HCM City (VNA) – Ho Chi Minh City has applied several measuresto boost the development of enterprises, including turning business householdsinto companies.

Experts said there are three main sources for business development –newstartup firms, existing enterprises expanding their operation and businesshouseholds developing into companies.

However, the success ratio of startups is low, meaning they make modestcontributions to growth in the number of businesses. Meanwhile, existing firmsare likely to improve their quality rather than multiply in number. Therefore,the city has put much stock in switching business households into companies, aquick way to increase the quantity of local enterprises.

Developing companies from business households has been integrated intobusiness development policies of the city, including a programme to support newcompanies launched by the municipal Tax Department in May 2017.

After a year of implementation, the programme has assisted more than21,000 startups and companies that began as household businesses. But the HoChi Minh City Tax Department also pointed to difficulties in encouraginghouseholds to form companies, explaining the low ratio of transformation.

Most of the households are small scale with instable operation, whilethe owners find accounting and tax declaration procedures complicated.

The department reported that after a year, only 3,100 businesshouseholds had turned themselves into companies, lower than the target and muchunder the total 36,200 business households with potential to become companies.

Nguyen Nam Binh, Vice Director of the department, said the households havelimited awareness of the Law on Enterprises and modest knowledge and skills inbusiness management. They maintain the habit of doing small business without payingattention to receipts or tax policies. Moreover, becoming companies means thehouseholds must pay more taxes and insurance premiums, added Binh.

Binh stressed that regulations in accounting and tax declaration arecomplicated, especially for small firms.

Experts asserted that transforming business households into companiesbenefits both businesses and the economy, as the policy urges the Government toimplement more measures to improve the business environment and speed upadministrative reform.

However, one of the obstacles hindering households from formingcompanies is the increase in legal obligations and indirect costs. A lack of businessmanagement skills also makes business households less confident to develop intocompanies.

At the same time, the high percentage of enterprises that close everyyear also showed that businesses still face many difficulties in theiroperation, they said.

The Ho Chi Minh City’s Statistics Office revealed that in the first sixmonths of 2018, the city granted licences to 20,194 enterprises with registeredcapital of 226.1 trillion VND, up 8 percent in quantity but down 10.4 percentin capital.

Also in the first half of 2018, 1,145 enterprises were dissolved, while2,920 others halted their operations.

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce andIndustry, said the number of firms quitting the market was high, which reflectsthe abundance of difficulties they face.

Only by solving problems from administrative procedures, businessconditions as well as weaknesses in technology and management, will give thecity hope for a  high rise in the numberof businesses and low ratio of bankruptcy, he stated.

Economist Huynh Thanh Dien also mentioned that enterprises can onlydevelop in a favourable environment with fair competition as well as supportingtools related to storage, logistics, production site, finance andtelecommunications.

He said that Ho Chi Minh City should roll out solutions to boost the improvementof all the factors to facilitate businesses’ growth.

On the other hand, the city should help business households recogniseopportunities when becoming companies, while taking advantage of the guidingrole of big firms for small and medium-sized ones by fostering links in technology,vocational training and capital, he added.-VNA