European business leaders desire to maintain or increase their investment in Vietnam, according to the Business Climate Index (BCI) for the third quarter of 2021, a regular barometer of the perceptions of business leaders released by the European Chamber of Commerce (EuroCham).
EuroCham member enterprises are more optimistic about the country’s business environment following the relaxation of COVID-19 restrictions last month and the ‘new normal’ of trade and investment.
This resulted in a small but encouraging increase of three points in the BCI to 18.3 points in the third quarter from a record low of 15 points in September.
Although the BCI remains low, it indicates a more optimistic perception about Vietnam’s economic outlook.
Forty-nine percent of business leaders and investors now predict a stabilizing and improving economic outlook in the next quarter, compared to just 19 percent in the previous three months.
However, business leaders remain cautious about their recruitment, investment, and profit projections.
Companies are taking a wait-and-see approach to staffing, with around one-fifth planning to hire more workers in the next three months, a figure consistent with the last quarter.
The proportion of business leaders planning to maintain or increase their investment in the fourth quarter is 69 percent, just two points higher than that in the third quarter, with revenue projections seeing a similar increase.
Meanwhile, around half the companies are still operating at reduced levels compared to before pandemic curbs were eased, while prolonged travel restrictions and staff shortages continue to affect two-thirds of them.
This indicates that there are still issues to be addressed if Vietnam is to reach its full potential in the ‘new normal’ of trade and investment.
Commenting on the latest BCI, Alain Cany, chairman of EuroCham, said though the index remains low in historical terms, the most important thing is that it is now moving in the right direction.
“With the pandemic now back under control in Vietnam, the confidence and optimism of European business leaders should continue to climb as companies get back to normal and consumer confidence rises,” Cany said, referring to Vietnam's decision to open its economy in October as COVID-19 cases were declining nationwide thanks in part to broader vaccine coverage.
Some interesting trends are emerging beneath the headline BCI figure, said Thue Quist Thomasen, CEO of YouGov Vietnam, a Vietnamese subsidiary of British international data and analytics group YouGov.
“While confidence in the prospects for the business environment of Vietnam has seen a small but encouraging rise, companies are a little more hesitant when it comes to their own operations,” Thomasen said.
“This suggests that business leaders are waiting to see how conditions and regulations in the 'new normal' unfold before making significant commitments in terms of investment projects or recruitment plans.
“Nevertheless, the latest data should give us grounds for cautious optimism in the months ahead.”
The third quarter BCI survey was conducted using an online questionnaire, scripted and managed by YouGov’s surveying and data management platform.
The survey is emailed quarterly to 2,223 business leaders among representatives from EuroCham’s more than 1,000 members.
The respondents typically represent top management from European companies and Vietnamese companies with close business connections to Europe, such as suppliers or distributors, while a minority are European individuals working in non-European companies in Vietnam.