Vietnam rebounds remarkably amidst global uncertainties: EuroCham

EuroCham's Q4/2024 Business Confidence Index (BCI) report released on Wednesday shows a significant rise in business sentiment, which reflects resilience amidst a turbulent global landscape, in terms of economics, environment, and geopolitics.

The BCI score surged from 46.3 in Q4/2023 to 61.8 in Q4/2024, marking a pivotal shift from a neutral to a positive sentiment in both current and future outlooks. This surge comes despite ongoing operational hurdles and global economic uncertainties.

Vietnam’s strong performance is, in part, attributed to the country’s continued growth trajectory, its improving infrastructure, and its emergence as a regional hub for both trade and investment, EuroCham stated.

EuroCham’s BCI, conducted by Decision Lab, serves as an important tool for gauging the sentiment of European businesses in Vietnam, providing valuable insights into the challenges and opportunities they face in the country’s dynamic market.

For much of the past two years, the BCI hovered around the neutral midpoint of 50, dipping below it on occasions. The Q4/2024 report, however, marks a pivotal shift as the score reached its highest level since early 2022.

According to the survey, 42% of respondents reported feeling positive about the current business situation, with 47% anticipating similarly optimistic conditions for the upcoming quarter. More prominently, 56% of respondents foresee improvements in Vietnam’s macroeconomic outlook in Q1/2025.

“This is a clear sign that European businesses are increasingly confident about Vietnam’s economic future,” said Bruno Jaspaert, chairman of EuroCham Vietnam. “This clear rise in sentiment reflects a broader recognition of the country’s ongoing political and economic transformation it has seen over the past year(s). The country’s GDP growth confirms its position as a central player in Southeast Asian regional trade and investment.”

The uptick in business confidence can be attributed to several factors, most notably Vietnam’s ongoing economic reforms and its centrality in the global shift toward sustainability.

Notably, many respondents referenced the “double transformation” of digital and green transitions as key drivers of optimism. Businesses that have embraced these trends reported significant growth, with some even citing a 40% increase in revenue compared to the previous year.

The trend toward sustainability, spurred by both government policy and global pressures, is becoming a significant factor in shaping business strategies across multiple sectors.

Rising as a key investment destination

Perhaps most notably, 75% of survey respondents indicated they would recommend Vietnam as an investment destination. This data underscores the growing recognition of Vietnam’s strategic importance as an investment hub within Southeast Asia.

With its strong growth rates and expanding infrastructure, Vietnam has positioned itself as an attractive destination for European businesses looking to expand in the region.

“The growing confidence in Vietnam as an investment destination is a testament to the country’s solid foundations in both trade and economic policy,” remarked the EuroCham chairman. “Despite the global challenges, Vietnam’s positive investment climate is creating new opportunities for European companies, especially in key sectors like technology, manufacturing, tourism and renewable energy.”

Thue Quist Thomasen, CEO of Decision Lab, noted that the data clearly shows that European businesses in Vietnam are increasingly optimistic about the country’s potential as an investment destination.

A significant portion of businesses indicated plans to expand their operations in Vietnam. Approximately one out of four member companies are considering partnerships with Vietnamese suppliers or service providers, and more than one-fifth of the respondents are looking to expand their footprint in the country.

Another 30% are looking to increase their import/export operations and/or shift production to Vietnam. This move aligns with Vietnam’s successful geopolitical positioning amid global trade shifts, particularly in light of recent disruptions to global supply chains.

Restructuring efforts bring hope

While the overall sentiment is positive, operational challenges continue to be a significant concern for European businesses in Vietnam. As in previous surveys, the top three operational obstacles identified were administrative burdens, unclear regulations, and difficulties in obtaining licenses and permits.

The complexities of visa requirements for foreign workers and experts topped the list of administrative challenges, with 42% of responses highlighting this as a primary concern. Tax-related issues, including VAT refunds, were also cited by 30% of respondents, with further challenges related to import/export and investment registration procedures.

“Vietnam is at a critical juncture,” noted chairman Jaspaert. “These ongoing administrative hurdles challenge business operations, but we are optimistic about the government’s determination to create a more conducive environment. Initiatives such as the steering committee for government restructuring show promise.”

In November 2024, Prime Minister Pham Minh Chinh announced the formation of a steering committee to restructure Vietnam’s government system. The goal of this initiative is to improve efficiency, decentralize administrative functions, and strengthen local accountability.

Many respondents to the survey expressed optimism that these reforms would lead to significant improvements in administrative processes, with 43% expecting streamlined procedures in the long term, particularly with the adoption of digital platforms and reduced paperwork requirements. However, 36% of respondents also expressed concerns about potential delays in processing applications during the restructuring phase.

Despite these challenges, the government’s commitment to digital transformation and e-governance was viewed as a positive step forward by a significant portion of the business community.

Infrastructure and logistics: Key to future growth

Another area where businesses are expecting significant improvements is in infrastructure. The ongoing development of the North-South high-speed railway, for instance, has garnered considerable attention, with 58% of respondents predicting substantial benefits for employee mobility and logistics.

The railway, expected to significantly improve connectivity between the north and south of Vietnam, will reduce transportation costs, improve supply chain efficiency, and enhance the overall business environment.

Nearly 40% of respondents anticipate that these infrastructure upgrades will not only reduce the cost of regional distribution but also bolster connectivity for import and export flows. Furthermore, 12% foresee transformative improvements in employee travel, enabling businesses to optimize operations and attract talent across regions.

Complementing these efforts are advancements in air and maritime infrastructure. Long Thanh International Airport is poised to elevate Vietnam's logistics playing field, while Hai Phong deep seaports are emerging as a key player in the nation’s maritime economy.

Collectively, these infrastructure developments in rail, air, and maritime transport will bolster Vietnam’s position as a more competitive player in regional and global trade, while fostering a more efficient and interconnected business landscape.