would still have to confront big difficulties in 2012, including high inflation, high interest rates and ineffective investments.
Not only independent surveys, but the Ministry of Planning and Investment itself has also admitted that the production and business of enterprises have still been meeting big difficulties. The pessimistic world’s economy has badly affected Vietnam’s exports and the financial market – the important channel for businesses to mobilize capital.
“Besides, the tightened fiscal policies, the tightened credit policies and the measures applied to curb inflation are all believed to hinder the capital mobilization of businesses. These are the reasons behind the sharp fall of the newly registered businesses and the increase of the dissolved businesses,” the ministry’s report reads.
The sharp decreases of the new businesses and the investment capital have raised big worries, because these are the indicators showing the dynamism of the national economy. In the long term, if the current situation cannot improve, this may lead to the weakening of the production capacity, thus causing long term consequences to the national economy.
However, Hoang Xuan Quyen, a well known economist, said that no need to get so surprised about the decrease of the number of businesses, when the global and the domestic economies both are in big difficulties with the production in stagnation because of the high inflation, high unemployment and demand decreases.
“The current decreases only reflect the cautiousness of investors in doing business in the context of high risks and low profits,” he said.
vietnamnet
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