Business registrations in Vietnam painted a contrasting picture in 2024, blending vibrant hues with somber tones. The number of newly-registered businesses was down compared to the same period of 2023, while over 100,000 businesses exited the market, casting a shadow over the year. Amid the challenges, however, the General Statistics Office (GSO) highlighted promising signs of recovery with each passing quarter. Bright spots emerged, fueled by the effectiveness of business support policies that not only bolstered the number of businesses but also inspired renewed investment in production expansion.

New entrants and re-entry at high rates

A key highlight was the positive impact of government support policies, which helped improve the outlook for both individuals and businesses. This is reflected in the combined high level of market entry (157,200 businesses) and re-entry (76,200 businesses) in 2024, which were 1.2-times higher than the 100,100 businesses that exited the market.

Another noteworthy point was the record number of businesses resuming operations after a period of temporary suspension, with over 70,000 doing so. This suggests that many businesses that had temporarily paused operations have now recognized new opportunities for reintegration after restructuring.

Furthermore, businesses in operation expanded production and other activities more so than in 2023, as evidenced by the substantial increase in registered capital, surpassing VND2,000 trillion ($80 billion) in 2024, a 3.6 per cent rise compared to 2023.

According to the GSO, this is one of the most positive indicators for Vietnam, showcasing the confidence of active businesses that have adapted to its economy. “Their investment demonstrates a clear belief in future opportunities,” the GSO noted.

Despite these positive signs, Ms. Phi Thi Huong Nga, Director of the Industry and Construction Statistics Department at the GSO, highlighted several concerns in the business landscape during 2024. Businesses continued to face numerous challenges, with the resources of individuals and enterprises showing signs of decline after enduring significant economic fluctuations. New business registrations fell 1.4 per cent compared to 2023, and in the last two months of the year the number of new market entrants saw a sharp decline year-on-year.

Rising raw material costs due to import price hikes put considerable pressure on production costs. Additionally, the growth of e-commerce has led many individuals to choose intermediary roles on digital platforms and e-commerce marketplaces, avoiding formal business setups to cut operational costs and maximize profits.

At the same time, more than 100,000 businesses temporarily suspended operations, highlighting persistent challenges. Lower domestic demand and purchasing power further complicated output, forcing many businesses to scale down production or temporarily halt business activities. Regions such as the Red River Delta, the southern region, and major growth hubs like Hanoi and Ho Chi Minh City all saw a decline in new business registrations over the course of 2024.

While significant achievements in exports, production, and FDI point to an overall positive trend in business development, challenges remain. The high number of market exits and persistent risks in the manufacturing sector reflect ongoing difficulties in the business environment.

Identifying challenges

Survey results from the GSO on manufacturing businesses in the fourth quarter of 2024 indicate that companies are facing numerous difficulties and are seeking government support to overcome them.

First, to ease input cost pressures and provide businesses with the necessary capital for operations, 42 per cent of survey respondents suggested that the government continue to bring down loan interest rates. Among sectors, the highest percentage of those calling for lower rates was in food processing, with 50.3 per cent, followed by wood processing and the production of wooden, bamboo, and rattan products (excluding furniture), with 50.1 per cent, and the production of non-metallic mineral products, with 47.3 per cent.

Second, 33.3 per cent recommended that the government take steps to stabilize raw material and energy prices to ensure businesses can continue operations without uncertainty. In particular, 40.2 per cent of companies in the non-metallic mineral products sector seek assistance in stabilizing prices, followed by 37.3 per cent in the food processing industry and 35 per cent in fabricated metal products (excluding machinery and equipment).

Third, 25.2 per cent of businesses called for administrative reforms, particularly in reducing processing times and simplifying bureaucratic procedures. This is especially evident in heavy industry, with 32.4 per cent of businesses in transportation equipment manufacturing, 31.5 per cent in electrical equipment production, and 30.7 per cent in electronics, computer, and optical product manufacturing advocating for such changes.

Fourth, businesses have urged the government to establish specific policies regarding land leasing for business operations, in a bid to ease the burden of rising land lease costs seen in 2024. This is especially critical in the southern region, with 18.5 per cent of businesses in Ho Chi Minh City and 24.1 per cent in nearby Dong Nai province raising concerns.

In addition to these recommendations, the GSO noted that businesses in the construction materials sector are calling for the government, ministries, and local authorities to implement policies that support the growth of the construction sector, ensuring stable and long-term markets for building material suppliers, particularly in steel production. These recommendations include securing the supply of materials, stabilizing raw material prices, providing financial assistance, enhancing transparency in bidding, cutting administrative red tape, ensuring timely land delivery for projects, and imposing penalties on investors who delay the settlement of construction-related debts.

Moreover, construction firms and contractors have urged the government and relevant bodies to expedite social housing projects, resolve legal hurdles for approving older projects, and create opportunities for smaller contractors to participate in local construction activities.

Solutions of focus

In light of the current challenges, the GSO proposed five strategic solutions to support the growth and development of businesses moving forward:

First, focus on stimulating domestic consumption by prioritizing the development of the local market. This includes effectively executing trade promotion programs and leveraging digital platforms and e-commerce to boost domestic consumption.

Second, place emphasis on fostering export growth and tapping into global markets to their full potential. This involves strengthening exports to major and emerging markets, maximizing the benefits of existing trade agreements, and diversifying import-export destinations. It is crucial to enhance trade promotion activities, improve supply-demand connections, eliminate barriers, and streamline export procedures, particularly in customs. Additionally, support is needed for businesses in adapting production to meet new export partner standards.

Third, ministries, sectors, and local authorities should work towards minimizing administrative procedures and compliance costs, ensuring the highest level of ease for businesses. Transition in from pre-clearance to post-clearance checks, eliminate unnecessary “permission-based” practices, and decentralize decision-making power to appropriate local and regional bodies to take responsibility for resolving issues.

Fourth, address the challenges and bottlenecks in administrative processes and legal regulations to improve the investment and business environment. Provide further cost-saving measures for businesses through continued implementation of tax exemptions, reductions, and deferrals such as VAT, corporate income tax, excise tax, environmental tax, and land rentals.

Fifth, accelerate the implementation of programs and solutions that foster business innovation, encourage digital transformation, and focus on inclusive digital growth. The program supporting private sector businesses for sustainable development from 2022 to 2025 aims to promote sustainable business models, foster inclusivity, and drive the transition to a digital and green economy.