EuroCham advocates for strategic focus on long-term power stability in Vietnam

July 11, 2023 | 12:12
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The European Chamber of Commerce in Vietnam (EuroCham) has highlighted the need for long-term strategies to tackle recurring power shortages in the country, arguing that the stability of the power supply is crucial for business efficacy and overall economic recovery, as indicated in their Q2 Business Confidence Index (BCI) report.
EuroCham advocates for strategic focus on long-term power stability in Vietnam

Recurrent power shortages in Vietnam – a significant deterrent to business productivity – are under EuroCham's spotlight, according to its Q2 BCI report released on July 10.

The study suggests that recent electricity shortfalls have had a considerable impact on various businesses. Even though substantial rainfall has somewhat stabilised the predicament, nearly 60 per cent of surveyed firms indicated the power deficiency as an obstacle, with about 10 per cent profoundly affected.

Addressing the power supply's stability ranks high on EuroCham's list of priorities for ensuring business operations and catalysing the nation's economic resurgence.

"The government should concentrate on devising long-term plans as this cyclical issue persists," stated Gabor Fluit, chairman of EuroCham.

From late-May to mid-June, northern Vietnam has faced recurring power outages. The amplified electricity demand, juxtaposed with the reduced hydroelectric power output due to drought, seriously limited Vietnam's principal energy source's ability to contribute. Several industrial zones in Bac Ninh, Hanoi, and Bac Giang experienced sustained power cuts during the week.

European business leaders also noted that compared to peer nations in the region, Vietnam's pace of infrastructure development lags. Around 53 per cent of businesses surveyed rated the existing infrastructure as either inadequate or outdated.

On the brighter side, businesses have acknowledged the Vietnamese government's proactive steps towards resolving these issues, particularly through the acceleration of pivotal infrastructure projects.

The survey also flagged other worrisome issues such as convoluted administrative processes, ambiguous regulations, difficulties in procuring visas and work permits, and the impending global minimum tax rate.

Despite these headwinds, the survey revealed a marginal up tick in business optimism. Approximately a third of businesses now predict a stable or improving economy, up by 2 per cent. The number of business leaders bullish about Q3's prospects also saw a 9 per cent rise compared to Q2.

Vietnam continues to be a magnet for foreign investors, with 48 per cent of respondents expecting growth in their company's foreign direct investment in Vietnam over the coming quarter. Over half of these businesses are currently benefiting from the EU-Vietnam Free Trade Agreement.

Nonetheless, in the face of global economic turbulence, EuroCham's BCI for Vietnam experienced a slight dip of 4.5 points to 43.5 in Q2.

According to Fluit, Vietnam's export and manufacturing-oriented economy has been hit significantly by global downturns. Consequently, the decrease in exports and orders has majorly impacted European businesses and the wider business community.

"The BCI vividly paints the current grim landscape," he opined.

Fluit commended the Vietnamese government's swift and pragmatic measures to tackle these challenges, specifically in expediting critical infrastructure projects. Such initiatives are projected to provide a substantial impetus to the long-term economic trajectory.

Thue Quist Thomasen, CEO of the survey's facilitator Decision Lab, observed that while the services sector is showing recovery signs, the manufacturing sector is plagued with numerous hurdles. To stimulate sustainable growth and lure foreign investments, addressing the regulatory bottlenecks and infrastructure shortcomings is crucial.

Thomasen added, "Businesses are voicing the importance of administrative simplification and the elevation of workforce skills as essential growth catalysts. A highly qualified workforce plays a significant role in bolstering business confidence in both enterprises and the economy at large."

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