Vietnam remains among the world's top investment destinations: EuroCham Chairman

EVFTA, EVIPA usher in a new era inVietnam - EU investment trade: EuroCham Chairman

EuroCham Business Climate Index

The EuroCham Business Climate Index (BCI) reported by the European Chamber of Commerce in Vietnam (EuroCham) and provided by YouGov Decision Lab shows that the level of confidence of European companies investing in Vietnam fell to 48 points in the last quarter decreased by 14.2 points compared with three previous months and down 25 points from the first quarter of 2022.

Though Vietnam's economy grew by 5.92% in the fourth quarter year-on-year and 8.02% for the whole year, this data came amid continued global economic volatility resulting from factors, including a slowdown in global growth, interest rate hikes, sustained inflation and bruised consumer confidence. As a result, only 27% of respondents expect the economy to stabilise and improve in the first quarter of this year. Moreover, the number of respondents predicting an economic recession also doubled.

Decision Lab CEO Thue Quist Thomasen also said that in the fourth quarter of 2022, fluctuations in the banking and real estate sectors in Vietnam affected foreign investors' sentiment. However, not all sectors are volatile, as economic sectors directly dependent on domestic consumption have a more positive outlook.

EuroCham Chairman Alain Cany said that although the difficult situation may continue in 2023, Vietnam's economic opportunities exceed its regional and international competitors. This is evident from the fact that many of EuroCham's members consider Vietnam central to their global investment strategies.

"Foreign direct investment from Europe and worldwide remains high and continues to grow, especially in Vietnam's green industries and manufacturing. Motivated by the FDI capital, strong economic foundation and sustainable commitment of Vietnam, the country is still among the top investment destinations in the world. Therefore, the European firms still believe in the Vietnamese market," Cany said.

According to BCI results, 41% of respondents said their companies are moving operations from China to Vietnam, an increase of 13% in the third quarter. In addition, about 35% of respondents ranked Vietnam among the top five global investment destinations for their companies, with 12% saying that Vietnam was their firm's top investment site internationally.

However, EU firms' representatives said three barriers to their operation in Vietnam include unclear rules and regulations, administrative issues, and visa and work permit difficulties.

According to experts, European foreign investment in Vietnam in the coming time will be strongly affected by Europe's new trade policies when prioritising digital transformation and developing the green economy. Therefore, to attract FDI from the EU, Vietnam should build an appropriate policy framework and reduce difficulties in administrative procedures.

Regarding the EU-Vietnam Free Trade Agreement (EVFTA), the survey found that about half of the respondents believe that the EVFTA is related or very related to business activities.

The businesses also said that new-generation free trade agreements positively impact the development and financial health of businesses through tariff reductions and the strength of supply chains. In addition, some business representatives said that EVFTA helps customers benefit from tax reductions, so they tend to order in Vietnam.

The BCI results also show concerns about EVFTA's administrative procedures, lack of understanding about the agreement and technical trade barriers have decreased.