Vietnam Sets Record for Newly Established Firms in Early 2024

As reported by the Business Registration Management Agency (BRMA) under the Ministry of Planning and Investment (MPI), nearly 65,000 firms were established in Vietnam during the first five months of 2024. This represents the highest number ever recorded, showing a 4.5 percent increase from the previous year. The most popular industries for new businesses were transport and warehousing; wholesale, retail, car, and motorbike repair; and electricity, water, gas production, and distribution.

Overview

According to the data released at the end of May, 64,758 enterprises entered the market between January and May 2024. The average registered capital per business was over US$365,500, marking a 1.2 percent rise from the same period in 2023. Moreover, 34,067 companies resumed operations in the same period, bringing the total number of new and revived businesses to 98,825, an increase of 4.1 percent compared to the previous year.

However, the BRMA highlighted that the recovery remains fragile, with 97,299 businesses exiting the market during the same timeframe, although this number represents a 10.5 percent year-on-year decrease. The agency attributed the modest recovery to ongoing challenges in the business environment, including political tensions and global market volatility.

In May alone, the BRMA reported 13,297 new market entries and 6,749 re-entries, while 11,391 enterprises withdrew from the market.

Detailed Analysis of Business Activity in Early 2024

Vietnam saw growth in new enterprise establishment in 10 out of 17 sectors during the first five months of 2024 compared to the same period in 2023. The leading sectors were:

• Transport and Warehousing: Increased by 20.8 percent.

• Wholesale, Retail, Car and Motorbike Repair: Grew by 11.2 percent.

• Electricity, Water, Gas Production, and Distribution: Rose by 9.4 percent.

Conversely, sectors like accommodation and food services experienced a 15.1 percent decline in new company formations, while healthcare and social assistance activities decreased by 16.2 percent.

Most new firms registered capital below VND 10 billion (approximately US$393,043), making up 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 areas, saw an increase in new business registrations from January to May 2024 compared to the same period last year.

These new enterprises collectively employed 426,381 people, a 5 percent increase from the same period in the previous year.

Vietnam’s Economic Outlook in Early 2024

For a comprehensive understanding of Vietnam's economic trajectory, it’s important to consider 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, raising over US$23.5 billion. This accounted for 64.2 percent of the total and marked a 39.9 percent increase year-on-year.

From January to February 2024, foreign-invested businesses recorded a trade surplus of US$8.25 billion. The Vietnam Chamber of Commerce and Industry (VCCI) also noted promising investment prospects in technology innovation and digitalization, renewable energy (particularly solar and wind power), and the med-tech and healthcare sectors.

Vietnam’s First Trade Deficit in Two Years

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

The majority of imports in the first five months of 2024 were machinery, tools, equipment, and materials for production and business, making up about 88.8 percent. Experts downplayed the negative impact of the trade deficit, emphasizing the potential for a rebound in domestic production. During the January-May period, Vietnam enjoyed a trade surplus of US$8.01 billion, with imports valued at US$148.76 billion, up 18.2 percent year-on-year.

Nguyen Cam Trang, Deputy Director of the MoIT’s Agency of Foreign Trade, noted that both domestic and foreign-invested sectors reported growth in exports, indicating a recovery in 2024. The textile and apparel sector also saw positive signs, with several enterprises securing enough orders for the third quarter. This could explain why imports of cotton, fabric, yarn, and other raw materials grew by 14.32 percent compared to the previous month.

State Priorities for Industry and Economy in 2024

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

The Vietnamese 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 on January 5, the government outlined 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.”

Key tasks for 2024 include promoting the green growth strategy, reducing and simplifying administrative procedures and business regulations, land reform, diversifying import markets, maintaining fiscal discipline, promoting tourism, accelerating industrial restructuring, and developing highly qualified talents in biotechnology, artificial intelligence, chips, and semiconductors.