European businesses show more trust in Vietnam

15:35 | 05/03/2014 Economy

(VEN) - On February 25, the European Chamber of Commerce in Vietnam (EuroCham) announced the results of the 14th quarterly survey on the Business Climate Index (BCI) in Vietnam in the first quarter of 2014. Survey results show that business confidence and outlook among European businesses in Vietnam have significantly increased.

EuroCham said that the BCI of the first quarter of 2014 went above the midpoint and reached 59 points, up nine points. The rise is attributed to sales increases achieved by European businesses around the Lunar New Year (Tet) period, their decreased fear of inflation and more confidence in the macroeconomic outlook as well as expectations from the Vietnam-EU Free Trade Agreement (VEFTA) which is being negotiated.

Optimistic outlook

Compared to the results of the last survey on the BCI of the fourth quarter of 2013, the number of respondents assessing their current business situation as positive has jumped from 38 percent to a very strong 45 percent. This finding is supported by how respondents assess their sales and level of business activities in the last 12 months compared to previous years. Although a considerable percentage of respondents found the last 12 months to have been less profitable, 42 percent found 2013 to have been more profitable.

Looking to the future, the business outlook for respondents has equally experienced a considerable improvement with members having positive expectations rising to 49 percent, significantly higher than last year’s 30 percent. This positive outlook, according to EuroCham, might be linked to European businesses’ hope for the VEFTA to be signed soon as well as their expectations from the successful resolution of a number of issues from the EuroCham Whitebook and the continued strong collaboration with the Vietnamese government.

The positive trend of expected number of business orders has continued, reaching 70 percent, higher than the last quarter’s 67 percent. At the same time, the level of respondents expecting a reduction of business orders has remained relatively low, 15 percent. In line with this development, reported investment plans have remained positive, with 78 percent of respondents intending to keep or increase their investment levels; 48 percent expecting to increase their headcounts and a mere 16 percent expecting to reduce their workforce.

Stronger belief

European businesses have become more confident of the macroeconomic outlook in Vietnam, with 47 percent of respondents expecting ‘stabilization and improvement’ of the situation and 23 percent fearing a further deterioration. The number of respondents expecting inflation to have a ‘significant or threatening impact’ on their business remains limited, 29 percent, compared to last year’s 45 percent. Respondents forecast the inflation rate in Vietnam would stand at 3.68 percent compared with 4.69 percent in the last quarter.

Respondents clearly expressed their belief that the various economic and administrative challenges facing Vietnam will be positively addressed in the coming time. The areas of improvement deemed to have the biggest impact on the European business community include legal and administrative matters, infrastructure and education.

Besides, the size of the market and consequent business opportunities, labor costs and the relatively young population were found to be other factors encouraging European businesses to continue their investments in Vietnam.

EuroCham Executive Director Csaba Bundik said, “The BCI going above the midpoint in the first quarter of 2014 is indeed great news. This is a very healthy sign, as it demonstrates that European companies are regaining trust in the Vietnamese market. However, it is also important to note that the BCI could decrease again if the Vietnamese government does not make further reform efforts to improve the investment and business environment as well as to resolve problems facing the business community and European businesses in Vietnam in particular.”/.

Lan Ngoc