July 01, 2022

[BCI Q2 2022] European Business Stakeholders’ Confidence in Vietnam’s Business Environment Declined Slightly Following Global Economic Uncertainty

[HO CHI MINH CITY, 1 July 2022] During the second quarter of 2022, European business stakeholders’ confidence in Vietnam’s investment environment declined slightly, according to the Business Climate Index (BCI) released by the European Chamber of Commerce in Vietnam (EuroCham) and conducted by YouGov Vietnam.

Following a first-quarter rise, the BCI dropped 4.4 points in the second quarter to 68.8 points. In contrast with earlier in the year, compounding factors such as the continuing war in Ukraine, commodity price spikes, and the ripple effect of China’s zero-COVID policy have dampened expectations among Vietnam’s European business community. Although the BCI has fallen, it remains 7.6 points higher than in the fourth quarter of 2021, when it measured 61.0 points.

The BCI is the leading indicator of the European business and investment community in Vietnam. To better understand the Vietnamese market, EuroCham invites its more than 1,200 members, representing virtually every sector of the Vietnamese economy, to provide quarterly updates on Vietnam’s business environment and forecasts for their own businesses in Vietnam. Researchers from YouGov Vietnam conduct the BCI research and compile the data.

Vietnam’s potential growth is also being viewed with less favour by European business leaders. 60 percent of respondents predicted that the Vietnamese economy would stabilise or improve in the third quarter of 2022, compared with 69 percent who held this belief entering the second quarter.

Additionally, participants were surveyed regarding foreign direct investment (FDI) in Vietnam. According to the findings, 45 percent of respondents were significantly or moderately satisfied with Vietnam’s efforts to attract and retain FDI, while 76 percent expected their company to increase FDI to Vietnam before the end of the third quarter. This may be due to the fact that 55 percent of respondents said Vietnam improved its FDI attraction and retention capabilities since the first quarter.

Positive views were expressed about Vietnam’s prospects for green growth as well. 79 percent of participants said their assessment of Vietnam’s green development potential improved from the first quarter. Regarding the link between green growth and FDI, nearly 90 percent of respondents believed Vietnam should increase green sector development to attract more foreign investment.

Furthermore, the survey identified barriers to European investment in Vietnam and trade between the two. 35 percent of respondents cited reducing administrative barriers as the most effective way to increase FDI, while 24 percent pointed to infrastructure development. Likewise, 45 percent of participants said administrative procedures impede their ability to utilise the EU-Vietnam Free Trade Agreement (EVFTA), demonstrating the difficulty foreign companies face in navigating Vietnam’s bureaucratic processes.

Commenting on the BCI, EuroCham Chairman Alain Cany said:

“Although the outlook for European business leaders has decreased since the last quarter, the factors affecting it are mostly beyond the Vietnamese government’s control. A perfect storm of external factors is contributing to global economic instability. This problem is not unique to Vietnam.”

“With this BCI, Vietnam’s path to improving its investment and business environment is clearly outlined. Green growth is the way of the future, not just because it will help build a prosperous foundation for Vietnam’s economy and people, but also because it will support the country’s transformation into one of the world’s strongest markets. Prime Minister Pham Minh Chinh’s COP26 commitments and the government’s National Green Growth Strategy show that the government is serious about making the changes necessary for a green transition.”

“Therefore, despite the global economic uncertainty, it is an incredibly exciting and promising time to do business in this country.”

CEO of YouGov Thue Quist Thomasen added:

“This BCI measurement clearly shows a small setback in Vietnam’s reopening and return to normal. However, Vietnam’s handling of the current situation is clearly a mitigating effect in the global economic context. The near target inflation rate and improvement in the country’s credit ratings are a strong testament.”

“As foreign investors’ confidence in the Vietnamese market remains stable in a turbulent time, more FDI is flowing into the country. Vietnam’s potential for green growth is also inspiring European investors. As a result, these BCI results should be interpreted positively, as should the Vietnamese market in general.”

About EuroCham Vietnam

The European Chamber of Commerce in Vietnam (EuroCham Vietnam) has remained the unified voice of the European business community in Vietnam since 1998. EuroCham Vietnam advocates on behalf of a plethora of sectors and companies ranging from SMEs to MNCs, and has a robust business network in both Vietnam and Europe. The organisation acts as a bridge for European companies interested in the Vietnamese market and Vietnamese companies considering European market expansion, helping both to utilise the full potential of the EVFTA.

EuroCham’s membership of more than 1,200 makes it one of the biggest foreign chambers of commerce in Vietnam. Its members directly employ more than 150,000 people across the Vietnamese economy.

EuroCham is also an umbrella chamber, counting among its membership nine European-affiliated business associations, including the Belgian-Luxembourg Chamber of Commerce, the Central and Eastern European Chamber of Commerce, the Chamber of Commerce and Industry Portugal-Vietnam, the Dutch Business Association, the French Chamber of Commerce and Industry, the German Business Association, the Italian Chamber of Commerce, the Nordic Chamber of Commerce, and the Spanish Chamber of Commerce in Vietnam.

For more information, or to request an interview, please contact Ms. Pham Minh Hien at eurochamhn@eurochamvn.org.
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