A worker at a plastic factory in Vietnam
More European companies plan to increase their investments in Vietnam amid concerns about economic conditions and revenues, a new survey found.
The European Chamber of Commerce in Vietnam (EuroCham) said 39 percent of respondents aim to expand their business in Vietnam, up seven points from the previous three months. There has also been a decline in the number of companies planning to reduce investments ""˜significantly" in 2012, from 20 percent to 13 percent.
"This shows a change towards businesses' plans to invest in Vietnam," the group said.
The number of companies that are looking to maintain their level of investment remained relatively constant at 32 percent, which EuroCham said probably "reflects the medium-term optimism linked to the recent improvements in macroeconomic stability of Vietnam."
The shift in confidence came after a long period of caution among European companies that began around a year ago. At times, up to one third of the respondents wanted to reduce investments in Vietnam.
But the improved sentiment was not enough to pick up the EuroCham Business Climate Index, which lost another three points to the record low of 45 this quarter. This is also the second quarter the index has stayed under the neutral 50 point level.
According to EuroCham, there was a further drop in companies assessing their current business situation as positive, from 30 percent to 26 percent, while 35 percent of respondents assessed their business outlook as "not good" or "very poor."
The survey also found that 44 percent of companies were expecting revenue to increase, down one point from last quarter.
"During the past 12 months, EuroCham's BCI has declined from 56 to 45 points a drop of 11 points. This indicates a declining confidence in Vietnam as an investment destination for European business," EuroCham Chairman, Preben Hjortlund, said in a statement.
"We remain hopeful that recent developments such as the beginning of negotiations for the FTA between Vietnam and the EU will encourage Vietnam to improve its competitiveness and attractiveness and turn around the declining business climate," he said.
Vietnam's economy is expected to expand 5.2 percent this year.
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