EuroCham’s Business Confidence Index (BCI) for Vietnam rose again to 46.3 in the last quarter of 2023, the second growth in a row since Q1/2022.
The index with 1,400 respondents, an indicator of the business sentiment among European companies operating in Vietnam, fell from 73 in Q1/2022 to 68.6 in Q2/2022, 62.2 in Q3/2022, 48 in Q4/2022, 48 in Q1/2023, 43.5 in Q2/2023, and 45.1 in Q3/2023.
The latest recovery, while still below the 50-point milestone for the fifth quarter in a row, showed signs of a positive shift towards economic stability and market disruptions vanishing, the EuroCham said.
Q4/2023 saw a marked increase in satisfaction among businesses. Firms with confident sentiment in their current situation rose from 24% in Q3/2023 to 32% in Q4/2023.
The outlook for Q1/2024 is also positive, with 29% of businesses viewing their prospects as “excellent” or “good,” a sign of diminishing concerns, as extreme worries fell from 9% to 5%.
Regarding the workforce, the report shows that 40% of respondents viewed Vietnam’s workforce as moderately proficient, indicating a blend of basic and intermediate skills. In addition, 50% rated the workforce’s availability as moderate, reflecting some challenges in finding qualified candidates.
About challenges, 52% of respondents identify ‘administrative burdens and bureaucratic inefficiencies’ as one of the top three hurdles, spotlighting the impact of red tape on business operations.
Other concerns were “unclear and variably interpreted rules and regulations” with 32% of respondents, “securing necessary licenses, permits, and approvals” with 22%, “lack of qualified local expertise in specialized fields” with 20%, and “visa regulations, work permits, and labor rules for foreign employees” with 19%.
In Q4/2023, Vietnam’s investment hotspot status increased significantly. As many as 62% of those surveyed ranked Vietnam among their top 10 global investment destinations, with 17% placing it at the very top. This strong endorsement is matched by 53% of respondents anticipating increased foreign direct investment in Vietnam by the end of Q4.
Looking ahead, Vietnam’s business sector is poised for growth, according to the EuroCham. 31% of companies plan to expand their workforce in Q1/2024, and 34% intend to increase their investments, a clear uptick from 2023.
“There’s definitely a positive trend underway. While we still have a long way to go for a full recovery, businesses are feeling more hopeful,” EuroCham chairman Gabor Fluit commented. “The European business community is increasingly optimistic that the most challenging economic period is now behind us,” he added.
“One vital area to focus on is simplifying administrative procedures, a well-known obstacle for businesses. At the same time, it is essential to upgrade the skills of the workforce. This will help Vietnam stay competitive and maintain its growth trajectory,” the executive highlighted.