European firms' biz confidence in Vietnam drops in Q2 2023: Report

11 Jul '23

2 min read

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Insights

European business confidence towards the Vietnamese market dropped 4.5 points to 43.5 in Q2 2023, as per EuroCham Vietnam.
Despite the decline, a marginal uptick in businesses foreseeing economic stabilisation was noted.
Challenges like securing visas for foreign workers and perceived inadequate infrastructure persist, impacting foreign direct investment.

European business confidence towards the Vietnamese market has dropped 4.5 points to 43.5 in the second quarter (Q2) of 2023, according to a recent report released by EuroCham Vietnam, the voice of the European business community in the country.

There was a 2 per cent rise in the number of businesses expecting the economy to stabilise or improve. This increase brings the total to nearly one-third of respondents maintaining a positive outlook.

Despite the optimism, there was also a 10 per cent hike in negative feedback regarding the current business landscape and a 6 per cent surge in pessimistic sentiment for the upcoming quarter. In line with these challenges, a 9 per cent increase was observed in business leaders who express a positive outlook for their business prospects in Q3 2023 compared to Q2, as per EuroCham Vietnam's Q2 2023 Business Confidence Index (BCI).

In light of the challenges, businesses are focusing on maximising revenue and orders, anticipating a potential decline in these areas. There was a 7 per cent increase in businesses planning to manage investments cautiously in the next quarter. Interestingly, workforce planning remained stable, reflecting companies' determination to maintain stability amidst prevailing conditions.

Over 80 per cent of surveyed businesses reported difficulties in securing visas and work permits for foreign workers, with extended processing times and justification for hiring foreign workers among the significant concerns. Moreover, the report threw light on the perceptions of European business leaders towards Vietnam's infrastructure development, with 53 per cent considering it as either ‘very inadequate’ or ‘lagging behind.’

Despite the challenges, the 48 per cent of respondents anticipate an increase in their company's foreign direct investment (FDI) in the upcoming quarter. Yet, 40 per cent of businesses have no plans for increased FDI, marking a 4 per cent increase from the previous BCI.

Approximately 40 per cent respondents expressed unease about the forthcoming global minimum tax implementation and about 42 per cent reported insufficient understanding of Vietnam's Personal Data Protection Decree.

Over half of the businesses surveyed reported benefits from the agreement, with tariff reductions as a significant gain. However, administrative procedures and a lack of understanding remain as the main barriers to fully capitalising on the agreement.

Fibre2Fashion News Desk (DP)

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