EuroCham Vietnam: Foreign Businesses' Confidence in Vietnam Increases

Strong confidence of European businesses in the Vietnamese economy was shown in the latest Business Confidence Index (BCI) for the first quarter of 2024 released by the European Business Association (EuroCham) in Vietnam.
April 11, 2024 | 13:37

Vietnam - Top investment destination

The report is the result of a survey of more than 1,400 EuroCham members in Vietnam in many different fields conducted by Decision Lab - an online market research and digital media measurement company in Vietnam. According to EuroCham, the report serves as an important tool to understand the perspectives of European companies and investors in the Vietnamese market.

In the first quarter, the Business Confidence Index (BCI) of European businesses in Vietnam reached 52.8 points. This is the first record with an index of more than 50 points in one quarter and the highest level since 2022. Thereby, it is a clear sign of growing confidence in Vietnam's European business community.

European businesses expressed optimism about Vietnam's economy, both in the short and long term, with sentiment turning positive in the upcoming quarter for the economy in general. The level of optimism increased by 6 points compared to the fourth quarter of 2023, to 45%, while the level of pessimism showed at 10%.

In addition, more than half of the businesses surveyed predict their number of orders and revenue will be higher in the second quarter of 2024. The employment outlook also shows stability when 40% of European businesses in Vietnam surveyed said they plan to expand their workforce in the second quarter. At the same time, investment confidence increased as the number of businesses planning to cut spending in the second quarter decreased to only 15% compared to 23% a quarter earlier. Looking to the long term, this optimism is reinforced, with 71% of businesses feeling positive about their long-term prospects in Vietnam over the next five years.

The skills of workers are an attraction for European investors to Vietnam
The skills of workers are an attraction for European investors to Vietnam (Photo: An Ninh Thu Do).

The investment environment needs improvement

According to the report, while external economic uncertainties, real estate difficulties, and supply chain risks pose some challenges, European businesses remain optimistic about the short-term recovery and long-term prospects in Vietnam's emerging market. As the country develops, the European business sector is ready to seize opportunities and support reforms to enhance Vietnam's competitive advantage.

Also, European businesses signal that they are likely to introduce Vietnam as a top investment destination. Up to 54% of businesses participating in the survey responded that they are likely to recommend Vietnam to other foreign businesses, ranking 8 or higher than 10. This emphasizes the increasing attractiveness. of Vietnam in the European business community, and also suggests the potential to increase Vietnam's position and attractiveness to investors.

Along with continuous efforts to improve the business investment environment of the Government, relevant ministries, branches and localities, Vietnam's highly skilled workforce is a major attraction for investors. According to the report, 75% of EuroCham members in Vietnam hire 76% or more of their staff locally. Also, in 2023, the BCI survey in the fourth quarter showed that 40% of businesses rated the qualifications of the workforce at an average level. Meanwhile, the strong recruitment trend in the first quarter survey of 2024 showed a solid talent base.

Although the confidence in the Vietnamese market is high, European businesses also point out shortcomings that need to be resolved and further improved. For example, legal barriers in Vietnam hinder market entry and long-term investment. Other shortcomings include administrative burden; regulations are unclear; licensing and licensing difficulties and work visa barriers. To attract more foreign investment, Vietnam should continue to implement a number of reforms. Accordingly, it is necessary to simplify management (37% of businesses polled called for reasonable procedures to easily enter the market and reduce bureaucracy); strengthen the legal framework (34% emphasized clear and consistent laws to create a predictable investment environment); improve infrastructure (28% favor improving roads, ports and bridges to support trade and logistics).

Another obstacle that European businesses in Vietnam are concerned about and want to be removed is work visas. Business representatives said that restrictive regulations (26% of businesses commented) have limited skills transfer and discouraged foreign expertise and capital from promoting growth in Vietnam.

The Chairman of EuroCham Vietnam Dominik Meichle said that addressing regulatory challenges is the key to fully realizing the economic potential in Vietnam. Simplifying procedures and establishing more transparent regulations will support the business community and strengthen economic partnerships between Vietnam and foreign countries in general.

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