BUSINESS REGISTRATION UPDATE IN APRIL AND THE FIRST FOUR MONTHS OF 2021

I. Factors affecting business registration in the first four months of 2021

The Government's direction to prevent and control the Covid-19 pandemic continues to be highly effective. Vietnam has vaccinated more than 128 thousand people out of a total of nearly 1 million received doses of vaccine. The expectation is that this year our country will receive 60 million doses of vaccine. In the first quarter of 2021, GDP growth increased by 4.5% year-on-year, equivalent to the fourth quarter of 2020. Although still lower than in pre-pandemic years, this growth rate has reflected an excellent recovery process of the economy. The ability of enterprises to adapt to the pandemic situation flexibly has improved markedly. Enterprises have proactively planned to respond to the pandemic under many different scenarios, thereby maintaining business operations and helping the economy not suffer a deep degradation and be ready for the pandemic recovery process.

The political situation in the country is stable, the 11th session of the XIV National Assembly has been held successfully and completed all of the program's content, the state apparatus system for the new term has been consolidated. The Government and the Ministry of Planning and Investment (MPI) have spread the "Start-up" spirit, digital transformation, innovation in small and medium-sized enterprises. This orientation is very suitable for the current pandemic context, promoting family growth, increase the number of businesses that develop in-depth.

ACCA (the Association of Chartered Certified Accountants) and IMA (the American Association of Management Accountants) have conducted a Global Economic Conditions Survey (GECS) in the first quarter of 2021. The participation of more than 1,000 Senior accountants and high level financial experts in the world showed that the Economic Confidence Index in the first quarter of 2021 increased the most since they started this survey ten years ago.

According to the report "World Economic Outlook" published at the opening session of the Spring Conference of the International Monetary Fund and the World Bank on April 8, 2021: Vietnam's economy had achieved a strong foundation when in 2020, Vietnam's financial results are better than many other countries during the pandemic period, with GDP growth of 2.9%, thanks to drastic solutions both in terms of economy and health of the Government.

In addition, the financial statements of the leading enterprises listed on the stock exchange in 2020 and the first quarter of 2021 both have increased profits, which has created confidence for new businesses to enter the market.

The macroeconomic situation has seen many positive changes along with the effectiveness in disease control, the expectation of economic prospects due to the completion of the signing of the Free Trade Agreement and Investment Protection between the two countries. Three factors: Vietnam and the EU (EVFTA and IPA); the progress of disbursement and construction of critical public investment projects has accelerated; the wave of investment and trade shifting that aim to spread risks from the US-China trade conflict - that have positively impacted the business registration situation in April and the first four months of 2021.

II. Business registration update in the first four months of 2021

1. Enterprises entering and re-entering the market

1.1. Newly established enterprise

The number of newly-established enterprises in the first four months of 2021 is 44,166 - increasing 17.5% over the same period in 2020. This is the highest number of newly-established enterprises in the first four months over the years so far. Compared to the negative business development situation due to the impact of the Covid-19 epidemic in the first four months of 2020 (the number of newly registered businesses during this period decreased by 13.2% compared to the same period in 2019), this is a very positive signal. The increase in the number of newly registered businesses continues to show the recovery trend of the economy and the business community's confidence in the economic development prospects in the coming time.

Besides the efforts of the business community, the business environment improving and supporting methods implemented vigorously recently are the factors that help achive the above results. According to the assessment in the Report "Vietnam Business Environment Reform Program: An Enterprise Perspective" conducted by the Vietnam Chamber of Commerce and Industry (VCCI), in 11 areas of Resolution 02, "Setting up a business" area is the most appreciated area, with 72.5% of businesses rating that there is a good or very good change. The time for business registration and business start-up has decreased continuously since 2014 and will continue to be improved thanks to the newly issued regulations on interoperability of administrative procedures.

The total registered capital added to the economy in the first four months of 2021 is 1,420,581 billion VND (an increase of 26.1% over the same period in 2020). The registered capital of newly established enterprises is 627,721 billion VND (a rise of 41.0% over the same period in 2020). This number is also the highest recently registered capital in the first four months over the years so far. There were 14,931 operating enterprises registered to increase prosperity in the first four months of 2021 (an increase of 27.2% over the same period in 2020). The additionally registered capital of operating enterprises reached VND 792,860 billion VND (increasing 16.4% over the same period in 2020). The average registered capital per enterprise in the first four months of 2021 reached VND 14.2 billion VND, increasing 20% over the same period in 2020.

The total number of newly established enterprises' registered employees in the first four months was 340,265 employees, up 7.8% compare to the same period in 2020.

- Segmentation by field of activity:

The number of newly registered enterprises increased in all business lines.

The fields with a substantial increase in new registration: Real estate had 2,727 enterprises (up 56.5%); Human health and social work activities had 329 enterprises (up 41.8%); Other service activities had 433 enterprises (up 37.9%); Education and training had 1,282 enterprises (up 32.4%) and Transportation and storage had 2,117 enterprises (up 31.1%).

The industries with the number of newly registered enterprises accounted for the most significant proportion: Wholesale and retail trade; repair of motor vehicles, motorcycles had 14,694 enterprises (accounting for 33.3%); Construction had 5,737 enterprises (accounting for 13.0%) and Manufacturing had 5,649 enterprises (accounting for 12.8%).

- Segmentation by capital size:

The number of newly established enterprises increased in all five capital sizes: Newly established businesses mainly concentrated in the scale from 0 to 10 billion VND with 39,147 enterprises (accounting for 88.6%, up 15.9% over the same period in 2020); the scale from 10 to 20 billion VND had 2,416 enterprises (accounting for 5.5%, up 24.0% over the same period in 2020); the scale from 20 to 50 billion VND had 1,337 enterprises (accounting for 3%, up 31.0% over the same period in 2020); the scale from 50 to 100 billion VND had 622 enterprises (accounting for 1.4%, up 43.0% over the same period in 2020); the scale of over 100 billion VND had 644 enterprises (accounting for 1.5%, up 52.2% over the same period in 2020).

1.2. Resumed operation enterprise

The number of businesses returning to operation in the first four months of 2021 was 19,256, increasing 8.0% over the same period in 2020.

Some fields had a sharp increase in the number of businesses returning to operation at the end of the first four months of 2021: Other service activities (276 enterprises, accounting for 1.4%, up 27.8% over the same period in 2020); Real estate (597 enterprises, accounting for 3.1%, up 25.4% over the same period in 2020); Manufacture and distribution of electricity, water, gas (158 enterprises, accounting for 0.8%, up 17.0% over the same period in 2020); Employment activities; Travel; Renting and leasing of machinery and equipment and Other supporting services (1,095 enterprises, accounting for 5.7%, up 16.4% over the same period in 2020); and Scientific and technical activities; Consulting and design services; Advertising and Other professional activities (1,340 businesses, accounting for 7%, up 13.5% over the same period in 2019).

The number of enterprises returning to operation in the first four months of 2021 decreased in 04/17 fields: Financial, banking and insurance activities (174 enterprises, accounting for 0.9%, down 13% over the same period in 2020); Agriculture, forestry and fishing (256 enterprises, accounting for 1.3%, down 12% over the same period in 2020); Arts, entertainment and recreation (163 businesses, accounting for 0.8%, down 3% over the same period in 2020) and Mining and quarrying (168 enterprises, accounting for 0.9%, down 0.6% over the same period in 2020).

2. Enterprises withdrawing from the market

The data of enterprises entering and returning to the market tend to be positive. However, the pandemic impacts on the economy are still persistent, reflected in the increasing number of enterprises withdrawing from the market, especially small-scale enterprises group. Many businesses still choose the solution of continuing to wait, temporarily suspending operations to listen and review market movements, look for new ideas and directions, or wait to implement supportive policies from the State. Then they will decide to continue or dissolve the business, not "closed" the business entirely at this time.

In April, businesses complete the final settlement and submit financial statements, so many previously troubled companies have completed procedures to switch to a state of waiting for dissolution. This also affects the number of businesses withdrawing from the market.

In addition, according to the survey results in the Provincial Competitiveness Index Report (PCI) 2020 published on April 10, 2021, conducted by VCCI, the Covid-19 pandemic has negatively impacted a wide range of industries. More than 87% of enterprises, including domestic and FDI private companies, said they faced many difficulties due to Covid-19.

Therefore, the number of enterprises withdrawing from the market in the first four months of 2021 continued to increase to 51,496 companies, increasing 23.3% over the same period in 2020. There were 28,349 temporarily suspending operating companies, accounting for 55.1% of the total number of enterprises withdrawing from the market in the first four months of 2021.

2.1. Enterprises temporarily suspending business

There were 28,349 enterprises suspending business in the first four months of 2021, increasing 24.9% over the same period in 2020.

The number of businesses suspending business in the first four months of 2021 increased in all 17 sectors: Manufacture and distribution of electricity, water, gas (269 enterprises, up 128%); Human health and social work activities (89 businesses, up 56.1%); Education and training (606 enterprises, up 49.6%); Mining and quarrying (181 enterprises, up 40.3%); Real estate (842 enterprises, up 35.2%); Scientific and technical activities; Consulting and design services; Advertising and Other professional activities (1,878 businesses, up 34.5%); Employment activities; Travel; Renting and leasing of machinery and equipment and Other supporting services (1,752 enterprises, up 32.6%) and Information and communication (627 enterprises, up 30.1%).

Enterprises registered to suspend business mainly concentrated in the scale from 0 to 10 billion VND with 25,919 enterprises (accounting for 91.4%, up 24.1% over the same period in 2020); the scale of 10 - 20 billion VND had 1,366 enterprises (accounting for 4.8%, up 39.2% over the same period in 2020); the scale from 20 to 50 billion VND had 664 enterprises (accounting for 2.3%, up 29.2% over the same period in 2020); the scale from 50 to 100 billion VND had 230 enterprises (accounting for 0.8%, up 13.9% over the same period in 2020) and the scale of over 100 billion VND had 170 enterprises (accounting for 0.6%, up 49, 1% over the same period in 2020).

The enterprises temporarily ceased business in the first four months of 2021 mostly have a short operating time. Mainly are enterprises with 0-5 years of operation with 14,940 enterprises (accounting for 52.7%); 7,284 enterprises were operating for 5-10 years (accounting for 25.7%) and 6,125 enterprises were operating for more than ten years (accounting for 21.6%).

2.2. Enterprises waiting for dissolution procedures

There were 16,403 enterprises waiting for dissolution procedures in the first four months of 2021, increasing 17.5% over the same period in 2020.

Compared to the same period in 2020, the number of enterprises waiting for dissolution procedures increased in 15/17 fields. The business lines with the largest number of enterprises awaiting dissolution are Wholesale and retail trade; repair of motor vehicles, motorcycles (5,946 enterprises, accounting for 36.2%); Construction (1,976 enterprises, accounting for 12%) and Manufacturing (1,908 enterprises, accounting for 11.6%).

Segmentation by capital size, enterprises waiting for dissolution procedures increased in 4/5 size mainly concentrated in the scale from 0 to 10 billion VND with 14,822 enterprises (accounting for 90.4%, up 18 % over the same period in 2020); the scale of 10 - 20 billion VND had 774 enterprises (accounting for 4.7%, up 18.7% over the same period in 2020); the scale from 20 to 50 billion VND had 410 enterprises (accounting for 2.5%, up 6.8% over the same period in 2020); the scale from 50 to 100 billion VND had 186 enterprises (accounting for 1.1%, down 1.6% over the same period in 2020) and the scale of over 100 billion VND had 211 enterprises (accounting for 1.3%, up 26.3% compared to the same period in 2020).

2.3. Enterprise dissolved, ceased to exist

The number of enterprises that dissolved or ceased to exist in the first four months of 2021 was 6,744 enterprises, increasing 32.2% over the same period in 2020.

In 17/17 main business lines, the number of dissolved and terminated enterprises increased. The fields with a high rate of dissolved and terminated enterprises compared to the same period in 2020 are Manufacture and distribution of electricity, water, gas (240,5%); Mining and quarrying (100%) and Agriculture, forestry and fishing (58.6%).

In the first four months of 2021, the number of dissolved or terminated enterprises which have operating time from 0 to 5 years was 4,525 (accounting for 67.1%); 1,172 enterprises were from 5 to 10 years (accounting for 17.4%) and 1,047 enterprises were more than 10 years (accounting for 15.5%).

By size of capital, the number of dissolved and terminated enterprises increased in 4/5 of the capital size, mainly concentrated in the scale from 0 to 10 billion VND with 6,024 enterprises (accounting for 89.3%, up 31.7% over the same period in 2020); the scale of 10 - 20 billion VND had 367 enterprises (accounting for 5.4%, up 42.2% over the same period in 2020); the scale from 20 to 50 billion VND had 203 enterprises (accounting for 3%, up 53.8% over the same period in 2020); the scale from 50 to 100 billion VND had 78 enterprises (accounting for 1.2%, up 23.8% over the same period in 2020) and the scale of over VND 100 billion VND had 72 enterprises (accounting for 1.1%, down 4 % over the same period in 2020).

We can see that most enterprises that had to suspend their business temporarily and were dissolved or ceased to exist were young and small-scale enterprises. They are very vulnerable to negative external influences.

III. Business registration update in April 2021

1. Enterprises entering and re-entering the market

1.1. Newly established enterprise

Following the business registration situation in the past years, businesses often choose to enter the market in April. Except for April 2020, companies were affected by the implementation of social distancing. Not an exception to that rule, April 2021 has reached a record so far with the number of newly registered enterprise was 14,866 (up 88.5% over the same period in 2020, which surpassed the record milestone of 14,854 enterprises as of April 2019) and the registered capital was 179,873 billion VND (increasing 91.7% over the same period in 2020).

The number of registered employees of newly established enterprises in April 2021 was 94,617 employees, up 31.4% over the same period in 2020.

1.2. Resumed operation enterprise

April 2021 recorded 5,745 businesses returning to operation, increasing 50.8% over the same period in 2020.

2. Enterprises withdrawing from the market

In April 2021, 11,747 businesses withdrew from the market, up 61.6% over the same period in 2020, including:

• 4,598 enterprises registered to suspend their business, up 11.6% over the same period in 2020;
• 5,608 enterprises are waiting for dissolution procedures, up 158.9% over the same period in 2020;
• 1,541 enterprises were dissolved or ceased to exist, up 57.2% over the same period in 2020.

Source: Agency for Business Registration