Vietnam Sets Record for Newly Established Firms in the First Five Months of 2024

Posted by Written by Vu Nguyen Hanh Reading Time: 4 minutes

According to the Business Registration Management Agency (BRMA) of the Ministry of Planning and Investment (MPI), nearly 65,000 firms entered Vietnam’s market in the first five months of 2024, marking the highest record ever with a 4.5 percent year-on-year increase. The top industries attracting new enterprises during the period were transport and warehousing; wholesale, retail, car, and motorbike repair; and electricity, water, gas production, and distribution.

Per reports published at the end of last May, a total of 64,758 enterprises entered the Vietnam market from January to May 2024. The average registered capital per business was over US$365,500, up 1.2 percent compared with the same period of 2023.

Additionally, the operations of 34,067 firms resumed in the country during the first five months of 2024. The resumption of activity help to push the total number of new and revived businesses to 98,825 firms, rising 4.1 percent over the same period last year.

However, the BRMA noted that the recovery was still weak as the country also saw 97,299 businesses withdraw from the market in the same period, though this number was 10.5 percent decrease year-on-year. The agency explained that adversities in the business climate were the reason for the modest rebound, especially as firms were struggling to adapt to political tensions and market volatility worldwide.

In May alone, the BRMA estimated that the number of firms that newly entered or re-entered the market was 13,297 and 6,749, respectively, while 11,391 enterprises withdrew from the market.

Analyzing business activity in the first five months of 2024

Going into more detail, Vietnam recorded an increase in newly established enterprises in 10 out of 17 sectors in the first five months of 2024 compared to the same period in 2023.

The top industries that experienced a rise in newly established enterprises were:

  • Transport and warehousing, which ranked first, rising 20.8 percent.
  • Wholesale, retail, car and motorbike repair, which increased 11.2 percent.
  • Electricity, water, gas production, and distribution industries, which climbed 9.4 percent.

The total number of new companies set up in accommodation and food services decreased the most, by 15.1 percent, while those undertaking healthcare and social assistance activities were down 16.2 percent.

The majority of new firms have registered capital below VND 10 billion (approx. US$393,043), constituting 92.2 percent of the total, amounting to 59,729 businesses. (US$1=VND25,442.51).

Geographically, most regions in Vietnam, except for the north-central and central coastal regions, saw an increase in new business registrations from January to May 2024 compared to the same period last year.

Those enterprises also employed a total workforce of 426,381 people, marking a 5 percent increase compared to the same period one year ago.

Vietnam’s economic outlook in 2024: January to May

For a broad understanding of Vietnam’s economic trajectory, businesses and investors should pay attention to FDI and trade trends.

Most-invested industries in Vietnam

According to Vietnam’s Foreign Trade Agency, the processing and manufacturing industry attracted the most capital from investors in the first two months of 2024. The sector was able to raise above US$23.5 billion in investments, accounting for 64.2 percent of the total and marking a 39.9 percent increase year-on-year.

Foreign-invested businesses had a trade surplus of US$8.25 billion from January to February, 2024.

Additionally, the Vietnam Chamber of Commerce and Industry (VCCI) highlighted that investment prospects had brightened up for several sectors, including technology innovation and digitalization, renewable energy with emphasis on solar and wind power, as well as med-tech field and other healthcare-related industries.

Read more: Vietnam’s Total Foreign Investment Climbs to US$9.27 Billion in Four Months: GSO

Vietnam posted its first trade deficit after two years

In May, Vietnam recorded its first trade deficit in two years following a continuous period of trade surplus. The Ministry of Industry and Trade (MoIT) attributed this to increased imports of major materials, worth US$33.81 billion, a 12.8 percent increase year-on-year. Meanwhile, export turnover rose by only 5.7 percent to US$32.81 billion, resulting in a trade deficit of roughly US$1 billion.

Most of the imports in the first five months of 2024 were machinery, tools, equipment and materials in service of production and business, standing at about 88.8 percent.

Experts downplay the negative impact of the May trade deficit. In contrast, they emphasize that the trend showed the possibility of rebounding domestic production activity. Moreover, in the January-May period, Vietnam had enjoyed a trade surplus of US$8.01 billion, with imports valued at US$148.76 billion, up 18.2 percent.

Nguyen Cam Trang, Deputy Director of the MoIT’s Agency of Foreign Trade, notes that both domestic and foreign-invested sectors reported growth in exports, signaling their recovery in 2024.

The textile and apparel sector also saw reason for optimism as several enterprises received enough orders for the third quarter. It could explain why in May, imports of cotton, fabric, yarn, and other raw materials grew by 14.32 percent compared to the previous month.

State priorities for the industry and economy in 2024

FDI enterprises have been tasked with leading the implementation of the Green Growth Strategy for the period 2021-2030, with a vision to 2050 approved by the Prime Minister. This includes promoting the adoption of ESG (short for environmental, social, and governance) measures in production and business.

The Vietnam Government has designated 2024 as a year of acceleration and breakthrough to effectively carry out the socio-economic development plan for 2021-2025. In Resolution 01/NQ-CP-2024 issued January 5, the government outlines the main tasks and solutions for implementing the socio-economic development plan and state budget estimate for 2024. The theme for this year is “responsible discipline, proactive innovation, creative creation, and sustainable efficiency.”

The Vietnam Government has identified several important tasks for 2024, which include promoting the green growth strategy, the reduction and simplification of administrative procedures and regulations on business, land reform, diversification of import markets, maintaining fiscal discipline, promoting tourism, accelerating industrial restructuring, and developing highly qualified talents in the sectors of biotechnology, artificial intelligence, chips, and semiconductors, to mention a few.

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