The Business Confidence Index (BCI) experienced a marginal decline in the second quarter, underscoring the necessity for ongoing policy adjustments to maintain momentum, according to the European Chamber of Commerce in Vietnam (EuroCham)’s Q2 2024 BCI report.

The BCI dropped from 52.8 in Q1 to 51.3 in Q2 despite the country's robust first-half GDP growth.

European companies attend a meeting in Ho Chi Minh City last April. Photos: EuroCham

Dominik Meichle, Chairman of EuroCham Vietnam, said that Vietnam's economic potential is undeniable, and the European business community remains confident in its long-term growth. 

“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 added.

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

He added that while 68% 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% GDP growth in the first half of 2024 and nearly 70% expressing long-term optimism indicate robust underlying confidence that may materialize in future readings,” he said.

Source: Q2 2024 BCI

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%), the number describing conditions as "not good" increased slightly (from 24% to 26%). Nevertheless, the majority (68%) still maintain a neutral to positive outlook for their own business conditions, suggesting an overall sense of stability.

Though overall sentiment towards Vietnam's economic outlook in Q3 is cautiously optimistic (45%), individual businesses are more hesitant about their own prospects for the quarter, with 45% remaining neutral and 23% expressing concern. 

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

While European businesses remain optimistic about Vietnam's potential, the survey highlights persistent regulatory challenges that hinder growth and investment. Key pain points identified include ambiguous regulations subject to different interpretations; burdensome administrative procedures; difficulties in obtaining licenses, permits, and approvals; challenges with visas and work permits for foreign workers; and duplicate or inconsistent approvals at different levels of government.

Carbon neutrality progress is key to attracting quality European FDI

Source: Q2 2024 BCI

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

However, the survey highlighted several key obstacles European businesses face in their net-zero efforts, including customer resistance to sustainable premium pricing, inadequate government support, limited access to clean energy and waste infrastructure, financial constraints, lack of employee engagement, and challenges measuring emissions and managing the supply chain.