European investors upbeat about Vietnam’s business landscape

Inside a company at Yen Phong Industrial Park, Bac Ninh province (Photo: VNA)

Confidence among the European businesses operating in Vietnam is showing signs of resilience as the latest Business Confidence Index (BCI) from the European Chamber of Commerce in Vietnam (EuroCham), conducted by Decision Lab, reached 46.3 points in the fourth quarter of 2023.

EuroCham Chairman Gabor Fluit commented that there was definitely a positive trend underway, and while there was a long way to go for a full recovery, businesses were feeling more hopeful.

“The European business community is increasingly optimistic that the most challenging economic period is now behind,” he said.

The last quarter of 2023 saw a marked increase in satisfaction among the businesses, with firms confident in their current situation rising from 24% in Q3 to 32% in Q4.

In Q4, Vietnam’s investment hotspot status increased significantly. An impressive 62% of those surveyed ranked Vietnam among their top ten global investment destinations, with 17% placing it at the very top. This strong endorsement was matched by 53% of respondents anticipating increased foreign direct investment (FDI) in Vietnam by the end of that quarter.

Last year, the potential of the EU – Vietnam Free Trade Agreement (EVFTA) was increasingly realised by businesses. By Q4, a significant 27% of companies reported experiencing “moderate” to “significant” benefits from the agreement, a marked increase from just 18% in Q2.

They said the foremost advantages of the trade pact were “tariff reductions or eliminations” (42%), “increased market access to Vietnam" (27%), and “improved competitiveness in Vietnam” (25%), indicating substantial economic impacts.

However, the BCI survey also revealed challenges in fully leveraging the EVFTA’s potential. About 13% of the respondents cited “uncertainty or lack of understanding of the agreement” as a primary obstacle, suggesting a need for more clarity and education around the agreement’s provisions.

Gabor Fluit said that amidst increasing economic competition in the region and the world, Vietnam should work to complete its policy and strategy so as to lure and maintain foreign direct investment from Europe.

He suggested vital areas to focus on are simplifying administrative procedures, investing in infrastructure to reduce logistics costs, and upgrading the skills of the workforce.

Along with the EVFTA, other bilateral and regional trade pacts are expected to play a key role in transforming the current economic recovery into long-term and balanced growth, he said, adding throughout this ongoing process, EuroCham Vietnam committed to playing a supportive role.

Meanwhile, Decision Lab CEO Thue Quist Thomasen said Vietnam’s long-term economic trajectory suggests a promising path of continued growth, while in the short and medium term, the country is showing its trademark ability to deliver a stable business climate even in turbulent times.

The fifth quarterly measurement within the range of 40-50 index points demonstrated the continued stability and potential improvement in 2024 will underpin the case for further FDI in the country, he added.

The outlook for Q1 of 2024 is also positive, with 29% of enterprises viewing their business prospects as “excellent” or “good” – a sign of diminishing concerns as extreme worries fell from 9% to 5%. Up to 31% of companies plan to expand their workforce in Q1, and 34% intend to increase their investments. The statistics signal a strong momentum for growth and opportunity as Vietnam begins 2024.

The quarterly BCI serves as a vital tool for understanding the perceptions of European and Europe-related companies and investors in the Vietnamese market. Since 2011, the BCI has collected feedback from EuroCham Vietnam’s extensive network of 1,400 members across a perse range of sectors, providing valuable insights into the current business landscape in Vietnam and offering a glimpse into future expectations./.