Business confidence and outlook among European businesses in Vietnam has
fallen to an all-time low, according to results of the eighth quarterly
EuroCham Business Climate Index (BCI) survey released on Thursday.
The survey, conducted in July
2012, shows the index dropped 5 points further to 48, indicating a declining
confidence in Vietnam as an investment destination, according to EuroCham
Chairman Preben Hjortlund.
“For the first time since we
started this survey in the third quarter of 2010, the index has dropped below the
mid-point of 50 pointing towards an overall negative business sentiment,” says
the chairman in a written announcement.
EuroCham members that
participated in the survey expressed an increasing concern about their current
business situation and outlook as well as the overall macroeconomic outlook in
Vietnam. Some 38% of the surveyed businesses are active in the services
industry, about 30% in manufacturing and the rest in trading or other
activities.
The percentage of respondents
assessing their current business situation as 'good' has fallen from 34% in the
previous quarter to 29% now, and down from 43% one year ago.
Only one percent of respondents
described their current situation as 'excellent'. The neutral assessment of the
current situation remained constant at around 30%.
Meanwhile, the number of
businesses viewing their current business situation 'very poor' has increased
by ten points, with 39% of respondents having a negative view of their current
situation.
EuroCham says that they can see a
negative trend in companies’ business outlook, when only 31% stated a 'good' or
'excellent' outlook, down from 38% last quarter and a significant drop from the
42% of respondents that had a positive business outlook in the second quarter
of 2011.
The shift has been towards a
negative outlook with 31% assessing their business outlook as 'not good' or
'very poor'. One year ago, only 20% of respondents had such a negative outlook.
“Despite some progress on
inflation there is a torrent or new and ongoing issues that are eroding
confidence in the business environment in Vietnam: macroeconomic troubles, lack
of adequate infrastructure and administrative burdens,” said EuroCham Executive
Director Paul Jewell.
Worry about orders, lower investment
When asked about their expected
number of orders and revenue in the medium-term, the answers were mixed.
Some 45% of companies expect
revenue to increase, down from 58% in the last quarter, while 20% of
respondents expected revenue to remain the same in the medium term. Worryingly,
35% expect their orders to decline, representing a 12-points increase from last
quarter and significantly more than the 9% who were worried about a decline in
orders/revenue one year ago.
Relating to investment, when
asked about their investment plans for 2012, only 32% of respondents were
looking to increase their investment in the country, falling from 36% in the
last survey and plunging from the 52% that were planning to do so one year ago.
A staggering 33% of businesses in
this survey are planning to reduce their investments with 20% of them stating
that they will 'significantly reduce' their investments in Vietnam this year.
Meanwhile, in EuroCham’s survey one year ago, only 4% of respondents
anticipated a significant reduction of their investment in Vietnam.
Relating to recruitment plans,
32% of respondents expected to hire more staff in the medium-term. Meanwhile,
41% expected to maintain the same level.
However, 26% are planning to
reduce their staff in Vietnam. Only 19% of businesses were planning to do so
last quarter and just 9% had plans to reduce their headcount this time last
year.
While overall concerns about
inflation remain high with 49% of companies expecting inflation to have a
significant impact on their business, this figure is slightly lower than 52%
last quarter.
However, when asked about the
macroeconomic outlook for Vietnam over the next six months, 60% of respondents
think that they will see a further deterioration of an already difficult
economic situation against 30%, who think that the situation will stabilize and
gradually improve.
This shows that the measures
taken to stabilize the economy do not ease the concern of the business
community about the macroeconomic outlook.
SaigonTimes
Business & Investment Opportunities
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