European businesses regain confidence in Vietnam

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For the first time in a year, business confidence and outlook among European businesses in Vietnam has stabilized and improved, a new survey has found.

The European Chamber of Commerce in Vietnam (EuroCham) said its latest quarterly Business Climate Index increased four points to 56. Last quarter, the index dipped to 52, the third decline in a row from 79 points recorded in the first quarter of 2011.

"Concerns about the current business situation and outlook appear to have eased slightly among EuroCham member companies that participated in the survey," EuroCham said in a report. "However, their business outlook and assessment of the current situation remains somber."

There was little change in respondents assessing their current business situation, with 36 percent viewing their situation as "good" or "excellent," compared to 32 percent last quarter. Meanwhile, the number of businesses having a negative view of their situation has remained nearly unchanged, at 26 percent, compared to only 14 percent a year ago.

According to EuroCham, there were also signs of optimism in business outlook as 39 percent of the respondents had a positive outlook, a 12 percent increase from last quarter. 

"The slight increase of the EuroCham Business Climate Index at 56 points shows a halt in the downward trend in business confidence we have seen in 2011," EuroCham Chairman Alain Cany said.

"However, the business confidence is still far below last year's level. This shows that uncertainty amongst investors remains. Key structural issues have not been resolved such as privatization of state-owned enterprises and stabilizing the macroeconomic environment to name two examples."

Inflation remains a major concern for businesses, EuroCham said, noting that 53 percent of companies expect inflation to have a significant impact on their business while 8 percent stated that inflation was actually "threatening" their business in the country.

EuroCham Executive Director Matthias Duhn said the European debt crisis has added to investors' uncertainty and impacted European investment in Vietnam.

"European investors are increasingly looking for alternative investment destinations in ASEAN. Therefore Vietnam has to increase its efforts to remain competitive in the region," he said.

40 percent of the businesses that participated in the survey are active in the services industry, about a quarter in manufacturing and trading each, and the rest in other activities, EuroCham said.

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