VN economy confidence rising among EU firms

Workers put the final touches on clothes at French-owned Scavi Hue Garment Company in Hue. Business confidence, outlook and expectations for the future among European businesses in Viet Nam have climbed moderately from the previous quarter. - VNA/VNS Photo Danh Lam

The BCI increased from 74 to 78, a value very close to the results of early 2011 and the highest since the survey began. The rise continues to be driven by a wide perception of favourable macro-economic conditions and, as with previous quarters, the result mirrors high expectations about the ongoing EU-Viet Nam FTA negotiations.

The number of respondents asserting their business situation as positive continued to rise. Participants perceiving the situation as "good" accounted for 52 per cent with another 5 per cent describing it as "excellent".

A third of the respondents described the business situation as "neutral". There was a slight rise from 8 per cent to 10 per cent in the number perceiving conditions as poor, but none called it "very poor".

The great majority of respondents described their business outlook as "positive", with 62 per cent of the respondents expecting "good" business conditions. The continued high expectations surrounding the EU-Viet Nam FTA have a bearing on these results.

Another 28 per cent perceive the outlook for doing business in Viet Nam as neutral/no change. It must be noted that Eurocham expects a sharp decline in confidence if the ongoing negotiations between the EU and Viet Nam are not concluded within a reasonable amount of time.

Assessing outlook

There was a slight drop to 59 per cent from the previous quarter's 61 per cent of the number of participants assessing the macroeconomic outlook for Viet Nam as "stable and improving".

Participants expecting the situation "not to change" also fell slightly from 24 per cent to 20 per cent and there was a rise in the number of participants that expected "deterioration in macroeconomic conditions" from 15 per cent to 21 per cent.

The respondents expected a rise in the inflation rate in the next six months to 5.78 per cent from 4.61 per cent in the last survey. A rise in the inflation rate is a logical expected outcome for the participants as they believe the overall business situation in Viet Nam will improve causing a likely acceleration of the economy.

The largest number of respondents - 48 per cent - said they are considering increasing slightly the number of employees.

Likewise, answering questions about investment plans in the medium term 41 per cent said they are considering increasing their investment in Viet Nam slightly.

Asked about revenues, 56 per cent said they expect a certain increase.

In light of the expected economic acceleration the participants were concerned about the inflation rate. A full 60 per cent said they believe the inflation would have a slight impact on their business situation while only 17 per cent feared a significant impact on business. The rest said inflation would have no impact on them.

Energy specific

Asked to what extent they attribute Viet Nam's attractiveness as an international investment destination to low energy prices as opposed to other factors, respondents were split down the middle, with 44 per cent each saying it is a key consideration and not a factor at all.

The rest said low energy prices matter to a significant extent.

On the question of whether energy shortages and unreliability of energy supply is more of a concern than likely higher energy prices over time, 38 per cent said yes while 35 per cent said it is less of a concern and the rest were not sure. Asked if they would welcome power that is more expensive but also more reliable, 40 per cent said yes and 33 per cent said no while the remainder were not sure.