European companies have expressed more confidence about Vietnam’s business climate given that the EU-Vietnam Free Trade Agreement (FTA) is set to be concluded later this year, a survey shows.
The European Chamber of Commerce in Vietnam (EuroCham) said its latest quarterly Business Climate Index survey, conducted last month, showed the index has risen to 66 from last quarter’s 59.
“A further increase by 7 points seems to underline the findings of last quarter’s survey. Our members have a strong belief in the Vietnamese market and are very hopeful of a strong implementable FTA,” Nicola Connolly, Chairwoman of EuroCham, said in a statement.
“We will continue to work with the Vietnamese government and the European Union to ensure that the final agreement will provide practical benefits for our members in the years to come,” she added.
Half of EuroCham members expect that trade would be the most beneficial sector from the agreement. Thirty three percent point out manufacture and 10 percent say services.
The improved positive sentiment of European firms is linked not only to the ongoing trade negotiations, such as EU-Vietnam FTA, but also the creation of ASEAN Economic Community in 2015, according to the survey.
In line with the creation of an ASEAN Economic Community, the survey asked respondents to evaluate Vietnam’s competitiveness against other ASEAN countries across a number of different criteria.
According to the findings, competitive labor costs were perceived as a key reason for European companies to settle their businesses in Vietnam.
On the other hand, a comparatively high percentage of the respondents assessed Vietnam as being less competitive in terms of infrastructure (75 percent) and legal/administrative system (80 percent).
How would you assess Vietnam's competitive advantages against other ASEAN countries in different criteria?
More investment, recruitment plans
Eighty-one percent of the respondents plan to maintain or increase their investment, compared with 78 percent last quarter. This translates into a rise in recruitment plans with 55 percent expecting to raise their headcounts, up 7 percent from last quarter.
However, the number of respondents expecting an increase in business orders has dropped to 64 percent from 70 percent.
At the same time, the level of respondents expecting a reduction in business orders has remained low -- 12 percent, compared to 15 percent last quarter.
The respondents remain somewhat confident in the macroeconomic outlook, with 46 percent expecting ‘stabilization and improvement’ of the situation (slightly down from 47 percent last quarter) and 26 percent fearing a further deterioration (up from the 23 percent last time).
The World Bank forecasts Vietnam’s economy to grow 5.5 percent this year.