There were 98,825 businesses established or returning to operations in the first five months of 2024, 4.1 per cent higher than in the same period of 2023 and 1.2-times the average of 83,109 in the same period from 2019 to 2023, according to a report from the Agency for Business Registration at the Ministry of Planning and Investment. This is the first time this year that the number has exceeded the number of businesses exiting the market, which totaled 97,299 in the period.

Though it may be still too early to claim that the business sector has returned to trends seen previously, the data since the beginning of the year clearly indicates a positive shift in registrations.

The number of businesses exiting the market in January was 53,888, or more than double the 27,335 entering the market or returning to operations. However, by February, March, and April, the gap had narrowed to 21,880, 14,090, and 5,105 businesses, respectively. In May, the trend finally reversed, with the number of businesses exiting the market being fewer than those entering, by over 1,500.

Positive signs

The Agency for Business Registration reported that several indicators in the business registration landscape improved significantly during the first five months of the year. Growth in newly-registered businesses in May was 9.2 per cent year-on-year, which is the highest rate in the previous four months and second only to January’s 24.8 per cent this year. As a result, the number of new businesses in May surpassed 13,000, bringing the total in the first five months to 64,758, a 4.5 per cent increase year-on-year and 1.1-times the average of 56,604 in the 2019-2023 period.

The Agency tallied 6,749 businesses returning to operations after a temporary suspension, up 13.4 per cent compared to the same period of 2023. In total, 34,067 businesses returned to operations in the opening five months of the year, a 3.3 per cent increase year-on-year and 1.3-times the average of 26,504 in the 2019-2023 period.

Alongside the rise in number, the registered capital of newly-registered enterprises in the first five months totaled VND601.22 trillion ($23.57 billion), marking a 5.7 per cent increase compared to the same period of 2023. However, total capital during the period was VND1,268.1 trillion ($49.73 billion), or a 9 per cent decline year-on-year, due to a significant 19.2 per cent fall in additional registered capital from existing businesses, of VND666.885 trillion ($26.15 billion), suggesting that investors remain cautious.

Another positive is that average registered capital per business in the first five months stood at $9.3 billion ($364,706), a 1.2 per cent increase compared to the same period of 2023.

Small enterprises dominate

The figures from the Agency for Business Registration show that the majority of newly-registered enterprises are small in scale. Among the 17 sectors surveyed, ten witnessed a year-on-year surge in new enterprises in the first five months. Leading this growth were sectors such as warehouse transport (up 20.8 per cent), wholesale and retail, and automobile and motorcycle repair (11.2 per cent), and the production and distribution of electricity, water, and gas (9.4 per cent).

Conversely, several sectors posted declines in the number of newly-registered enterprises in the period, particularly accommodation and food services, by 15.1 per cent, and healthcare and social affairs 16.2 per cent.

Of significance is that the majority of new enterprises are characterized by their small-size, with many having initial capital of less than VND10 billion ($392,156). They also constitute 92.2 per cent of the total, up 5 per cent year-on-year. These businesses primarily operate in the service sector, which accounts for 75.2 per cent of newly-registered entities, up 4.6 per cent. Following closely were those in the industrial and construction sectors, comprising 23.8 per cent of the total and up 4.2 per cent.

Among Vietnam’s regions, most demonstrated an increase in the number of registered enterprises compared to the same period of 2023, except for the north-central and central regions. Notably, the northern region saw the most significant increase, of 12 per cent, with 3,407 new businesses.

In terms of jobs, the total number of workers needed by newly-registered enterprises in the opening five months reached 426,381, or a 5 per cent increase year-on-year.

Many businesses leaving

After experiencing a 6.1 per cent decline in business withdrawals in April, the rate rose a slight 0.8 per cent in May. Nevertheless, this increase is notably subdued compared to January, (22.8 per cent, February (15.8 per cent), and March (16.9 per cent).

Obstacles encountered by businesses in the early months of 2024 have contributed to the rise in the number of those withdrawing, which stood at 97,299, or a 10.5 per cent increase compared to the same period of 2023. According to regulatory agencies, the majority of these, or 67.9 per cent, chose to temporarily suspend operations.

The number of businesses temporarily suspending operations now stands at 66,072, a substantial 19.7 per cent increase compared to the same period of 2023. A considerable proportion of these have operated for less than five years, totaling 29,169 businesses, or 44.1 per cent. They were mostly of small scale, with 59,078 businesses, or 89.4 per cent, up 19.9 per cent year-on-year.

Meanwhile, there were 23,262 businesses awaiting dissolution in the five-month period, down 8.8 per cent year-on-year. Most are also of small-scale, totaling 20,386 businesses, or 87.6 per cent, down 9.6 per cent.

There were also 7,965 businesses that actually dissolved, marking an 8.4 per cent increase compared to the same period of 2023. Notably, 13 of the 17 major business sectors saw an increase in dissolutions year-on-year. The majority, or 5,621 businesses (70.6 per cent), also had short periods in operation, of less than five years, and were primarily small in scale, at 6,951, or 87.3 per cent of the total, up 10 per cent against the same period of 2023.

On average, around Vietnam and in all sectors, 19,500 businesses withdrew from the market each month for a host of differing reasons.