European Companies Remain Confident in Vietnamese Business Environment

European companies ended 2021 more positive and optimistic regarding the local trade and investment environment, according to the Business Climate Index (BCI) from the European Chamber of Commerce in Vietnam (EuroCham)

Jasmine Le

lehang1997hanu@gmail.com January 27, 2022 | 15:42

The BCI reached the highest point following the fourth wave of the Covid-19 pandemic, with positive sentiment reaching 61 points. This represents a jump of 42 points since quarter three of 2021, with business leaders welcoming the end of lockdowns and the re-opening of normal commercial operations, VOV reported.

Despite the BCI remaining below its pre-pandemic peak, there is clear evidence that confidence is returning to the market.

European Companies Remain Confident in Vietnamese Business Environment

Photo: Bao Phap Luat

The BCI is a regular barometer assessing the views of European business leaders and investors. Each quarter, EuroCham asks its over 1,200 members - including business leaders and investors in all sectors and industries - for their perceptions of the nation’s trade and investment environment and their predictions for the prospects of their own companies. Since 2020, the fieldwork for the BCI has been conducted by YouGov Vietnam.

Over half, 58%, of European business leaders are now anticipating economic stabilisation and growth in quarter one of 2022. This represents an eight-point rise in optimism, whilst less than one-in-five, 17%, now predict a deterioration, a figure which has almost halved since the last BCI.

Furthermore, business leaders are also more confident about the prospects of their own enterprises moving into the post-pandemic ‘new normal’. Therefore, 43% plan to increase their investment in the first quarter of the year, compared to just 17% three months ago.

Likewise, more than one-third, 38.5%, intend to increase their headcount - up around 15% - while over half, 51.5%, are predicting a rise in orders and revenue, an increase of 7.5% compared to quarter three.

Alain Cany, chairman of EuroCham, said “These latest figures are a vote of confidence in Vietnam’s trade and investment environment now that the pandemic is back under control as well as in the government’s clear direction that we learn to live with the virus.”

“Business leaders welcome the return to life as normal and business as usual, and in particular the easing of entrance requirements for vaccinated foreigners who live and work here. Almost 90% of our member companies reported that previous restrictions had an impact on their commercial operations. So, this new regulation will help to improve the business environment and increase the confidence of business leaders still further,” the EuroCham representative added.

Photo: VOV

“However, some sectors remain at risk of falling behind in the race to recover post-pandemic. Tourism - one of Vietnam’s spearhead economic sectors and one which is responsible for millions of jobs - remains restricted to guided tours, and this is keeping the brakes on economic growth. Therefore, we encourage the government to go further and faster in re-opening - at least in areas with high vaccination rates - so that Vietnam can achieve its full potential as a leader in this and other industries and attract more foreign investment in 2022,” he noted.

“Our data shows that confidence and optimism are returning as companies get back to work. European business leaders are planning to increase their staffing levels, investment plans, and revenues as a result now that the pandemic is back under control,” according to Thue Quist Thomasen, CEO of YouGov Vietnam.

“The challenge now is to capitalise on this positive sentiment and ensure that enterprises in all sectors and industries can operate to their full potential. In doing so, European businesses will be able to make their greatest possible contribution to Vietnam’s economic growth in 2022,” he emphasized.

In July, European business leaders also expressed confidence in Vietnam’s long-term prospects.

Before the fourth wave struck, the BCI had almost climbed back to pre-pandemic levels, reaching 73.9 in quarter one. However, the outbreak and the spread of new variants seen the Index fall almost 30 points in quarter two to 45.8. This was reportedly a significant drop, though not as steep as during the first outbreak of the pandemic in 2020.

The fourth wave has also led to increased pessimism about the short-term outlook of Việt Nam’s business environment. Just one-fifth of EuroCham members (19 per cent) believe that the economy will stabilise and improve in the next quarter. That’s down from almost two-thirds (61 per cent) in quarter one.

However, business leaders remained confident about the future prospects of their own companies. More than half (56 per cent) anticipate an improved or neutral performance in quarter three. And eight-in-ten (80 per cent) plan to maintain or increase their headcount and investment.

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Jasmine Le