EU firms wary of Vietnam's legislative changes: survey

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   Photo courtesy of VnEconomy

Though more European businesses plan to increase their investment in Vietnam, they are worried about the negative impact of future legislative changes, a new survey has found.

Results of quarterly survey, conducted by the European Chamber of Commerce in Vietnam (EuroCham) in October 2013 and released on November 6, show that 41 percent of respondents expect to expand their business in Vietnam, compared with 34 percent in the last survey.

Furthermore, the number of respondents planning to "significantly increase investments" has doubled from last quarter's 8 percent to 16 percent this quarter.

The number of respondents expecting to reduce their workforce decreased from 23 percent last quarter to 15 percent this quarter, while the number of those expecting to increase it remained at 47 percent.

With a number of respondents considering relocating their business to another Southeast Asian country, EuroCham has identified 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 taking a more detailed look at the impact of "lack of or inconsistent implementation of legislation." the study found that half of the respondents found that legislative changes negatively impacted their business and only 7 percent recognized the legislative changes as positive in 2013.

Looking forward to 2014, half the respondents expected legislation to continue to have a negative impact on their business. However, 32 percent remain hopeful of a positive legislative environment next year.

According to the survey, business confidence and outlook among European businesses in Vietnam remains unchanged this quarter as the EuroCham Business Climate Index stayed at 50 points on a scale of 100 for the third time.

"It is worrisome to see that EuroCham's Business Climate Index comes out at 50 for the third time. Furthermore, it is interesting to see that so many of the respondents still fear that legislative changes could negatively impact their business in 2014," EuroCham's chairman Preben Hjortlund was quoted as saying in a press release.

"This clearly demonstrates the need to incorporate the business community in the legislative process and to take their opinions into account in order to avoid legislation having perverse effects when implemented. Finally, it is important to note the high level of respondents calling for the Vietnamese government to take note of the Whitebook 2014, which will be published next week - on 11 November."

Inflation fears ease

The findings show that measures taken by the Vietnamese government to reduce inflation have been effective. The number of respondents expecting inflation to have a "significant or threatening impact" on their business has reduced from 43 percent last quarter to 29 percent this quarter.

Members 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.

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.

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