New business formation speeds up as economy slows

July 27, 2009

Though the national economy has fallen into difficulties, forcing a lot of businesses to scale back production, the number of newly-registered businesses has been increasing sharply, not only in big urban areas, but even in mountain regions.

Fashion shops, fastfood shops and cafés continue to pop up like mushrooms.  All need business premises

Tran Thien Trang, the young director of a newly-established real estate company, related that she  had just wrapped up a big deal. In only three days, Trang’s ‘Houselink’ firm had found a villa near the center of HCM City fit for a Canadian family of four to lease.


Houselink is owned by five ‘8X’ professionals – people of the 1980’s generation — who all have many years’ experience in the real estate sector.


“Because we well understand our clients and our own strengths, we decided to focus on the brokerage service in the immediate time. We act as go-betweens for leasing houses to foreigners,” Trang said.


“The demand in the market segment is very big , Trang added. “It’s a good niche for us.  Big companies disdain to perform such services, while foreign clients do not want to contact individual brokers, who they fear are not professional and hence risky.”


Another new real estate company, Skydoor, also owned by a group of ‘8X’ founders, aims to earn money serving the foreign retailers who are flocking to Vietnam.


Skydoor Marketing Director Bui Nguyen Huyen Trang said that though other business fields have become stagnant in the last year, fashion shops, fastfood shops and cafés continue to pop up like mushrooms.  All need business premises. This has brought a lot of opportunities to real estate brokerage firms.


At the newly founded Viet Duc Trade and Transport Service Co., Director Vo Thanh Quyen said that the market has recovered since early June after a difficult period.  “We believe that the situation will continue to improve.  There’s a lot of demand,” he added.


Quyen is a young businessman who thinks it is better to invest right now to take full advantage of lower start-up costs.  He has purchased 200 trucks to carry goods between north and south.


Gov’t’s demand stimulus package helps


Local planning and investment departments have reported sharp increase in the number of new businesses. The website of the HCM City Planning and Investment Department reports that 13,500 businesses were set up in the first six months of the year.


Some were good-sized businesses, set up with registered capital of 100 billion dong (about $56,000), while some businesses claimed only 10 million dong ($555) in capital.


A sharp increase in new company registrations is also evident in the Central Highlands.  The number of companies registered business in Lam Dong Province in the first half of 2009 was equalled the 2007 total.  The figure in Dac Lak’s first half was equal to 2/3 of 2008. In Gia Lai, where typically only a few dozen businesses are set up each year, 200 businesses were established just in the first half of 2009.


Dang Xuan Ha, a senior official of the Dac Lak Planning and Investment Department, said that the increase of newly set up businesses has coincided with the implementation of the demand stimulus package. The businesses told us that they want to take full advantages of the Government’s interest rate subsidy programme.


The Lam Dong, Gia Lai and Kon Tum province authorities also said that the demand stimulus package motivated a lot of household size businesses and workshops to incorporate as limited liability companies.


These new businesses mainly operate in the fields of agricultural processing, fertilizer and agricultural machinery.


Dr Nguyen Dinh Cung, Deputy Head of the Central Institute for Economic Management (CIEM), said that opportunities are always available in a developing economy like Vietnam.


“I know a lot of young people who were staff of big international groups, but have quit their jobs to develop their own businesses,” Cung said.



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