An analysis of business performance in the first nine months of the year, based on data recently released by the General Statistics Office, shows a widening gap between positive growth in production and trade and the underlying health of the business sector.
The number of newly established and reactivated enterprises fell 3.2 percent year on year. While fewer businesses temporarily suspended operations or halted activities while awaiting dissolution, the number completing dissolution procedures surged nearly 119 percent, suggesting that more enterprises are moving from temporary inactivity to permanent closure. New business registrations also declined in two major sectors: manufacturing and processing, and wholesale and retail trade.
Business exits stem from two main groups of factors. The first relates to state management and may be viewed positively, reflecting the tax identification number cleanup campaign, which accelerated the dissolution of shell companies and the revocation of tax codes for businesses that had long been inactive. The second is more concerning, involving high compliance costs, limited access to credit and a defensive business mindset that has prompted companies to scale back operations.
Externally, domestic businesses face mounting pressure from cross-border e-commerce and the rapid expansion of foreign retail groups. Meanwhile, manufacturers are grappling with increasingly stringent requirements, including carbon border adjustment mechanisms, environmental, social and governance (ESG) standards, fire safety regulations and emissions controls. Many domestic small and medium-sized enterprises (SMEs) lack the financial resources and technology needed to meet these requirements.
Strengthening Vietnamese enterprises is therefore essential, but policymakers must find ways to protect domestic businesses while maintaining an investment climate that attracts high-quality foreign direct investment (FDI).
Nguyen Dinh Cung, former president of the Central Institute for Economic Management (CIEM), said many countries have introduced technical barriers and equitable tax measures to ensure fair competition between imported and domestically produced goods.
Proposed measures include ending value-added tax (VAT) exemptions for low-value imports worth less than VND1 million purchased through cross-border e-commerce, as well as tightening inspections of product quality, food safety, technical standards and origin at bonded warehouses and border crossings. According to Nguyen Dinh Cung, applying technical standards equally to all goods circulating in the market is consistent with World Trade Organization (WTO) rules.
Vietnam should also strengthen mechanisms linking FDI incentives to localization commitments. Corporate income tax incentives and land rental concessions for major foreign investors should be tied to meaningful technology transfers and the use of Tier-1 and Tier-2 suppliers wholly owned by Vietnamese entities. Such measures would help domestic enterprises become more firmly integrated into global value chains.
Other priorities include establishing credit guarantee funds and green transition support funds to ensure fairer access to support across different types of enterprises. The State could share lending risks and provide technical and financial advice to help domestic SMEs upgrade production facilities and meet environmental standards.
Digital transformation should also be encouraged, while accounting and tax procedures should be simplified for household businesses transitioning into formal enterprises. These reforms should be pursued without relying on rigid administrative enforcement that could discourage businesses from making the transition.
By combining WTO-compliant technical controls, FDI incentives tied to domestic economic linkages and targeted support for local enterprises, Vietnam can strengthen its domestic market while continuing to attract high-quality foreign investment.
