The BCI figure for quarter IV represents a drop of 14.2 points compared to three months prior and 25 points from quarter I of 2022.
“Things were definitely less positive in the fourth quarter of 2022 than they were earlier in the year,” said Alain Cany, chairman of EuroCham.
“Although the situation is very likely to continue in this direction in 2023, this shouldn't be viewed as a cause for concern. In fact, Vietnam's economic opportunities continue to exceed those of its regional and international peers. This is evident from the fact that so many of EuroCham's members consider Vietnam central to their global investment strategies,” added the EuroCham representative.
“It is also encouraging to see that foreign direct investment from Europe and around the world remains high and continues to grow, especially in Vietnam's green industries and manufacturing. It is clear that, with this FDI, Vietnam's strong economic fundamentals, and its commitment to sustainability, the country is still among the top investment destinations in the world. As a result, the European business community remains confident in the Vietnamese market,” he noted.
Though the Vietnamese economy grew by 5.92% in the fourth quarter of 2022 and 8.02% for the whole year, this data comes amid continued global economic volatility as a result of a perfect storm of factors such as a slowdown in global growth, interest rate hikes, sustained inflation, and bruised consumer confidence.
EuroCham invites its 1,300 members, who represent virtually all sectors of the Vietnamese economy, to provide quarterly feedback on the local business environment and forecasts for their own businesses in the Vietnamese market.
With only 27% of respondents anticipating economic stabilisation or improvements to be made during quarter I, the BCI results also suggest a growing sense of pessimism. Compared to projections made in quarter IV, when 42% shared this sentiment, this marks a 15-point decline. Over the past quarter, the number of people who anticipated an economic downturn has also doubled.
In total, 41% of respondents stated their company is shifting operations from China to Vietnam, up from 13% in quarter III. Furthermore, approximately 35% of respondents ranked Vietnam among the top five global investment destinations for their company, with 12% stating that the country was their firm's top international investment site.
The three most significant regulatory barriers to foreign companies operating in the Vietnamese market include a lack of clarity regarding rules and regulations (51%), administrative issues (41%, as well as visa and work permit difficulties (30%).
In spite of these difficulties, 58% of BCI respondents were satisfied with the attention policymakers pay to the needs and requirements of business when setting relevant policies.
In terms of what the country should do to improve its FDI attraction prowess, reducing administrative difficulties at 70% retained the top spot. This has been the case since this question was first raised with BCI respondents in quarter II of 2022. In addition, the issue of reducing visa difficulties for foreign experts has become increasingly pertinent, increasing by eight points from quarter III of last year.
According to the survey, 63% of respondents believed they are sufficiently knowledgeable about the EU-Vietnam Free Trade Agreement (EVFTA). Moreover, nearly half of respondents maintained that the EVFTA is relevant to or very relevant to their business, indicating no significant change compared to quarter III of 2022.
BCI participants also reported that new generation free trade agreements had led to a positive effect on the growth of their businesses, their financial health through tariff reductions, and the overall strength of their supply chains.
This latest BCI showed some concerns regarding the EVFTA's administrative procedures, a lack of understanding of the agreement, and technical barriers, which have combined to trade have all decreased.