Vietnam remains top 5 global investment sites for EU firms

Motorbike production line of Piaggio Vietnam’s factory in Binh Xuyen Industrial Park, Vinh Phuc Province. (Photo: VNA)

The confidence of European enterprises in Vietnam’s economy declined for a second quarter but the S-shaped country still remains in the top five global investment destinations for their companies, the latest Business Climate Index (BCI) published by the European Chamber of Commerce in Vietnam (EuroCham) showed last week.

The BCI dropped below the baseline to 48.0 in Q4 2022, a drop of 14.2 points compared to three months ago and 25 points from the first quarter of the year.

Though Vietnam’s economy grew over 8% for the whole of 2022, this data comes amid continued global economic volatility resulting from a storms of factors including a slowdown in global growth, interest rate hikes, sustained inflation and bruised consumer confidence.

The number of companies expecting economic stabilisation or improvement in Q4 dropped to 27% from 42% in Q3, while the number of firms with growing sense of pessimism doubled from 19% in Q3 to 38% in Q4.

“Things were definitely less positive in the fourth quarter of 2022 than they were earlier in the year,” said EuroCham Chairman Alain Cany.

However, according to him, this should not be viewed as a cause for concern.

“In fact, Vietnam’s economic opportunities continue to exceed those of its regional and international peers. This is evident from the fact that so many of EuroCham’s members consider Việt Nam central to their global investment strategies,” Cany said.

The report said 41% of respondents stated their company is shifting operations from China to Vietnam, up from 13% in the third quarter, while nearly 35% of firms ranked Vietnam among the top five global investment destinations for their company, with 12% stating that Việt Nam was their firm’s top investment site globally.

However, the report also pointed out three most significant regulatory barriers to foreign companies operating in Vietnam, including a lack of clarity regarding rules and regulations (51%), administrative issues (41%) and visa and work permit difficulties (30%).

Despite that, 58% were satisfied with the attention of policymakers paid to business needs when setting relevant policies.

In addition, BCI participants reported that the EU-Vietnam Free Trade Agreement (EVFTA) had a positive effect on the growth of their businesses, their financial health through tariff reductions and the strength of their supply chains./.