European Businesses remain Confident in Long-term Investment in Vietnam

	71% of European businesses expect increases in revenue in Q4
	Binh Phuoc Province Seeks Investments from EU Businesses

Vietnam remains attractive to European businesses

According to EuroCham Vietnam board member Hoang Tri Mai, EuroCham has released the Business Confidence Index (BCI) report for the third quarter of 2024. Accordingly, despite the exogenous challenges from the recent Typhoon Yagi and global economic fluctuations, Vietnam's BCI increased significantly, from 45.1% in the third quarter of 2023 to 52% in the third quarter of 2024, marking a strong recovery of Vietnam's business environment.

Vietnam is attractive to foreign investors.

“One of the main reasons for this improvement is the strong belief in Vietnam’s ability to maintain a stable macroeconomic environment and promote green initiatives, especially with its commitment to renewable energy and the Direct Power Purchase Agreement (DPPA). Nearly 40% of businesses have benefited or expect to benefit from the DPPA, showing enthusiasm for Vietnam’s policy innovations,” said Hoang Tri Mai.

According to Mai, In the context of a volatile global macroeconomic environment, Vietnam’s growth of 7.4% in the third quarter of 2024 is considered an outstanding achievement. The Government’s efforts to stabilize inflation, support exports, and improve infrastructure have created a premise for international investors.

According to the BCI results for the third quarter of 2024, more than 69% of European businesses remain optimistic about long-term investment in Vietnam. Despite the obstacles, business expansion plans remain promising, with nearly 80% of businesses saying they already have 1 to 3 offices or production facilities in Vietnam.

“Of the businesses that shared their expansion plans, more than half intend to expand their operations, with many planning to develop new production facilities in the North or open additional offices in key cities such as Hanoi, Ho Chi Minh City, Da Nang and Can Tho”, added Hoang Tri Mai.

EuroCham representative said that in the first 9 months of 2024, total FDI capital in Vietnam increased by 11.6% compared to the same period in 2023. In addition to the solutions proposed by the Government such as cutting logistics costs and improving infrastructure, Vietnam can continue to simplify administrative procedures and improve the quality of highly qualified human resources, helping to create a favorable environment for high-tech sectors and towards the goal of sustainable development.

Despite certain difficulties after Typhoon Yagi, Vietnam's economy is still assessed to have recovered quickly. The Government has plans to rebuild and support affected industries, especially agriculture and logistics, aiming for GDP growth of 6.5-7% by the end of 2024. These are the driving forces for Vietnam in attracting FDI, including FDI flows from Europe.

Still barriers to overcome

Although the assessment of the investment and business environment as well as business prospects in Vietnam is quite positive, the BCI survey in the third quarter of 2024 also showed that the three biggest obstacles in the operations of European enterprises in Vietnam are administrative burden, unclear regulations and difficulties in obtaining licenses.

According to statistics, 66% of businesses currently employ between 1% and 9% of foreign employees, while 6% of businesses have over 20% of foreign employees. Although businesses show a desire to exploit the full potential of domestic and international labor resources, they still face many barriers in recruiting Vietnamese workers, including a lack of necessary skills and experience, high turnover rates, and limited training resources.

For foreign experts, European businesses believe that the main challenges come from the visa and work permit application process, along with difficulties in obtaining the necessary documents and approvals.

This issue is especially serious when up to 1/3 of businesses participating in the survey said that they had negative experiences with the visa system in Vietnam, causing many international experts to be concerned about entering the Vietnamese labor market. In addition, businesses also noted difficulties related to tax procedures and compliance with fire prevention and fighting regulations... Accordingly, in the coming time, Vietnam needs to continue improving its investment and business environment to increase its attractiveness to European investors.

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