VietNamNet Bridge – The government has successfully controlled the inflation and ensured the macroeconomic stability. However, Vietnam has to pay a heavy price for this – the low GDP growth rate and the death of tens of thousands of businesses.

The GDP is estimated to increase by 5.42 percent in 2013, which means that Vietnam, for the third consecutive year, obtained the low growth rate of less than 6 percent, failing to fulfill its plans.

“The total demand of the national economy is still weak. The domestic market has been narrowed, while the economic reform has been going slowly. All these factors have affected the GDP growth in 2013,” commented Dr Dao Van Hung, Head of the Development Policies Institute, an arm of the Ministry of Planning and Investment.

Businesses, the major driving force for the economic development, therefore, have experienced a very tough year. According to the General Statistics Office (GSO), 60,737 businesses have got dissolved or suspended their operation, an increase of 12 percent over the previous year.

The majority of the businesses chose the “silent death”: 40,116 businesses stopped their operation without reporting to competent agencies.

More businesses have to leave the market, while investors have become more cautious when starting up new business. Nguyen Bich Lam, General Director of GSO, noted that the production capacity of new businesses tends to be weaker.

The average capital of a business set up in 2013 is VND5.18 billion, a modest figure, which is lower than VND6.68 billion in 2012.

Meanwhile, Dr. Nguyen Mai, former Deputy Minister of Planning and Investment, noted that a lot of newly registered businesses may not be operational in 2014, while a lot of businesses facing difficulties in 2013, would really be dead in 2014.

Le Chi Phuc, General Director of SGI Capital, citing the institution’s analysis, said that only 10 percent of the 800 listed companies have really overcome difficulties, while the other 70 percent are still facing difficulties and the remaining 10-20 percent facing big difficulties. Most of them are in the real estate sector.

The director of a building material enterprise in Bac Ninh province complained that he has to cut down the selling price sharply by 20 percent on the weak demand.

When asked if he intends to borrow money to scale up the production in 2014, he said it would be too venturesome to do that.

“No one would expand the production if the goods unsalability is foreseeable,” he said.

The most serious thing, according to Phuc from SGI Capital, is the businessmen’s decreased confidence.

“In 2011-2012, though facing big difficulties, businesses still kept optimistic about the future because they put a high hope on the state’s policies to support businesses,” he said. “However, a lot of them have become discouraged because the policies come late.”

President Truong Tan Sang, at the meeting with the 30 young entrepreneurs in August 2013, when hearing that only a half of the registered businesses had survived the difficulties, also expressed his worry about the exhaustion of entrepreneurs’ enthusiasm.

However, analysts believe that Vietnam’s economy would see considerable improvement in 2014, when the global economy warms up.

Chi Mai