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European firms’ confidence in Vietnam’s business environment falls slightly

By Le Hoang

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HCMC – European companies’ confidence in Vietnam’s business environment declined slightly in the second quarter of the year amid the global economic uncertainty.

According to the Business Climate Index (BCI) conducted by YouGov Vietnam and released by the European Chamber of Commerce in Vietnam (EuroCham), following an increase in the first quarter, the BCI dropped 4.4 points last quarter to 68.8 points.

The ongoing Russia-Ukraine military conflict, commodity price spikes, and the ripple effect of China’s zero-Covid policy have dampened expectations among the European business community in Vietnam.

Although the BCI fell, it was 7.6 points higher than in the fourth quarter of 2021.

Vietnam’s potential growth was also viewed with less favor by European firms. Only 60% of respondents predicted that the Vietnamese economy would stabilize or improve in the third quarter of 2022, compared with 69% who held this belief in the second quarter.

In addition, 45% of respondents said they were significantly or moderately satisfied with Vietnam’s efforts to attract and retain foreign direct investment (FDI), while 76% expected their companies to increase investment in Vietnam before the end of this quarter. This may be due to the fact that 55% of respondents said Vietnam improved its FDI attraction and retention capabilities since the first quarter.

The survey identified barriers to European investment in Vietnam and trade between the two sides. Around 35% of respondents cited the streamlining of administrative procedures as the most effective way to increase FDI, while 24% pointed to infrastructure bottlenecks.

Likewise, 45% of participants in the survey said complicated and time-consuming administrative procedures impeded their ability to make the most of the European Union-Vietnam Free Trade Agreement.

Commenting on the BCI in the second quarter, EuroCham Chairman Alain Cany said “Although the outlook for European business leaders has decreased since the last quarter, the factors affecting it are mostly beyond the Vietnamese Government’s control. A perfect storm of external factors is contributing to global economic instability. This problem is not unique to Vietnam.”

CEO of YouGov Thue Quist Thomasen said, “This BCI measurement clearly shows a small setback in Vietnam’s reopening and return to normal. However, Vietnam’s handling of the current situation is clearly a mitigating effect in the global economic context. The near target inflation rate and improvement in the country’s credit ratings are a strong testament.”

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