European business leaders ended 2020 more optimistic about Vietnam’s trade and investment environment than at any point since the outbreak of Covid-19, according to the Business Climate Index (BCI) from the European Chamber of Commerce.
The BCI is a regular barometer of EuroCham members and their perceptions of the business environment. Each quarter, it tracks the performance of EuroCham’s member companies and their perceptions of the economic outlook in Vietnam. The fieldwork and data collection for the BCI is conducted by YouGov Vietnam.
The BCI climbed 6 points in quarter four of 2020 to reach 63.6 – ending 2020 on a high. In total, the index rose 37 points over the course of last year, after falling to a historic low in quarter one with the initial outbreak of Covid-19. Since then, the BCI has maintained positive growth as Vietnam’s successful handling of the pandemic and implementation of the EVFTA combined to improve confidence and boost business.
When asked about Vietnam’s economic prospects in the next quarter, 57 per cent of EuroCham members predicted “stabilization and improvement” in the first three months of 2021. That compares to 39 per cent in the third quarter of 2020 – a rise in confidence of 18 percentage points.
Turning to the prospects of their own enterprises, European business leaders were more positive and optimistic in quarter four. One-third of EuroCham members predicted a rise in their headcount in the next quarter, with a further 57 per cent expecting to maintain the same level. Meanwhile, 30 per cent anticipate a rise in investment and 43 per cent predict a rise in orders and revenue.
With the EU-Vietnam Free Trade Agreement (EVFTA) now in force, EuroCham also asked its members for their perceptions of this agreement and its impact on their business operation. In an encouraging sign, 70 per cent said that their business had already benefitted from the EVFTA since it entered into force on 1 August.
However, 33 per cent also said that “administrative procedures” were the main barrier for them to utilize the EVFTA – showing the importance of monitoring the implementation of this agreement.
Commenting on the BCI, EuroCham chairman Nicolas Audier said, “Our latest BCI paints a positive picture of Vietnam’s business environment as we look ahead to 2021. The growth in confidence we have seen over the last 12 months is a testament to the government’s swift and effective handling of Covid-19, and creates a strong foundation for the next five years of Vietnam’s socio-economic growth.
Meanwhile, EuroCham’s members report a positive impact of the EVFTA since it entered into force six months ago. European business leaders are looking forward to the increased trade and investment that the agreement will bring, while also highlighting some of the issues which need to be addressed to ensure its smooth and successful implementation.
Thue Quist Thomasen, CEO of YouGov Vietnam, added that the continued upward trend in positive sentiment suggests growing confidence in Vietnam’s trade and investment environment – standing in contrast to the situation elsewhere in the world.
“When we look at the detail, our data show that this confidence is rising across the board”, said Thomasen.
Business leaders report stronger expectations for their headcount, with 33 per cent anticipating an increase in the first quarter of 2021. That’s ten percentage points higher than the 23 per cent predicted in the third quarter of 2020. Meanwhile, 30 per cent of business leaders now expect to increase their investment in the next quarter, up from 20 per cent in quarter three of 2020.
By Quynh Chi