Results of the survey show that business confidence and outlook among European businesses in Vietnam remains unchanged for the third time, stagnating at 50.

More than half of the businesses that participated in the survey are active in the services industry, less than a fifth in trading and manufacturing, respectively and the rest in other activities. Respondents’ assessment of the current business situation has overall remained unchanged compared to the third quarter, with 38 percent assessing the current situation as positive. However, this number is still considerably better than one year ago - when the BCI was at its lowest level ever at 45. As much as 24 percent of respondents having a negative view of the current business situation has dropped compared to the last quarter with 28 percent.

Ominously, the number of positive assessments of the business outlook dropped (to 44 percent) for the first time after two consecutive quarters of growth. However, compared to last year’s 26 percent it is more promising. Even if the majority of our members remain committed to the Vietnamese market in the long term, this development is worrying and further underlines the need for the Vietnamese Government to address the business issues negatively impacting foreign investors.

Investment plans and expected business orders increase

Reported investment plans are increasing with the number of respondents expecting to increase investments in Vietnam growing from 34 percent last quarter to 41 percent this quarter. Furthermore, the number of respondents planning to ‘significantly increase investments’ has doubled from last quarter’s 8 percent to 16 percent this quarter. In line with this development, the expected number of business orders has continued to grow – to 67 percent (from 61 percent and 53 percent the past two quarters, respectively). The survey says a drop in the respondents expecting a reduction of business orders down from 36 percent one year ago to 14 percent this quarter.

The positive development in investment plans and expected business orders has translated into increased recruitment plans: the number of respondents expecting to increase their headcounts remains at 47 percent. More importantly, the number of respondents expecting to reduce their workforce has decreased from 23 percent last quarter - the same as last year - to 15 percent this quarter.

The initiatives undertaken by the Vietnamese Government to reduce inflation have been effective, which is clearly demonstrated by the BCI findings; the number of respondents expecting inflation to have a ‘significant or threatening impact’ on their business has been substantially reduced (29 percent compared to 43 percent last quarter and 50 percent last year). Respondents were also asked to indicate what they think the rate of inflation will be and the average came to 4.69 percent. Compared to last quarter’s estimate of 5.94 percent, this represents a considerable improvement.

Respondents remain somewhat confident in the macroeconomic outlook, with 47 percent expecting a ‘stabilisation and improvement’ of the situation and 35 percent expecting no change.

The key findings of this quarter’s BCI indicate the following four key challenges to doing business in Vietnam: corruption (72 percent); lack of or inconsistent implementation of legislation (67 percent); administrative difficulties (52 percent); and lack of transparency (45 percent).

When looking more in detail on the impact of ‘lack of or inconsistent implementation of legislation’, it was found that 50 percent of respondents found that legislative changes negatively impacted their business and only 7 percent recognised the legislative changes as positive in 2013. Looking forward to 2014, half of the respondents expect legislation to continue to have a negative impact on their business. However, 32 percent remain hopeful of a positive legislative environment in 2014.

It should also be mentioned that the respondents found a number of very positive aspects with doing business in Vietnam, of which the most important are: business opportunities (60 percent); future growth of the market (60 percent); and Vietnam as a regional hub for export (19 percent).

Source: VCCI