Vietnam remains key investment destination for European firms

The EuroCham Business Climate Index (BCI), a quarterly benchmark seeking to measure the level of confidence of European companies investing in Vietnam, fell for the third time in a row in the last quarter to 48 points, down 25 points from the first quarter of 2022.

Though Vietnam’s economy grew by 5.92% in the fourth quarter year-over-year, and 8.02% for the whole year, this data came amid continued global economic volatility resulting from a perfect storm of factors, including a slowdown in global growth, interest rate hikes, sustained inflation and bruised consumer confidence.

European companies seem to have a pessimistic outlook on Vietnam’s economy, as only 27% of respondents expect the economy to stabilize and improve in the first quarter this year.

Nearly four out of 10 respondents, or 38%, believe that the economy is more likely to deteriorate in the first quarter of 2023.

“Things were definitely less positive in the fourth quarter of 2022 than they were earlier in the year,” said EuroCham Chairman Alain Cany.

But he added that this shouldn’t be viewed as a cause for concern.

“Vietnam’s economic opportunities continue to exceed those of its regional and international peers,” he said. “This is evident from the fact that so many of EuroCham’s members consider Vietnam central to their global investment strategies.”

Foreign direct investment from Europe and around the world remains high and continues to grow, especially in Vietnam’s green industries and manufacturing, and the country is still among the top investment destinations in the world, Cany said.

The survey found that 35% of respondents ranked Vietnam among the top five global investment destinations for their companies, with 12% stating that Vietnam was their firm’s top investment site internationally.

Business representatives said that several issues are acting as barriers for their operations in Vietnam, with the top one being unclear rules and regulations, according to 51% of respondents.

Administrative issues came in second with 41% of respondents, followed by visa and work permit difficulties, 30%.

To improve the business environment, Vietnam should reduce administrative difficulties, according to seven out of 10 respondents.

Developing infrastructure should be the second priority, followed by reducing visa problems for experts.