The European Chamber of Commerce in Vietnam (EuroCham) unveiled its Q2 2024 Business Confidence Index (BCI) report, offering a nuanced perspective on the economic landscape for European enterprises in Vietnam. Despite the country's robust first-half GDP growth, the BCI experienced a marginal decline from 52.8 in Q1 to 51.3 in Q2 2024, underscoring the necessity for ongoing policy adjustments to maintain momentum.

The BCI survey, conducted by Decision Lab and distributed to EuroCham's network of 1,400 members, serves as a barometer of sentiment among European businesses operating in Vietnam. This quarterly assessment provides real-time insights into the evolving business environment of one of Southeast Asia's most dynamic markets.

Download the full BCI Q2 2024 report to learn more.

"Vietnam's economic potential is undeniable, and the European business community remains confident in its long-term growth," says Dominik Meichle, Chairman of EuroCham Vietnam.

"While our survey points to areas for improvement, we believe that by working together to address administrative and regulatory hurdles, we can create a more efficient and attractive business environment that benefits both the European and Vietnamese business communities."

Meichle continued, "This survey, powered by our members' real-world experiences, is the backbone of our advocacy work. It shapes our conversations with Vietnamese officials and EU policymakers. By bringing our members' perspectives to the table, we are identifying key areas for growth and strengthening the Europe-Vietnam partnership through open dialogue and teamwork."

Download the full BCI Q2 2024 report to learn more.

"These survey results reveal a nuanced picture of the business landscape," said Thue Quist Thomasen, CEO of Decision Lab.

"While 68% of respondents report neutral to positive current conditions, there is a slight increase in short-term caution, which needs to be addressed to continue the positive trend from the previous quarters. However, the strong 6.42% GDP growth in the first half of 2024 and nearly 70% expressing long-term optimism indicate robust underlying confidence that may materialise in future readings."

Action needed to continue improving Vietnam's business climate 

The survey paints a mixed picture, reflecting both resilience and ongoing challenges:

• Current Business Conditions: While fewer companies report the economic situation as "very poor" (decreasing from 8% to 6%), those describing it as "not good" increased slightly (from 24% to 26%). Despite this, a majority (68%) still maintain a neutral to positive outlook regarding their own business conditions, suggesting an overall sense of stability.

• Immediate Outlook: Though overall sentiment towards Vietnam's economic outlook in Q3 2024 is cautiously optimistic (45%), individual businesses are more hesitant about their own prospects for the quarter, with 45% remaining neutral and 23% expressing concerns.

• Long-Term Outlook: This short-term uncertainty is balanced by robust long-term confidence, with nearly 70% of businesses expressing optimism about Vietnam's economic growth over the next five years. This confidence is further reflected in the fact that a comparable percentage would recommend Vietnam as an investment destination

Top pain points for European businesses in Vietnam

While European businesses maintain optimism about Vietnam's potential, the survey highlights persistent regulatory challenges that hinder growth and investment. Key pain points identified include:

• Ambiguous regulations subject to varying interpretations;

• Burdensome administrative processes;

• Difficulties in obtaining licences, permits, and approvals;

• Challenges with visas and work permits for foreign workers;

• Duplicate or inconsistent approvals across government levels.
  

Download the full BCI Q2 2024 report to learn more.

The survey also highlights specific areas where regulatory hurdles are particularly pronounced:

• Work permits and visas for foreigners: Despite the introduction of Decree No. 70 in September 2023 to streamline work permit and visa procedures for foreign workers, only 3.3% of respondents report significant improvements. While half acknowledge some progress, a quarter indicate no change. Enhancing this process is crucial for attracting international talent and fostering knowledge exchange.

• Personal Data Protection Decree (PDPD): The recently implemented Personal Data Protection Decree (PDPD), designed to safeguard personal information, has inadvertently caused uncertainty among businesses. A quarter of survey respondents admit to not fully understanding the decree's requirements, and only a third feel confident in their ability to comply. This highlights the need for clearer guidance and support from authorities to ensure a smooth transition and compliance.

Five ways to boost FDI in Vietnam: EuroCham members

To attract more FDI and stimulate economic growth, businesses surveyed highlighted five key areas where Vietnam could enhance its business environment:

• Streamlining administrative and procedural processes;

• Enhancing clarity and precision in laws to reduce arbitrary interpretation;

• Developing core infrastructure (roads, ports, bridges, etc.);

• Simplifying visa and work permit procedures for foreign experts; and

• Ensuring political stability and security.

EuroCham's 2024 Whitebook offers recommendations to address these challenges, providing a roadmap for creating a more competitive and welcoming business landscape in Vietnam. 

Carbon neutrality progress is key to attracting quality European FDI

The survey reveals a growing commitment to sustainability among European businesses in Vietnam, with 7% having already achieved carbon neutrality. An impressive 37% have set targets to reach this goal by or before 2050, while an even more ambitious 18% aim to achieve carbon neutrality by 2030. 

Download the full BCI Q2 2024 report to learn more.

However, the surveyed businesses identified several key obstacles in their net-zero efforts, including:

• Customer resistance to paying premium prices for sustainable products

• Inadequate government incentives and regulations to promote sustainability

• Limited access to clean energy sources and effective waste management infrastructure

• Financial constraints in implementing sustainable practices

• Lack of employee awareness and engagement with sustainability initiatives

• Difficulty measuring emissions and ensuring supply chain compliance

On a positive note, the recent signing of the Direct Power Purchase Agreement (DPPA) decree offers a ray of hope. Swift and successful implementation could address some of these challenges, particularly by improving access to clean energy sources and potentially providing better sustainability incentives. 

Download the full BCI Q2 2024 report to learn more.

To further address these challenges and promote sustainable economic practices, EuroCham Vietnam is organising the Green Economy Forum & Exhibition (GEFE) 2024, scheduled for October 21-23 in Ho Chi Minh City.

The three-day event will feature conference sessions, an exhibition of green technologies, and high-level plenary discussions with European and Vietnamese leaders. It aims to equip businesses with the knowledge, connections, and tools needed to navigate Vietnam's evolving business landscape while promoting environmentally responsible practices.

About the Business Confidence Index survey

The quarterly Business Confidence Index (BCI), which is conducted by Decision Lab, serves as a vital tool for understanding the perceptions of European and Europe-related companies and investors in the Vietnamese market. Conducted since 2011, the BCI collects feedback from EuroCham Vietnam's extensive network of 1,400 members across a diverse range of sectors. This survey provides valuable insights into the current business landscape in Vietnam and offers a glimpse into future expectations.

Decision-makers, media, and business professionals see the BCI as a key indicator of economic activity in the country. It is a trusted source of information on the business environment in Vietnam, and its findings are widely used to inform government policies and investment decisions.
 Download the full BCI Q2 2024 report to learn more.