EuroCham: Vietnam Continues to Draw Foreign Investment

The latest Business Confidence Index by the European Chamber of Commerce in Vietnam (EuroCham) has revealed that the country is an attractive destination for foreign investors.

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The European Chamber of Commerce in Vietnam (EuroCham) has released its Business Confidence Index (BCI) report for Vietnam in the second quarter of 2023. The report shows a 9% increase in the number of business leaders who have a positive outlook on their business prospects for the third quarter of 2023 compared to their assessment for the second quarter.

EuroCham: Vietnam Remains Attractive for Foreign Investors
BCI figures through the years.

In the second quarter, there was a modest decline of 4.5 points in European business confidence towards the Vietnamese market. The current score of 43.5 reflects prevailing market conditions, according to the report.

The report indicates that businesses are prudently assessing the landscape and focusing on optimizing revenue and orders. There is a marginal increase of 4% in the proportion of companies anticipating a decline in these areas.

Additionally, 7% more companies plan to carefully manage investments in the upcoming quarter. Despite the challenges, workforce planning remains stable, reflecting a commitment to maintaining stability regardless of the prevailing conditions.

The report underlines that Vietnam continues to attract foreign investors, with 48% of respondents expecting an increase in their company’s foreign direct investment (FDI) in the country next quarter. However, a total of 40% of businesses express no plans for elevated FDI, marking a 4% increase from the previous BCI.

Nevertheless, Vietnam remains among the top five investment destinations for over one-third of the businesses, demonstrating its enduring appeal.

EuroCham: Vietnam Remains Attractive for Foreign Investors
Panasonic Life Solutions Vietnam in Vietnam – Singapore Industrial Park, Binh Duong province. Photo: VNA

In the current business climate, respondents highlight regulatory reforms and the availability of skilled labor as crucial drivers for their companies’ growth. Regulatory reforms are deemed the primary factor contributing to the growth in the service sector, while the manufacturing sector places significant emphasis on the availability of skilled labor.

The survey reveals that over half of the surveyed businesses have benefited from the European Union-Vietnam Free Trade Agreement (EVFTA). Among these beneficiaries, 35% of business leaders have reported gains from tariff reductions. Despite these gains, businesses continue to face challenges in fully capitalizing on the agreement, with administrative procedures and a lack of understanding remaining the main barriers to full capitalization.

EuroCham Chairman Gabor Fluit commented on the BCI, stating that Vietnam’s economy has taken a hit from the tough global situation, resulting in a decline in exports and orders. Fluit commends the Vietnamese government for taking swift action, particularly by expediting key infrastructure projects, which will bring long-term boosts to the economy. EuroCham is fully committed to providing support through ongoing dialogue and policy consultations.

Earlier reports also highlighted Vietnam’s attractiveness as an FDI destination among European business leaders, with more stakeholders considering it as a top investment hotspot worldwide. The current business environment outlook for 2023 is displaying promising signs of improvement, with a growing faith in the nation’s prospects.

The survey results indicate a decrease in individuals expecting a downturn in the economy and an increase in those forecasting an upturn in revenue and orders. The European business and investment community is broadly content with the level of attention policymakers have given to business needs in Vietnam, with significant satisfaction expressed by a third of respondents. This positive feedback reflects the government’s commitment to fostering a business-friendly environment in the country.

Hannah Nguyen