European Businesses Confident about the Current Conditions and the Future of the Vietnamese Market

EuroCham has released the results of Business Climate Index (BCI) for Quarter 3 – 2016.
The index is 86, increased 10 points from 77 of last quarter

The sentiment of European business in Vietnam when it comes to the conditions for business in the Vietnamese market in the last quarter is very positive. According to the responses to the latest EuroCham Business Climate Index (BCI) survey, 71.5% of the respondents described their current business situation as “excellent” and “good”. Only 5.5% classified the present state of the market as “not good”, while there were no responses describing it as “very poor”.

Chart  1 Current business situation

For the future, a positive perception is also what the results indicate, with 16.5% of responses being “excellent” and 64.2% “good”, in regards to Question 2: Based on the business performance of recent Quarters, what is the Business Outlook for your Enterprise in the next quarter?. Only 2.7% of responses were negative.

Chart  2 Business Outlook for next quarter

In regards to the macroeconomic outlook for Vietnam in the next quarter, EuroCham members are confident that macroeconomic stability is likely to continue, with almost 60% of the respondents expecting “stabilisation and improvement”. Only 4.6% of respondents expected deterioration. The number of respondents that expect no change in the country’s macroeconomic outlook suffered a 3.2% increase from last quarter and is now close to the 40% mark.
In regards to headcount, the number of businesses expecting to maintain the current size of their workforce was roughly 42%, decreasing 8% when compared to last quarter. On the other hand, around 52% declared their intention to increase their number of employees, of which approximately 16% said to be willing to hire significantly in the near future. The number of businesses manifesting intention to reduce their number of employees was only 2.8%.

Chart  3 Expected headcount in the next quarter

Most responding businesses intend to maintain their level of investment in the country, with this group representing roughly 41% of the total. However, those who intend to increase their investment are not far away from the latter number with 39% willing to invest more, and 17% planning to invest significantly as the results show. Divesting businesses were marginal, with less than 1% stating their intention to do so, a marked drop from 7% last quarter.

Chart  4 Expected Investment plan in the next quarter

This EuroCham BCI included a new section, where questions regarding Green Growth were also included.
The first question asked the survey recipients how important the availability of clean and renewable energy is to their business. Responses were balanced, with “very important” at 20.4%, “important” at 29.6%, “slightly important” at 26.9%, and finally “not important at all” at 23.10%.
In the second question, the BCI survey enquired companies on whether rising air pollution levels in Vietnam could encourage them to move their business outside of the country. A majority of almost 58% responded negatively to the question and roughly 18% stated that they could consider doing so. 25% were unsure.
The final question of this section was the most complex: Which regulatory changes do you think would have the strongest impact to attract foreign investment in the clean and renewable energy sector? Here the respondents were given a set of options, with “Favorable conditions for investors in clean and renewable energy field” preferred by the majority with almost 30%; closely followed by “Tax incentives” with 27%. “Liberalisation of the state-controlled electricity sector” was chosen by 20% of the respondents, while “attractive feed-in tariffs” was seen as the solution by roughly 18%. The least highlighted were “Access to financing for renewable energy project” and “Other” regulatory changes, scoring around 3% each.

Chart  5   Which regulatory changes do you think would have the strongest impact to attract foregin investment in the clean and renewable energy sector?

EuroCham Chairman Michael Behrens commented:The results for Quarter 3 2016 show positive expectations for the near future and consistent satisfaction with the present situation. EuroCham members maintain a positive view on the Vietnamese market and their business operations in the country, a result which does not differ from our last survey. This is a good sign for the current implementation of the EU-Vietnam Free Trade Agreement, which is expected to strongly enhance European business and investment.
The specific questions on Green Growth in this Business Climate Index are linked to a topic which EuroCham has been working on extensively in recent months, and a field of activity which had its highlight in our event with the UN Envoy for Climate and El Nino Dr. Mary Robinson this past September. I believe the results can serve as useful insights for both EuroCham’s advocacy work and policy-making in Vietnam.

Chair of EuroCham Green Growth Sector Committee Tomaso Andreatta commented: According to results, EuroCham members who participated in the BCI survey of 3rd quarter 2016 agreed that the availability of clean and renewable energy is important to their operations in Vietnam. The Government of Vietnam has promulgated some regulations on clean energy; however, there is currently no ‘renewable energy law’ that coordinates the development of the sector. There is also still no specific plan for the development of renewable energy, apart from the targets in the overall Power Master Plan VII, which, with all our applause, have been revised upwards. Individual regulations have been issued for wind, hydropower and waste-to-energy but not for yet for solar, which it is still under discussion. Eurocham has recently published a survey conducted among all the companies currently interested in solar energy in the region that shows that the Solar Decree can be further improved to allow investment to start.  EuroCham would be pleased to support the Vietnam Government prepare and implement all necessary regulations and to continue to encourage an open discussion among all parties interested in order to bring the best practice to Vietnam.

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