The service sector has reported a strong growth, thanks to the rising number of enterprises, especially in education and training, administrative operations and entertainment.

The Viet Nam Business annual report 2016-17, released by the Viet Nam Chamber of Commerce and Industry (VCCI) in Ha Noi on Thursday, showed that the capacity of local companies has seen impressive growth in recent years.

The number of newly established firms in 2016 reached a record level of 100,000, bringing the total number of new firms in the 2007-16 period to around 802,000. The sharp surge in the number of new firms over the past two years has broken the trend of a gradual increase of 74,000 companies each year between 2011 and 2014.

The number of companies registered under limited and joint stock companies is also on the rise.

The report also revealed that in the 2007-15 period, three sectors - education and training, administrative services and entertainment - saw a high growth rate, of more than 20 per cent a year. The number of businesses in these sectors has increased by five times from 2007 to 2015. For example, the number of firms in the education and training sector rose from 976 in 2007 to 6,000 in 2015.

The growth of the service sector is an important trend for higher development, and thus is a positive sign for the economy, the report said.

However, new businesses in the agricultural, forestry and seafood sectors saw a low growth rate of six per cent, indicating that these sectors are not attractive despite their huge export potential. The proportion of companies in these sectors dropped from 1.61 per cent in 2007 to 0.87 per cent in 2015.

The report said that most enterprises are located in two regions: east-southern and Hong (Red River) Delta region, with the number of businesses rising from 38 per cent in 2007 to 41 per cent in 2015.

It also showed that state-owned enterprises (SOEs) have low effectiveness of capital utilisation and bear huge losses. Foreign direct investment (FDI) companies incurred the highest losses of up to 51 per cent in 2008 and 50 per cent in 2009. However, FDI firms have continued to expand their production and increase their investment, raising the question of transfer pricing.

It stated that effective capital utilisation of businesses has been on a downward trend, with a sharp decrease in 2009 partly because of the global financial crisis.

Pham Thi Thu Hang, VCCI’s general secretary, said this has been an alarming reality for Vietnamese firms as the 2007-11 period saw a decrease in capital utilisation despite higher investment, causing “hot”, unsustainable growth, and waste of investment.

Hang said the government should offer solutions, especially in corporate governance, to support small- and medium-sized enterprises and help them improve their effectiveness. — VNS