The European Chamber of Commerce in Vietnam (EuroCham) on July 10 announced its Business Confidence Index (BCI) report for Vietnam in the second quarter of 2023, showing a 9% increase in the number of business leaders who positively assess their business prospects for the third quarter of 2023 compared to their assessment for the second quarter, VNA reported Monday.

BCI figures through the years.

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

It said that businesses are prudently assessing the landscape, focusing on optimizing revenue and orders, with a marginal increase of 4% in the proportion of companies anticipating a decline in these areas.

Additionally, there is a proactive approach, as 7% more companies plan to carefully manage investments in the upcoming quarter. It is intriguing to note that despite these challenges, workforce planning remains stable, reflecting a resolute commitment to maintaining stability regardless of the prevailing conditions.

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

Nevertheless, Vietnam remains firmly positioned among the top five investment destinations for over one-third of the businesses, underscoring its enduring appeal, it said.

Panasonic Life Solutions Vietnam in Vietnam - Singapore Industrial Park, Binh Duong province. Photo: VNA

In the current cautious business climate, respondents highlight regulatory reforms and the availability of skilled labor as crucial drivers for their companies’ growth, it said, adding that 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 businesses surveyed 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.

Commenting on the BCI, EuroCham Chairman Gabor Fluit said that Vietnam’s economy relies heavily on manufacturing and exports, and it has taken a big hit from the tough global situation. This decline in exports and orders has had a major impact on European businesses and the overall business community. The BCI clearly shows this current gloomy outlook, he said.

To address these challenges, the Vietnamese government has swiftly taken practical steps, particularly by expediting key infrastructure projects. EuroCham commends these efforts, which will surely bring a substantial long-term boost to the economy, he stated.

By taking prompt and comprehensive action, Vietnam can not only attract foreign investment but also ensure a resilient economy capable of overcoming future obstacles, he said, stressing that EuroCham is fully committed to providing support through ongoing dialogue and policy consultations every step of the way.

Earlier, the BCI report released by EuroCham and produced by Decision Lab in April, highlighted that Vietnam's draw as a FDI destination remains strong among European business leaders, with 3% more European business stakeholders citing it as one of their top three investment hotspots worldwide.

The business environment outlook for 2023 is displaying promising signs of betterment. Specifically, the number of respondents who are sanguine about the nation's economy has risen by 8 points, signaling a growing faith in its prospects, it said.

According to the survey, the number of individuals expecting a downturn in the economy decreased by 6%, while that of those forecasting an upturn in revenue and orders increased by 7%.

The survey results also indicate that the European business and investment community is broadly content with the level of attention policymakers have given to business needs in Vietnam, with a third of respondents expressing significant or moderate satisfaction. This positive feedback is a testament to the government's ongoing commitment to fostering a business-friendly environment in the country.

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