Việt Nam's economic rise fuels European optimism

A garment and textile production line at Maxport Company Limited in the northern province of Thái Bình. — VNA/VNS Thế Duyệt

HÀ NỘI — The European Chamber of Commerce in Việt Nam’s (EuroCham) Business Confidence Index released on Monday, conducted by Decision Lab, has signalled optimism in Việt Nam's economy.

The quarterly index reached 52.8 in Q1 2024 – its highest level since Q3 2022 – a clear sign of increased confidence within Việt Nam’s European business community.

Sent to EuroCham's network of over 1,400 members, the BCI gathers responses to gauge the prevailing mood among European businesses operating in Việt Nam, delivering real-time observations on the ever-evolving dynamics of the vibrant Southeast Asian market.

“This positive trend underscores the European business community's view of Việt Nam as a dynamic market with promising growth prospects,” said EuroCham Chairman Dominik Meichle. “The index once again rising above the 50 threshold reaffirms the country's growing appeal. Continued efforts to enhance stability and predictability will further strengthen Việt Nam's global competitiveness and unlock its full potential.”

“The hard data from the Business Confidence Index paints a clear picture - investor optimism is steadily improving,” said Decision Lab CEO Thue Quist Thomasen. "Việt Nam certainly has the capacity to become the region's preeminent investment destination, and proactive, investor-focused policies will further accelerate its rise.”

European businesses signal a strong likelihood of recommending Việt Nam as a top investment destination. A significant 54 per cent of those surveyed indicated a high likelihood of recommending the country to other foreign businesses, giving ratings of 8 or above out of 10. This highlights Việt Nam's rapidly growing appeal within the European business community, while also suggesting potential to further increase its attractiveness to investors.

European businesses express optimism about Việt Nam's economy, both in the near and long term. While a third of businesses feel optimistic about their individual Q2 outlooks, and nearly 40 per cent are neutral.

Looking at the long term, this optimism strengthens, with 71 per cent of businesses feeling positive about their long-term prospects in Việt Nam over the next five years.

Việt Nam's skilled workforce is a major draw for European investors, with 75 per cent of EuroCham members hiring 76 per cent or more of their staff locally. While a Q4 2023 BCI survey found 40 per cent of businesses rating workforce proficiency as moderate, the strong hiring trend suggests a solid talent foundation for future growth.

While optimism remains high, businesses face regulatory hurdles in Việt Nam that hinder market entry and long-term investment. Key concerns include administrative burdens, unclear regulations, permit and licence difficulties and work visa barriers.

To attract more foreign investment, businesses pinpointed several key reforms including simplifying administration, strengthening legal framework and enhancing infrastructure.

“Việt Nam has tremendous economic potential, and addressing regulatory challenges is key to fully realising it,” said Meichle. “Streamlining procedures and establishing more transparent regulations will empower both Vietnamese and foreign businesses to succeed. This will position Việt Nam as a leading investment destination in the region, benefiting domestic businesses, attracting international capital and strengthening economic partnerships.”