Eurocham upbeat about Vietnam’s business climate

The survey, conducted in May 2014 by the European Chamber of Commerce in Vietnam (Eurocham), reveals that the BCI is back to its 2011 levels-having gone from last quarter’s 59 to 66, which demonstrates the European business community’s commitment to the Vietnamese market.  

It is expected that the continued positive development of the BCI is linked not only to the ongoing trade negotiations, such as the EU-Vietnam free trade agreement (FTA) but also the creation of ASEAN Economic Community in 2015.

“Our members have a strong belief in the Vietnamese market and are very hopeful of a strong implementable FTA,” said EuroCham Chairwoman Nicola Connolly. “As EuroCham, we will continue to work with the Government of Vietnam and the European Union to ensure that the final agreement will provide practical benefits for our members in the years to come.”

EuroCham Executive Director Csaba Bundik noted “EuroCham will remain our effort and collaboration with Vietnamese Government to address issues to our business both within and outside the remit of the EU-Vietnam FTA to ensure the best possible business climate for our members.”

European companies have high hopes of cashing in on the EU-Vietnam free trade agreement when the trade pact is due to be signed in the coming months.

In line with the creation of an ASEAN Economic Community, the BCI survey asked respondents to evaluate Vietnam’s competitive advantages against other ASEAN countries across a number of different criteria. According to the findings, competitive labour cost was perceived as one of the main reasons for EuroCham members to settle their businesses in Vietnam.

On the other hand, one should note that a comparatively high percentage of respondents assessed Vietnam as being less competitive in terms of infrastructure (75%) and legal/administrative system (80%).

In terms of internal market developments supporting the increased BCI, the survey finds that increased investment plans, positive perception of business situation and business outlook could also be counted.

Compared to the results of last quarter’s BCI, the amount of respondents assessing their current business situation as positive has remained relatively stable at 44% -compared to 45% last quarter and last year’s 43%.

In addition, the number of respondents remain negative perception has comparably declined from 29% to 21%

However, in order to maintain that positive trend, Eurocham proposed that the Vietnamese government take into consideration a number of concerns, including the hiring of foreign staff and experts at European companies.

According to the survey, only 16% of respondents found that lack of skilled labour in Vietnam would not have an impact on their business. At the same time, 50% found that this particular issue would have a serious impact on their companies.

The business outlook has seen a continued qualification with responses having positive assessment rising above the midpoint to an impressive 57% compared to last quarter 49% and last year 44%.

This quarter has shown a high expectation from the European business community in terms of the resource of strong implementation of FTA. In addition, the new online Customs VNACCS/VCIS system is deemed to be positive by almost relevant respondents (75%).

The positive trend of increasing investment plans has come back with 81% of respondents intending to maintain or increase their investment level, compared to last quarter’s 78%.

The trend also transfers into the recruitment plans, with the number of respondents expecting to increase their headcounts continuing to increase – from 48% last quarter to 55% this quarter. The number of respondents expecting to reduce their workforce has further diminished - 11% compared to last quarter 15%.

After a dip in the expected level of inflation last quarter (3.68%) the inflation level is now back to earlier expectations, with members having guesstimated it at around 4.26% this quarter. Respondents remain somewhat confident in the macroeconomic outlook, with 46% expecting ‘stabilisation and improvement’ of the situation (slightly lower than last quarter) and 26% fearing a further deterioration. The part of respondents expecting a deteriorating has slightly increased from the 23% last time.