Vietnam needs to win over European businesses

But EuroCham members involved in the survey are very concerned about their current business prospects on account of increased inflation levels as well as overall macroeconomic management in Vietnam.

The survey also finds that during the last six months around one fifth of the respondents considered shifting their business to another ASEAN market.

More than half of the businesses polled are active in the services industry, a quarter in manufacturing and the rest in trading and other activities.

The BCI, which turned around in the last two quarters, now remains stuck at the midpoint. This is to a large extent due to the reduction in respondents assessing their current business situation as positive - from 43% to 38% -, which is further strengthened by the increase in respondents having a negative view of the current situation from 25% last quarter to 28%.

However, looking to the future, the business outlook has seen continued improvement with respondents having positive expectations, rising to 51% from 43% last quarter - and 30% the previous quarter.

This is a clear demonstration of the fact that EuroCham members are committed to Vietnam in the long term. However, investment plans are decreasing with the number of respondents expecting to increase investments in Vietnam decreasing by 8% (from 42% to 34%).

The number of companies intending to ‘significantly increase investment’, has returned to the levels of the first quarter of the year of 8% from last quarter’s 13% - and 20% one year ago.

In addition, there has also been a slight increase in members expecting to decrease their investments in Vietnam, from 19% last quarter to 21%. 

Business orders expected

When asked about their expected number of orders and revenue in the medium-term, they answered in the positive.

Even with many companies facing a drop of 17% in revenue, the number of respondents showing their positive view has increased from 53% to 61%, showing significant sign of rebound to the same level one year ago. 

Recruitment plans remain stable

The positive growth in revenue has not translated into higher rates of recruitment: the number of respondents expecting to increase staff (by 8 percentage points) is roughly the same as the ones expecting to decrease headcount (9 percentage points). However, compared to last year, the number of respondents expecting to employ more staff has grown - from 32% to 47%.

Growing concern about inflation

43% of respondents agreed that inflation will have a significant impact on - or even threaten - their business (8 percentage points higher than last quarter’s figure).

However, this is still a slight improvement, compared to last year’s 49%. Other members estimated the average rate at 5.94%, compared to last quarter’s 5.13%, which represents a noticeable difference.