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Viet Nam: Enterprises Thrive Despite Economic Woes
Source: vietnamnet.vn
Source Date: Monday, December 20, 2010
Focus: Electronic and Mobile Government
Country: Viet Nam
Created: Dec 28, 2010

New enterprises continued to be established despite the global recession and unstable factors in the domestic economy, heard a seminar held here recently by the Viet Nam Chamber of Commerce and Industry.

Viet Nam Institute of Economics director Tran Dinh Thien said the number of newly-established companies had surpassed the target of 500,000 by 2010.

About 85,000 new private companies have been established so far this year alone, with a total registered capital of VND500 trillion (US$25.6 billion), an increase of 125 per cent over last year.

Many of these fledgling enterprises immediately faced obstacles in the form of tight credit, high borrowing costs and a shortage of skilled workers, said the deputy director of the Government Office's Department for Enterprise Renewal Pham Tuan Anh.

"Vietnamese enterprises should improve workforce quality if they do not want to fall into the cheap labour trap," said Anh.

The debts of troubled State-owned shipbuilder Vinashin and an unstable foreign exchange market also posed threats to sustainable growth and challenges to policymakers.

"In past years, monetary policies have been amended but fiscal policies have been kept in place, so the combination of the two types of policies has not been effective," Thien said, adding that the Government's top priorities should be curbing inflation and restructuring State-owned enterprises.

Businesses had been adversely impacted by the devaluation of the Vietnamese dong against the US dollar over the past year, said National Economics University lecturer Nguyen Ke Tuan.

"This has caused businesses and individuals to hoard dollars, making the forex market fluctuate," Tuan said.

Luong Minh Huan from the chamber's Institute for Business Development introduced the results of a survey conducted by the chamber and the World Bank which found Vietnamese businesses were growing larger.

"Vietnamese enterprises experienced an average growth of 20.7 per cent during 2005-09," Huan said.

Vietnamese enterprises were developing a "fewer workers but greater assets" orientation, and the proportion of medium-sized and large companies had been on the rise, he said.

Meanwhile, foreign-invested enterprises saw the highest proportion of failed companies, while State-owned enterprises saw the lowest rate. The proportion of enterprises suffering losses grew during the 2008-09 economic crisis, especially in the manufacturing sector.

At the seminar, experts predicted a number of factors which would have an impact on businesses in 2011.

Institute for Business Development deputy director Nguyen Minh Tuan said lending interest rates would continue to be high, causing businesses headaches in accessing credit.

Agricultural products would continue to see rising prices due to persistent disease outbreaks, Tuan added.

Comments and forecasts from the seminar would be gathered by the institute for its Vietnamese Businesses' Annual Report for 2010.

Institute director Pham Thi Thu Hang said the report would include four major components: business climate, enterprise capacity, business restructuring, and major economic groups.
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