Dam says that high bank interest have directly resulted in many firms going under, minus a few small-sized businesses. Inefficient usage of capital has made it difficult for enterprises to access credit, he said.
Minister Vu Duc Dam, Chairman of the Government Office
According to a Government report released in March, upwards of 2,200 enterprises have filed for bankruptcy during the first quarter of 2012, while another 9,700 are considering temporarily ceasing operations.
At the same time, the number of new businesses registering for licenses has also been high, with 15,300 in the same period.
Dam said that the increasing number of bankruptcies and businesses slowing or ceasing operations altogether is reflects the state of the economy. He added, however, that most of these cases involve smaller sized businesses, and do not have a great effect on the labour market.
Quality versus quality
Dam said, "It's a fact that there are many companies who do not have access to bank credit as a result of the high interest rates. But part of the problem stems from the firms themselves. Many are not capable of presenting sound business strategies."
The minister also reveals that there have been a number of firms registered for operation for many years but made no revenues at all. And now they filed for bankruptcy.“The establishment and dissolution of businesses is nothing new. The Government's role here is to provide an environment that does not place priority on the number of firms operating, but to facilitate those which operate efficiently," Dam said.
He added that, in order to create such an environment there should be comprehensive policy reforms that would address issues such as access to bank loans, tax extensions and the streamlining of administrative procedures.
“The Government has asked the Ministry of Finance and other agencies to coordinate to propose a tax extension plan. But such a tax extension should only apply to enterprises who make profits and pay taxes. There should be separate measures taken to assist insolvent companies," he said.
