Crisis looms: Why businesses are fleeing the market?

A bleak picture

In the first three months of this year alone, Vietnam lost around 5 thousand businesses each month. This contrasts with the picture of an economy seemingly on the path to recovery, with major balances being ensured.

Moreover, private investment growth is low, at just over 4%, and credit growth is very low, at less than 1% in the first three months of the year. All these figures reflect a bleak picture of investment, production, and business in the private sector.

Dr. Can Van Luc, Chief Economist of BIDV, believes that businesses, exhausted after four years of coping with diseases and inflation risks, are "no longer able to endure" and are "forced to withdraw from the market."

Furthermore, some businesses are not adapting well, which can easily lead to crises amidst an economy that harbors many unpredictable fluctuations.

Delving into the difficulties faced by businesses, Deputy Minister of Planning and Investment Do Thanh Trung said that challenges persist in many areas, such as real estate, which is facing issues in developing social housing projects, and the aviation industry, which is grappling with challenges like a decrease in commercial aircraft, increasing domestic ticket prices, affecting travel demand and the tourism sector.

Meanwhile, unusual climate developments, droughts, and saline intrusion threaten agricultural production areas, especially in the Mekong Delta region.

In the processing and manufacturing sector, the biggest challenge is that people are tightening their spending, leading to reduced shopping demand. This is clearly reflected in the overall retail sales of goods and services in the first quarter, which increased by just over 8% compared to the same period.

The difficulties faced by the processing and manufacturing industries are slowing down industrial production recovery, posing a major challenge to the country's main growth engine.

Challenges related to administrative procedures

Speaking at the 14th session of the National Assembly Economic Committee, the Deputy Minister pointed out that in the face of numerous difficulties, businesses also have to deal with challenges related to certain mechanisms, policies, and administrative procedures that are inadequate and cause inconvenience and trouble.

Among these, notable mentions include regulations on iodine supplementation in food, fire prevention and fighting regulations, or tax management regulations for related-party transactions.

Notably, these regulations have been issued for a long time, businesses have made recommendations, the government has accepted and directed amendments, but the relevant units have not yet completed their tasks.

Further discussing the cautious consumer spending behavior, Mr. Luc assessed that this is a common issue worldwide amidst unpredictable changes.

In response to this situation, Mr. Luc suggests a resolute approach in supporting businesses, especially in improving the business environment. Alongside, there needs to be a coordinated fiscal and monetary policy to ensure capital supply to the economy, helping businesses alleviate their struggles to some extent.

According to Dr. Vo Tri Thanh, Director of the Institute for Branding and Competition Strategy Research, the crux lies in building trust. Specifically, it's about how to build and maintain confidence in businesses and the public regarding policy implementation and the economic recovery prospects.

Trust enables businesses to boldly invest, helps consumers spend more confidently, provides support to the economy, and enhances the effectiveness of countercyclical fiscal and monetary policies.

To build trust, Mr. Thanh emphasizes the role of the government in vigorously implementing solutions instead of just making promises and leaving them unfulfilled.

Source: theleader

Compiled by VBI