EuroCham Vietnam's Q3 2023 business confidence index rises to 45.1

The BCI survey is conducted by the Decision Lab.

Business sentiment seems to be in a flux, with a 3 percentage point (pp) drop in pessimism regarding the current situation between Q2 and Q3, while positive and neutral perspectives increased by 6 pp and 4 pp respectively.

There was an 11-pp rise in businesses anticipating economic stabilisation and growth for the upcoming quarter compared to responses recorded in the Q2 survey. On the other hand, businesses projecting a negative trend saw a drop of 5 percentage points.

The country is approaching the end-of-year period with hope and caution. Though the country’s Q3 GDP grew by 5.3 per cent year on year (YoY), companies continue to be cautious.

Expectations regarding increased revenue or orders remained stable, with no change observed from the previous quarter. Just 22 per cent of companies plan to expand their teams in Q4, whilst only 16 per cent expect an increase in investments.

The nation’s global investment appeal remains strong. Sixty-three per cent of surveyed businesses positioned the country within their top 10 foreign direct investment (FDI) destinations. Thirty-one per cent ranked the nation among their top three, while 16 per cent hailed it as their foremost investment destination.

Over half of those surveyed plan to increase their foreign direct investment in the Vietnamese market by the end of the year.

But obstacles do exist. Fifty-nine per cent cited administrative difficulties as their main challenge. Challenges such as uncertainties in rules and regulations, hurdles in permit acquisition and strict visa and work permit requirements for foreign workers are also prominent barriers.

To improve the nation's attraction as an FDI destination, 58 per cent of respondents said streamlining bureaucracy is the key, 48 per cent advocated enhancing the regulatory environment, a third called for upgrading transport infrastructure and 22 per cent emphasised easing visa and work permit requirements for foreign experts.

Sustainability is emerging as a priority for European companies operating in Vietnam, with 80 per cent citing such alignment as highly or moderately important.

Only a fifth of the firms are proactively preparing for impending EU green regulations, such as the Carbon Border Adjustment Mechanism, while 38 per cent currently have no plans for alignment.

This lack of preparedness not only poses challenges domestically, but can also hinder international competitiveness, especially in the crucial EU market, the survey disclosed.

Over three-fifths of companies called the EU-Vietnam Free Trade Agreement (EVFTA) beneficial, citing tariff cuts as the top perk, followed by improved competitiveness in the nation as a whole, reduced trade barriers, expanded partnerships with local firms and increased access to the Vietnamese market.

However, challenges include discrepancies in customs valuations for imports, opaque and protracted customs clearance procedures, technical obstacles to trade, and an overarching uncertainty or lack of clarity concerning the agreement.

ALCHEMPro News Desk (DS)