European companies expressed increasing concern about their current business situation, fear of increased inflation levels as well as the overall macroeconomic outlook in Vietnam. Furthermore, the survey also found that during the last six months around one fifth of respondents have considered shifting their business to another ASEAN market.
This is one of the results of the 12th quarterly EuroCham Business Climate Index Survey, which was conducted in August 2013. More than half of the businesses that participated in the survey are active in the services industry, a quarter in manufacturing and the rest in trading and other activities.
Continued confidence in economic outlook
The Business Climate Index remains at midpoint, but demonstrates continued confidence in the economic outlook. Following the turn-around of the Business Climate Index over the past two quarters, the BCI has now come to a halt at the midpoint. This is to a large extent due to the reduction in respondents assessing their current business situation as positive, from 43 percent to 38 percent, which is further strengthened by the increase in respondents having a negative view of the current situation from 25 percent last quarter to 28 percent.
However, looking to the future, the business outlook has seen continued improvement with respondents having positive expectations, rising to 51 percent from 43 percent last quarter and 30 percent the previous quarter. This is a clear demonstration of the fact that EuroCham members are committed to Vietnam in the long term, and strongly linked to hopes of improvement of the business climate as a result of the WTO Country Review of Vietnam in September this year and the belief in a strong, implementable EU-Vietnam Free Trade Agreement in the future.
Reported investment plans are decreasing with the number of respondents expecting to increase investments in Vietnam decreasing by 8 percent (from 42 percent to 34 percent). The number of companies intending to ‘significantly increase investment’, has returned to the levels of the first quarter of the year of 8 percent from last quarter’s 13 percent – and 20 percent one year ago. In addition, there has also been a slight increase in members expecting to decrease their investments in Vietnam, from 19 percent last quarter to 21 percent.
Compared to last year, the numbers have further reduced; European companies are getting more cautious about investing and some are starting to plan the relocation of their activities within ASEAN.
Whilst the share of companies expecting a drop in revenue remains at 17 percent, the number of respondents expecting it to increase, has further improved from 53 percent to 61 percent, which is a significant improvement bringing us back up to the same levels as one year ago.
Concerns about inflation and economic recession
Concerns about inflation return, with 43 percent of respondents finding that inflation could have a significant impact on – or even threaten – their business (an increase of 8 percentage points compared to last quarter). However, compared to last year, this is still a slight improvement, from the then 49 percent.
Besides, there is a light improvement in overall economic outlook. Last quarter 48 percent expected a further deterioration of the macroeconomic environment. This quarter, respondents’ appreciation of the macroeconomic situation has slightly improved, with only 40 percent expecting a further deterioration and the majority of respondents (60 percent) now expecting the macroeconomic environment to stabilize and improve.
Regarding the increasing role of ASEAN, EuroCham asked its members how this influences their business planning and decision making. The results demonstrated that around one in five respondents have during the past 6 months considered shifting their business to another ASEAN market. This is an indication of the increasing frustration with the current business environment and the growing competitiveness of other markets in the region. This is further supported by the assessment of respondents’ perceived position of Vietnam in a regional business context: 45 percent found other markets in ASEAN to represent better business destinations than Vietnam, 37 percent considered the Vietnamese business climate to be average, and only 18 percent found it to be in the top tier.
However, it should be noted that more than 80 percent of respondents have not considered shifting their business, which clearly indicates that the vast majority of our members remain dedicated to the Vietnamese market in the long term.
EuroCham Chairman Preben Hjortlund commented on the survey: “It is thought-provoking to see that EuroCham’s Business Climate Index has not continued to increase – and stagnates at the midpoint. Even if many of our members are here for the long haul, it is interesting – and worrying – to see that so many of the respondents perceive other ASEAN markets as potential better business destinations. This further underlines the importance of Vietnam continuing and intensifying efforts to improve the underlying structural problems of the economy as well as ensuring a strong and well-implemented FTA.”
Quynh Chi
Đăng ký: VietNam News
