According to information from EuroCham, more than 69% of European businesses are optimistic about long-term investment prospects in Vietnam.
Vietnam is becoming attractive to European businesses.
According to Ms. Hoang Tri Mai - member of the Board of Directors of the Business Association Europe in Vietnam (EuroCham): EuroCham has just released the Business Confidence Index (BCI) report for the third quarter of 2024. The results show that, despite the exogenous challenges from the recent Typhoon Yagi as well as global economic fluctuations, Vietnam's BCI index still increased significantly, from 45.1% in the third quarter of 2023 to 52% in the third quarter of 2024, marking a strong recovery of Vietnam's business environment.
“One of the key reasons for this improvement is the strong belief in Vietnam’s ability to maintain a stable macroeconomic environment and promote green initiatives, especially with its commitment to renewable energy and Direct Power Purchase Agreements (DPPAs). Nearly 40% of businesses have benefited or expect to benefit from the DPPA, demonstrating enthusiasm for Vietnam’s policy innovations.” - Ms. Hoang Tri Mai affirmed.
According to Ms. Hoang Tri Mai: In the context of a volatile global macro economy, Vietnam's 7.4% growth in the third quarter of 2024 is considered an outstanding achievement. The Government's efforts in stabilizing inflation, supporting exports and improving infrastructure have created a premise for international investors.
Initiatives such as the approved Power Development Plan VIII (PDP8) and DPPA, along with Vietnam’s commitments at COP26 and the Just Energy Transition Partnership (JETP), are shaping Vietnam as a promising investment destination for high-tech and green businesses.
According to BCI results in the third quarter of 2024, more than 69% European business remain optimistic about the long-term investment prospects in Vietnam. Despite the obstacles, business expansion plans remain promising, with nearly 80% of businesses saying they already have one to three offices or manufacturing facilities in Vietnam.
“Of the businesses that shared their expansion plans, more than half intend to expand their operations, with many planning to develop new manufacturing facilities in the North or open additional offices in key cities such as Hanoi, Ho Chi Minh City, Da Nang and Can Tho.” – Ms. Hoang Tri Mai added.
EuroCham representative said that in the first 9 months of 2024, total FDI capital in Vietnam increased by 11.6% compared to the same period in 2023. In addition to the solutions proposed by the Government such as cutting logistics costs and improving infrastructure, Vietnam can continue to simplify administrative procedures and improve the quality of highly qualified human resources, helping to create a favorable environment for high-tech sectors and towards the goal of sustainable development. Despite certain difficulties after super typhoon Yagi, Vietnam's economy is still assessed to have recovered quickly. The Government has plans to rebuild and support affected industries, especially agriculture and logistics, aiming for GDP growth of 6.5-7% by the end of 2024. These are the driving forces for Vietnam in attracting FDI, including FDI flows from Europe.
There are still barriers to overcome
Although the assessment of the investment and business environment as well as business prospects in Vietnam is quite positive, according to Ms. Hoang Tri Mai, the BCI survey in the third quarter of 2024 also showed that the three biggest obstacles in the operations of European enterprises in the process of operating in Vietnam are: Administrative burden, unclear regulations and difficulties in obtaining licenses.
According to statistics, 66% of businesses currently employ between 1% and 9% of foreign employees, while 6% of businesses have over 20% of their employees being foreigners. Although businesses show a desire to exploit the full potential of domestic and international labor resources, they still face many barriers in recruiting Vietnamese workers, including: Lack of necessary skills and experience, high turnover rates, and limited provision of training resources.
For foreign professionals, European businesses say the main challenges come from the visa and work permit application process, along with difficulties in obtaining the necessary paperwork and approvals.
In particular, this problem becomes more serious when up to 1/3 of the businesses participating in the survey said that they had negative experiences with the visa system in Vietnam, causing many international experts to be concerned about entering the Vietnamese labor market. In addition, businesses also noted difficulties related to tax procedures and compliance with fire prevention and fighting regulations... Accordingly, in the coming time, Vietnam still needs to continue to improve. investment and business environment to increase attractiveness to European investors.
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