HANOI – Việt Nam’s economic potential is undeniable and the European business community remains confident in its long-term growth, said Dominik Meichle, Chairman of European Chamber of Commerce in Việt Nam (EuroCham).

The Eurocham on Monday unveiled its Q2 2024 Business Confidence Index (BCI) report, offering a nuanced perspective on the economic landscape for European enterprises in Việt Nam. Despite the country’s robust first-half GDP growth, the BCI experienced a marginal decline from 52.8 in Q1 to 51.3 in Q2 2024, underscoring the necessity for ongoing policy adjustments to maintain momentum.

The BCI survey, conducted by Decision Lab and distributed to EuroCham’s network of 1,400 members, serves as a barometer of sentiment among European businesses operating in Việt Nam. This quarterly assessment provides real-time insights into the evolving business environment of one of Southeast Asia’s most dynamic markets.

“While our survey points to areas for improvement, we believe that by working together to address administrative and regulatory hurdles, we can create a more efficient and attractive business environment that benefits both the European and Vietnamese business communities,” he said.

Meichle added: “This survey, powered by our members’ real-world experiences, is the backbone of our advocacy work. It shapes our conversations with Vietnamese officials and EU policymakers. By bringing our members’ perspectives to the table, we are identifying key areas for growth and strengthening the Europe-Việt Nam partnership through open dialogue and teamwork.

“These survey results reveal a nuanced picture of the business landscape,” said Thue Quist Thomasen, CEO of Decision Lab.

“While 68 per cent of respondents report neutral to positive current conditions, there is a slight increase in short-term caution, which needs to be addressed to continue the positive trend from the previous quarters. However, the strong 6.42 per cent GDP growth in the first half of 2024 and nearly 70 per cent expressing long-term optimism indicate robust underlying confidence that may materialise in future readings,” he said.

Actions needed to continue improving Việt Nam’s business climate

The survey paints a mixed picture, reflecting both resilience and ongoing challenges.

While fewer companies report the economic situation as “very poor” (decreasing from 8 to 6 per cent), those describing it as “not good” increased slightly (from 24 to 26 per cent). Despite this, a majority (68 per cent) still maintain a neutral to positive outlook regarding their own business conditions, suggesting an overall sense of stability.

Though overall sentiment towards Việt Nam’s economic outlook in Q3 2024 is cautiously optimistic (45 per cent), individual businesses are more hesitant about their own prospects for the quarter, with 45 per cent remaining neutral and 23 per cent expressing concerns.

This short-term uncertainty is balanced by robust long-term confidence, with nearly 70 per cent of businesses expressing optimism about Việt Nam’s economic growth over the next five years. This confidence is further reflected in the fact that a comparable percentage would recommend Việt Nam as an investment destination.

While European businesses maintain optimism about Việt Nam’s potential, the survey highlights persistent regulatory challenges that hinder growth and investment including ambiguous regulations subject to varying interpretations; burdensome administrative processes; difficulties in obtaining licences, permits, and approvals; challenges with visas and work permits for foreign workers; and duplicate or inconsistent approvals across government levels.

The survey reveals a growing commitment to sustainability among European businesses in Việt Nam, with 7 per cent having already achieved carbon neutrality. An impressive 37 per cent have set targets to reach this goal by or before 2050, while an even more ambitious 18 per cent aim to achieve carbon neutrality by 2030.

On a positive note, the recent signing of the Direct Power Purchase Agreement (DPPA) decree offers a ray of hope. Swift and successful implementation could address some of these challenges, particularly by improving access to clean energy sources and potentially providing better sustainability incentives.