48% of European firms expect to expand Vietnam investment: EuroCham

A survey conducted by EuroCham has found that 48% of European businesses expect to increase their investments in Vietnam by the end of the next quarter, the commerce chamber said in its Business Confidence Index (BCI) report for the second quarter of this year.

The companies affirmed their viewpoints regardless of the Vietnam’s worsening BCI of 43.5, lower than the 45 recorded during the banking crisis in Q4/2012.

The BCI has fallen from 73 in Q1/2022. The score of 43.5 is only higher than 26.7 and 33.6 in Q1 and Q2 of 2020, when the first Covid-19 lockdowns occurred in the country; and 15.2 and 18.3 in Q3 and Q4 of 2021, when lockdowns kicked in again due to the fourth wave of the pandemic.

Even though the BCI fell to 43.5 in Q2/2023, 30% of businesses expected the economy to stabilize and improve in the next quarter, up from 28% in Q1/2023, but 37% expected the economic situation to deteriorate in the next quarter, up from 32%.

Out of the 48% of businesses that expect to increase their investments, 3% are looking to invest significantly, 13% moderately, 16% slightly, and 16% marginally. Meanwhile, 40% responded with “not at all”, up by four percentage points versus Q1/2023.

Regarding Vietnam’s ranking as an investment destination, 49% rated Vietnam in the top 10, including 14% as top, 9% as top two-three, and 13% as top four-five. Only 13% responded with “no planned investment”.

For Vietnam to improve FDI attraction, the top factors according to European businesses were “enhancing the regulatory environment,” “improving infrastructure,” and “improving access to financing”. The lowest-ranking factors were “increased political stability and security” and “increased quality and availability of skilled labor”.

The most common obstacles were unclear rules and regulations with 53% of respondents, up from 51% in the previous quarter; administrative issues and difficulties with 50%, up from 44%; and visa and work permit difficulties with 25%, down from 31%.

Regarding major events or initiatives affecting businesses, 37% raised concerns related to the global minimum tax (GMT). For the personal data protection decree, 42% said they had inadequate understanding.

About visa and work permit for foreign workers, 17% reported no difficulties, 34% noted significant issues, and 49% cited difficult but manageable issues. The biggest challenges are lengthy processing times, clarification of the need to employ foreign workers, and matching educational backgrounds and job requirements.

Pertaining relocation from China to Vietnam, 81% said they have not relocated any of their operations yet. Meanwhile, 3% are considering and 2% are actively planning to relocate.

Only 38% of respondents said the power shortages had “not at all” impacted their operations, but nearly 10% experienced severe impacts. The most common impacts were operational inefficiencies, reduced productivity, production disruptions, customer dissatisfaction and loss.