European firms plan investment cutbacks in Vietnam

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European companies continued to be cautious about their business outlook in Vietnam, with 28 percent looking to reduce their overall investment in the country, a new survey found.

The figure compared to 24 percent three months ago and only 8 percent in early 2011, the European Chamber of Commerce in Vietnam (EuroCham) said, noting the result is the continuation of a downward shift in confidence to invest in Vietnam.

"While the majority of companies are looking to maintain and increase their investments in the country, it is worrying that nearly a third of companies in this survey are considering a reduction of their investments here," EuroCham said.

The Business Climate Index lost three points to 53, staying near the neutral midpoint for a third quarter in a row.

According to EuroCham, no respondent described their current situation as "excellent" while only 34 percent of companies viewed their situation as "good".

Inflation remained a major problem as 57 percent of respondents still saw it as a concern or even threat to their business operations in Vietnam. More than half still expected the overall economic situation to deteriorate further.

"The continuing low level of the EuroCham Business Climate Index at 53 points shows ongoing concerns and uncertainty in the business community and amongst investors," EuroCham Chairman Preben Hjortlund said. "While there are some encouraging signs, the overall business sentiment is stagnating at a relatively low level."

Hjortlund said EuroCham would welcome further progress on the Vietnam - EU Free Trade Agreement as it would "underpin an increase in business confidence and lay the foundations for future investment increases from Europe."

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