Vietnam - European businesses’ confidence in Vietnam slightly improves

Business confidence and outlook among European businesses operating in Vietnam is improving slightly, according to the European Chamber of Commerce in Vietnam (EuroCham).

The EuroCham Business Climate Index survey released on March 7 showed that the Business Confidence Index (BCI) for Vietnam in the first quarter of 2013 increased from a record low of 45 in the previous quarter to 48 points.

The businesses participating in the survey are active in the services industry, manufacturing, trading and other activities.

However, the Index remained below the half-line, which raised concerns among entrepreneurs about their current business situation and outlooks as well as the impact of increased tax, fines and official scrutiny.

The survey saw an increase in respondents assessing their current business situation as positive from 26 per cent to 40 per cent. With respondents holding a neutral view remaining fairly stable at 36 per cent, there were still a quarter of respondents holding a negative view of their current business situation.

At the same time, the reported investment plans seem to be stabilising. About 73 per cent of respondents said they expect to keep their investment at similar levels to 2012, or to increase investment slightly. Up to 78 per cent reported that they are maintaining or increasing their investment, indicating a continued faith in Vietnam’s medium term future.

Besides, 68 per cent of respondents expect to either maintain or decrease headcount, compared with 56 per cent in the last quarter. Only 29 per cent expect to increase the number of employees compared with 40 per cent in the last survey. These figures show that businesses are looking for efficiency and trying to maintain flexibility by keeping their fixed costs as low as possible, especially in an uncertain environment.

Commenting on the survey, EuroCham Chairman Preben Hjortlund said that it is encouraging to see EuroCham’s BCI increase slightly, which reflects perceived stabilisation in the macroeconomics.

However, the index is still the wrong side of 50 and is down on the 79 level achieved two years ago, which requires the Government’s continued efforts to improve the underlying structural problems of the economy, he added.

QDND

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Vietnam - EuroCham displays a guiding hand

The European Chamber of Commerce (EuroCham) in Vietnam last week launched its eagerly awaited White Book 2013, a high-profile report highlighting issues of great concern for European companies in Vietnam. VIR’s Tuong Thuy spotlights some of the hottest issues.

EuroCham’s “2013 Whitebook of Trade/Investment Issues & Recommendations” was released late last week to draw the attention of national policy-makers to the year’s top trade and investment issues facing European firms in Vietnam.

Three reoccurring themes in this year’s Whitebook are pricing, the role of the state sector and intellectual property rights (IPR) issues.

According to EuroCham, the government continues to display an ambivalent attitude towards free market pricing, and in sectors like energy, price changes now require approval.

EuroCham finds this type of price control worrying as investors expect to be able to set prices themselves within the normal boundaries of cost and competition.

EuroCham said it was estimated that 40 percent of the Vietnamese economy was in the hands of the state sector, which in itself was not a problem. “However, in those areas, state companies generally receive favourable treatments through loans, access to land, limited profit targets and others which hampers the growth of the economy.”

The Vietnamese government has expressed the desire and need to move away from a labour intensive economy into technology and value-added areas. However, according to EuroCham, unless there is real, implemented protection of intellectual property rights, investors are unlikely to bring their technology to Vietnam, and Vietnam will remain in the low labour cost trap.

EuroCham chairman Preben Hjortlund said that in practice, real protection for IPR remained very limited.

In order to give a clearer outline of the issues, the Whitebook 2013 has a new, improved layout which pinpoints the main issues in each industry sector and provides suggestions for how to address them.

The book includes chapters on the Vietnam-EU Free Trade Agreement (FTA), for which negotiations have just started; as well as human resources and training, IPR, logistics and transport, taxation and transfer pricing. Other chapters cover information technology, nutritional food for infants and toddlers, pharmaceuticals, tourism and hospitality, energy, mergers and acquisitions, and World Trade Organization commitments.

“This year we have tried to make the White Book more readable, and thus more useful, than the past by providing a top 10 list of recommendations for each industry” Hjortlund said. If implemented, these top 10 recommendations are the ones which would have the biggest benefit for European investors and, thus for foreign direct investment flows and the economy of Vietnam.

“We hope that like the prior editions, this year’s White Book will be well received and more importantly a helpful tool for the Vietnamese government. As always, EuroCham is prepared to further advise on the implementation of any of the proposed changes and remains confident that together, we can overcome the challenges ahead and boost quality long term investments in Vietnam,” he noted.

Vietnamese Government, Hjortlund stressed, had achieved much in the last year in terms of controlling inflation, but many issues remained, which needed to be addressed, and which were acting as a brake on European direct investment.

At the launching of the Whitebook, Hjortlund said that according to EuroCham’s Business Climate Index (BCI) European businesses’ perception of Vietnam as a business destination has further declined this year – for the first time going below the mid-point of 50. Many of EuroCham’s concerns are shared by non-European companies doing business in Vietnam.

EuroCham’s members remained positive for the medium term development of Vietnam, but were concerned at a lack of progress on many issues in the short term. Many members were reporting an increase in business hurdles, through increased scrutiny and bureaucracy. In the medium term, the members were optimistic and ready to invest once the business environment in Vietnam improves, he stressed.

EuroCham’s executive director Paul Jewell said that recent developments such as the beginning of negotiations for the Vietnam-EU FTA represented an important signal for Vietnam. “The coming years will determine the longer term future of Vietnam, and if the government is successful in addressing the issues identified by the business community and a comprehensive FTA is agreed, then Vietnam would be a strong regional player.”

Jewell added that this could lead to a further increase in the quantity and quality of foreign direct investment and that EU enterprises increasingly would perceive Vietnam as their ASEAN hub or even headquarters, from where they could service efficiently both ASEAN markets and neighbouring countries.

“EuroCham therefore believes that the White Book 2013 represents an important opportunity for the Vietnamese government to demonstrate its future economic aspirations and send a clear signal to the business community that Vietnam is ready to do business.”

The White Book covers the major industries that EuroCham’s almost 800 member companies operate in, such as pharmaceuticals, fast-moving consumer goods, energy, telecom, automotive, tourism and banking.

Hjortlund said over the last five years, the government had discussed and considered issues raised in previous editions of the publication. “But we would like to see more action from the government,” he added.

Jean-Jacques Bouflet, head of trade and economic affairs at the EU Delegation to Vietnam, said that many of the issues highlighted in this year’s White Book “will be included and addressed in the Vietnam-EU FTA negotiations.”

According to Bouflet, the EU has recently become the most important trade partner for Vietnam in terms of trade and investment, but also politically. Today, the EU is the largest overseas market for Vietnam and a largely favourable relationship for Vietnam. The EU trade deficit with Vietnam surged to 7.72 billion Euros in 2011 from 4.9 billion Euros in 2010 and 3.77 billion Euros in 2009.

Hjortlund said EuroCham made its various suggestions within this White Book on behalf and in the interests of its members. However, he also underlined that “it is clear that in the vast majority of cases the recommendations are clearly in the long term interest of the Vietnamese government and people. The economy can only grow sustainably if the business climate is favourable, if there is a level playing field, if corruption and the resulting inefficiencies are banished, if government bureaucracy and oversight are reasonable.

“We sincerely hope our suggestions will assist the government to reach such a situation and we in EuroCham will continue to assist where possible in striving towards this goal,” added Hjortlund.

For more information please consult the Whitebook press releases in English or Vietnamese. To access last year's edition, the Whitebook 2012, please click here.

vir.com.vn 

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Vietnam - EuroCham survey shows new low in confidence

European companies that do business in Vietnam are becoming more pessimistic, with a new  European Chamber of Commerce (EuroCham) survey showing confidence falling to a record low in the fourth quarter amid concerns over inflation and the impact of increased taxes, fines and official scrutiny.

The EuroCham Business Climate Index (BCI) survey, released on November 2, also showed a further drop in respondents assessing their current business situation as positive from 30 per cent to 26 per cent.

More than a third of businesses continue to have a negative view of their current situation. At the same time the neutral assessment of the current situation grew to 37 per cent - up by 7 points compared to last quarter.

“During the past 12 months, EuroCham’s BCI has declined from 56 to 45 points - a drop of 11 points. This indicates a declining confidence in Vietnam as an investment destination for European business,” said EuroCham chairman Preben Hjortlund.

“We remain hopeful that recent developments such as the beginning of negotiations for the FTA between Vietnam and the EU will encourage Vietnam to improve its competitiveness and attractiveness and turn around the declining business climate,” he added.

EuroCham executive director Paul Jewell said the further drop of EuroCham's BCI was caused by slow progress on many of the issues that we have flagged in the past.

Half of surveyed European companies remain expecting inflation to have a significant impact on their business in the medium-term. Meanwhile, 72 per cent of respondents think that they will see a further deterioration of an already difficult economic situation. This is a rise by 12 points since last quarter and it shows that the measures taken to stabilize the economy do not ease the concern of the business community about the macroeconomic outlook.

In addition, European companies said that the current downturn in the economy impacts Vietnamese government tax revenues, thus resulting in cases of increased fines, auditing visits and customs duties. More than two third of respondents have experienced a form of increased scrutiny and 10 per cent of the respondents find that this threatens their business in Vietnam.

“Increased official scrutiny and fines have certainly played a role in terms of this quarter’s overall decline of the Business Climate Index and it is therefore of utmost importance that these issues are addressed,” EuroCham said in a statement.

Bao Tram | vir.com.vn

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Vietnam - EuroCham Business Climate Index falls to record low

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

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Vietnam - Cash flow heading for the real estate market

VietNamNet Bridge – No one can foretell when the property market will defrost. However, analysts have pointed out that the sharp falls of the bank loan interest rates, plus the lessened attractiveness of other investment channels would drive the cash flow to the real estate market.

Deputy Minister of Construction Nguyen Tran Nam also said at the meeting with Eurocham on June 16 in HCM City, that a huge capital has been kept among people, estimated to reach 25-40 billion dollars, and that it is very likely that the capital would flow into the real estate market, when the opportunities in other investment channels have been narrowed.

It’ll take time to defrost real estate market

Nam believes that the deposit interest rate reduction to 9 percent per annum has made deposits unattractive to the people who have idle money. Meanwhile, investors also keep hesitant to inject money in gold and foreign currencies, since the two items have been put under the strict control by the State, and they are not considered the kinds of goods or payment instruments.

Meanwhile, the dong/dollar exchange rate is believed to be stabilized thanks to the big foreign currency reserves.

Investors also cannot see big opportunities with securities investment deals, because the stock market remains gloomy and listed companies, like many other businesses, are facing big problems in the economic downturn.

With the analysis, Nam has predicted that the cash flow would be driven into the real estate market. However, it would take time to see the real estate market warm up, because it would need some more time to restore investors’ confidence on the investment opportunities.

“The real estate market would thaw, but it would not be defrosted as quickly as the ice in your glass of water. It would warm up gradually according to the national economy recover,” Nam said when answering a question raised by a businessman about the state’s policies to revive the market.

According to Nam, the government has been aware of the difficulties of the property market and it would be determined to settle the existing problems to re-activate the market, which is considered an important part of the national economy. Once the market meets difficulties, this would lead to the banking sector losing its liquidity and to the increase of the bad debts.

Nevertheless, the government would have to be cautious with its steps in the process to revive the property market. The government can only loosen the monetary policies in a cautious manner, because it needs to keep vigilant over the possible returning of the high inflation.

In the immediate time, the government has made necessary interventions to help warm up the real estate market. For example, the housing development projects have been weeded out from the list of the sectors to which commercial banks are not encouraged to provide loans. As such, real estate developers now can access official credit sources at lower interest rates.

Nam believes that the real estate market would begin warming up in the last months of 2012 and regain its recovery by 2013.

Real estate developers cherish hope

Though real estate developers understand that they should not expect the market recovery overnight, they have been trying all the ways they can to boost sales.

Thu Duc House, for example, is offering apartments and landed properties in districts 9 and Thu Duc with flexible sale policies which offer a lot of preferences.

About 100 apartments at TDH-Truong Tho apartment block and TDH-Phuoc Binh have been put on sale. The apartments have been completed and they are ready to be delivered to buyers immediately. The price of 14.9 million dong per square meter and 950 million dong an apartment prove to be affordable to people.

Meanwhile, Hung Viet and South Korean KRDF03 (HVK) have begun seeking buyers for the first apartments of The Eastern project in district 9 in HCM City.

Source: TBKTSG

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Vietnam - EuroCham Index pessimistic about business outlook

Vietnam’s business outlook has left European enterprises little to cheer about.

According to results of the seventh quarterly EuroCham Business Climate Index survey, conducted in April/May 2012 and released on May 19, the index decreased three points to 53.

Compared to the previous survey, there was a 10 per cent increase in respondents assessing their current business situation as “not good” to 29 per cent, up from 19 per cent in the last quarter and only 12 per cent one year ago, but 34 per cent described their current business situation as “good.” This is unchanged from the last survey but down from 50 per cent with a positive view on current business one year ago.

Some 40 four per cent of businesses surveyed are in the services industry, 28 per cent in manufacturing, 20 per cent in trading and the rest in other activities.

The baseline of optimism was retained by some firms, with 38 per cent stated a “good” and 36 per cent a “neutral” outlook. This is almost unchanged from last quarter, but is put into perspective by the 51 per cent of respondents that had a positive business outlook this time last year. Twenty six per cent were pessimistic about their business in the next six months and 62 per cent were neutral or negative, according to the survey.

When asked about their investment plans for 2012, many respondents remain cautious. Some 34 per cent want to maintain their level of investment and 38 per cent are looking to increase their investment in Vietnam. That is a slight increase from 36 per cent in the last survey, but still a significant fall from 59 per cent aiming to increase their investments this time last year.

Meanwhile, 28 per cent of businesses are looking to reduce their overall investment in the country, up from 24 per cent last quarter and only 8 per cent in early 2011. This result is the continuation of a downward shift in confidence in Vietnam. While the majority of companies are looking to maintain and increase their investments in the country, it is worrying that nearly a third of companies in this survey are considering a reduction of their investments here.

When giving the estimate for the expected percentage of VND depreciation, the average of all answers was 5.63 per cent, down from 8.33 per cent last quarter hinting towards an increase in confidence towards government measures to curb inflation. However, 57 per cent of respondents still saw inflation as a major concern or even threat to their business operations in Vietnam. Slightly less than the 61 per cent reported major inflation effects on their business last time, but inflation remains a major concern.

Kieu Linh | vir.com.vn

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Vietnam - Vietnam is losing its competitiveness: EuroCham

Vietnam is losing its competitiveness, Preben Hjortlund, newly appointed president of the European Business Chamber of Commerce (EuroCham) said basing on the declining inflows of foreign direct investment (FDI) in Vietnam recently.

In a survey on business indicators of European enterprises in Vietnam, when answering the question "whether the current economic crisis in Europe affects the company's decision to invest in Vietnam or not", 55% of EuroCham members participating in the survey have confirmed that the crisis has affected them, though only slightly. In contrast, 44% others said that they has no effects.

According to new chairman of the European Chamber of Commerce (EuroCham), Mr. Preben Hjortlund, the drop in FDI recently has shown that Vietnam is losing its competitiveness in the region and investors are looking for other locations. This is especially true when comparing to Indonesia as this country is a major attraction in attracting FDI at this time.

The World Bank (WB)’s report on the business environment in 2012 showed that Vietnam dropped six steps in competitiveness criteria. This is not good news.

According Hjortlund, the biggest obstacle that European investors are experiencing in Vietnam is high inflation. "We hope that in 2012 inflation will ease and the economy will be stable again," he said.

The president also warned, Vietnam’s trade deficit management is also a worrying story (in 2011 Vietnam's trade deficit was $9.5 billion). Instead of managing by limiting imports, the Vietnamese Government should encourage imports to increase exports in the long term.

To attract FDI with better quality, the government should remove unnecessary restrictions in accessing market, affecting the free trade within this year.

VietBiz24

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Vietnam - Number of newly set up businesses down, raising worries

VietNamNet Bridge – The number of newly established businesses in January 2012 decreased by 36 percent over the same period the last year. This should be seen as a worry for the national economy?


A report of the Ministry of Planning and Investment showed that in January 2012, only 4117 businesses were set up which had the total registered capital of 18,200 billion dong, a decrease of 36 percent in the number of businesses and 56 percent in the registered capital, in comparison with the same period of the last year.

The foreign direct investment (FDI) picture in January 2012 was also gloomy. The FDI registered capital in the month was just equal to 2.5 percent of the same period of the last year, even though a huge project capitalized at 575 million dollars was licensed.

The low number of newly set up businesses reflects the current difficulties of the national economy and the problems it is facing. The two latest surveys have also pointed out that the business confidence of businessmen has decreased.

In the EuroCham’s report on the business confidence index (BCI), though the index increased slightly by four points, only 39 percent of businesses said “good” or “excellent” about their business prospects. Though the figure represents a 12 percent increase in comparison with the previous quarter, it remains too low if compared with the 72 percent level of the same period in 2011.

Alan Cany, Chair of EuroCham has noted that the confidence was still far below that of the last year, which shows the uncertainties of investors about their business in the future.

The worries about the macroeconomy in Europe and in Vietnam could be the reasons that make European businesses feel less optimistic. However, the worry of European businessmen could also be the worry of other investors from the US, Japan, South Korea or Taiwan.

The same low confidence has also been reported for domestic businesses. A survey conducted by WVB Vietnam, a finance information service company, showed that the BCI in the fourth quarter of 2011 dropped sharply to 116 points from 123 points of the third quarter of 2011.

The surveys have also shown that the number of businesses that kept optimistic about the Vietnam’s economic prospects in the next 12 months, has dropped by 10.5 percent in comparison with the third quarter of 2011.

“The BCI decrease shows the insecurity of businesses amid the continued changes in the economy in the last year,” WVN commented. Businesses believe that they would still have to confront big difficulties in 2012, including high inflation, high interest rates and ineffective investments.

Not only independent surveys, but the Ministry of Planning and Investment itself has also admitted that the production and business of enterprises have still been meeting big difficulties. The pessimistic world’s economy has badly affected Vietnam’s exports and the financial market – the important channel for businesses to mobilize capital.

“Besides, the tightened fiscal policies, the tightened credit policies and the measures applied to curb inflation are all believed to hinder the capital mobilization of businesses. These are the reasons behind the sharp fall of the newly registered businesses and the increase of the dissolved businesses,” the ministry’s report reads.

The sharp decreases of the new businesses and the investment capital have raised big worries, because these are the indicators showing the dynamism of the national economy. In the long term, if the current situation cannot improve, this may lead to the weakening of the production capacity, thus causing long term consequences to the national economy.

However, Hoang Xuan Quyen, a well known economist, said that no need to get so surprised about the decrease of the number of businesses, when the global and the domestic economies both are in big difficulties with the production in stagnation because of the high inflation, high unemployment and demand decreases.

“The current decreases only reflect the cautiousness of investors in doing business in the context of high risks and low profits,” he said.

Source: TBKTVN


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Vietnam - EuroCham: Vietnam’s business climate index increases slightly

There has been a slight increase in business confidence and outlook among European enterprises in Vietnam, according to the EuroCham Business Climate Index survey announced on February 1.

The results of the survey showed that the EuroCham business climate index rose to 52 points after dropping 11 points in the fourth quarter of last year.

About 36 per cent of surveyed businesses expressed pleasure at their current business operation in Vietnam, while 26 per cent are still pessimistic.

More than 47 per cent are expected to see a middle-term increase in their trade revenue and 27 per cent want to maintain their current business operation. Only eight per cent voice concern over the negative impact of Vietnam’s inflation rate.

Regarding recruitment place in 2012, 40 per cent of surveyed businesses say they will employ more workers, 39 per cent want to maintain their current staff level, and 14 per cent will reduce the number of employees in Vietnam.

The Chairman of the European Chamber of Commerce (EuroCham), Alian Canym, said the index reflects the confidence of EuroCham members in Vietnam’s business prospects. However, he said European businesses are still worried about the country’s equitisition process and macro-economic stability.

According to Dr. Matthias Duehn, EuroCham managing director, the debt crisis in the Euro zone has affected investors’ decisions in Asia. Many investors are keen on the Southeast Asian market, including Vietnam. Therefore, he said, Vietnam should sharpen its competitive edge to attract more investors.

VOV

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Vietnam - Remove unnecessary restrictions: EuroCham

Unpredictably, 2011 has turned out to be a tough year for businesses in Vietnam and other parts of the globe rather than a promising year as expected at the beginning of this year. In this difficult situation, the European Chamber of Commerce in Vietnam (EuroCham) has insisted all unnecessary restrictions to investment and trade to be removed, and to support the business community to cope with challenges in 2012.


New trade conditions

In a review of the White Book launched in Hanoi on Thursday, EuroCham Chairman Alain Cany said EuroCham believed that to attract more and higher-quality foreign investment, the Vietnamese Government should focus its effort next year on removing all unnecessary restrictions to market access and free trade. 

“We have observed over the last year a number of restrictive measures impeding trade,” Cany said in an emailed interview with the Daily before the launch of the fourth edition of its “White Book of Trade/Investment Issues and Recommendations.” Like the prior editions, the new White Book summarizes for the Government the key issues affecting the business climate for European companies in Vietnam. 

Cany cited as one of the restrictions Notice 197 of the Ministry of Industry and Trade on the importation of alcoholic beverages, cosmetics and mobile phones that entered into force on June 1, 2011. Accordingly, shipment arrivals of the three imported ‘non-essential items,’ namely mobile phones, cosmetics and liquors, will only be allowed at major ports of HCMC, Danang in central Vietnam and the northern city of Haiphong.

EuroCham expressed its concern that the ministry issued Decision 1380/QD-BCT on March 25 revising the list of “goods discouraged for import” and issued a plan in April to ‘manage’ imports, which include “Strengthening measures for management of importation of non-essential goods and domestically produced goods”. It also noted that the ongoing automatic import license procedures under Circular 24/2010/TT-BCT continue to interfere with the smooth import of goods to Vietnam and authorities’ feedback on these issues has been rather slow. 

“EuroCham believes that rather than ‘managing’ the trade deficit by restricting imports, the Vietnamese Government should encourage more imports to boost exports in the long run. Therefore, Notice 197 and Decision 1380 should be repealed,” Cany responded to a question raised by the Daily about the certain efficiency of the measures to narrow trade deficit and address other issues. 

Cany agreed restricting the import of luxury goods would not help reduce the trade deficit in the long run. “In the short run, it may well have the desired effect, but in the medium and long term, such measures will fail to tackle the problem as they are not addressing the root causes of the trade deficit. Such restrictions on market access even harm perceptions abroad of Vietnam as a place to do business,” he argued.

Combination of old and new issues

EuroCham said its progress report showed fewer improvements for 2011, which is due to macroeconomic woes and new regulatory burdens in addition to trade restrictions in Vietnam. 

EuroCham Executive Director Matthias Dühn said that EuroCham had actually seen some slowdowns, particularly in the area of investment licensing that takes its member companies up to 12 months in some cases. Also, red tape and corruption have increased significantly despite reform efforts to remove administrative burdens and streamline bureaucracy in Vietnam. 

Again, the organization representing over 750 European businesses complained about Decree 46/2011/ND-CP on recruitment and management of foreign employees. EuroCham said conditions in this Decree, effective on August 1, have caused a lot of concerns for many of its members as they make life hard for both foreign and local companies when it comes to recruiting foreign employees.

Dühn said the new Decree and implementing Circular 31 in order to extend the work permit for a foreign employee, a company must still enter into an apprenticeship contract with a Vietnamese employee expected to substitute the relevant foreign employee.

EuroCham advocated that employers should be allowed to select the right candidates based on their own discretion and internal processes. “We are unhappy that our recommendations regarding Decree 46 have not been taken into account,” said the chamber. Dühn added that even though Circular 31 now mentions the requirement of a training program as an alternative to substitution, this alternative had not been applied in practice so far.

Bureaucracy, especially in the tax and customs area, remains a fundamental issue to be tackled in Vietnam. EuroCham said its view was supported by the World Bank's latest “Doing Business 2012” Report, according to which the ranking of Vietnam’s business climate has fallen this year as a result of the slow pace of administrative reforms. 

“A worsening of conditions was seen in the Report in areas such as starting a business in terms of licensing, registering property, paying taxes and obtaining credit,” EuroCham said.

Therefore, EuroCham assumed that slow progress on many of the issues that were addressed in the White Book 2011 and some new issues were eroding confidence of European companies in the business environment in Vietnam.  

“Whilst European companies have been patient and remain hopeful that the business environment in Vietnam will improve, their confidence has been steadily declining since the beginning of 2011, as is evidenced by the quarterly EuroCham Business Climate Index (BCI) survey for Vietnam,” Cany said.

Business confidence falls

EuroCham’s latest BCI released in October unveiled high inflation and other concerns resulted in a decline in confidence and outlook among European businesses in Vietnam for the fourth consecutive quarter. Conducted among 200 EuroCham members in the services, manufacturing, trading and other sectors, the survey showed a drop of 11 points to 52 points compared to the previous survey. 

The EuroCham Chairman said the latest BCI reflected a declining confidence in Vietnam as an investment destination though he admitted that global slowdown and macro-economic problems in Vietnam have not caused a serious scale-down or shut-down of operations of its members in the country. 

The latest report issued by the Foreign Investment Agency under the Ministry of Planning and Investment indicated US$12.69 billion foreign investment had been pledged for 919 fresh projects as well as additional capital for 423 operational projects in the year to November, down 16% on the same period last year.

The EuroCham BCI found that 38% wanted to maintain their level of investment and 36% were looking to increase their investments in Vietnam, down from 52% last quarter. The result also showed 22% were looking to scale down their overall investment in the country, up from 13% last quarter.

Answering the Daily’s questions about investment before launch of the White Book 2012, the EuroCham Chairman Cany said EuroCham believed that whilst there may be an impact from external factors, such as "imported" inflation and the current Eurozone debt crisis, many of the reasons for European investors’ declining FDI in Vietnam were to be found in the aforesaid structural issues, besides the lower-than-expected performance of State-owned enterprises. 

“Overall, we can see that Vietnam’s current woes, combined with a difficult macroeconomic situation in Europe and beyond, have caused many investors to review their predictions of the country's prospects,” EuroCham Executive Director Dühn said. “The long-standing issues mentioned above as well as lack of reforms in the education sector and infrastructure bottlenecks are now being raised and seen as a serious obstacle much more than before. Other ASEAN countries, such as Indonesia, may soon overtake Vietnam in terms of competitiveness if these fundamental issues are not addressed quickly.” 

In addition to addressing the issues mentioned above, Dühn said EuroCham also expected that an EU-Vietnam free trade agreement would help increase European investment in both quantity and quality. 

“EU enterprises will increasingly perceive Vietnam as their ASEAN hub or even headquarters, from which they can service efficiently both ASEAN markets and neighboring countries like Japan, China and India,” Dühn said.

Such an FTA will enable Vietnam to benefit from high-quality imports and increased technology transfer. Increased high-quality imports will in turn help upgrade the quality of Vietnam’s exports so that Vietnamese enterprises will be able to improve their competitiveness in the long term. But, EuroCham urged efficient enforcement of intellectual property rights protection to encourage companies to transfer their technology and high-tech knowledge to this country.

Therefore, Dühn said EuroCham believed that now is the time to kick off official negotiations to conclude the FTA after more than 20 months since the first talks between the EU and Vietnam. He added EuroCham was ready to advice on specific contents of a future FTA and assist the authorities with the recommendations from the private sector side.

SGT


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Vietnam - EuroCham co-publishes Handbook for Green Housing

The handbook was officially launched during the 4th ASEAN-EU-NET Stakeholders Conference in Hanoi from 16-17 November, at MoC in Hanoi on 16 November and on 18 November at Department of Construction in HCMC. The handbook is part of the work package "climate-adapted housing and energy-efficient buildings" of the MegaCity HCMC research project funded by the German Ministry of Education and Research (BMBF). An interdisciplinary team has developed a Handbook for Green Housing in Vietnam. This handbook targets mainly ordinary Vietnamese people and explains in an easy-to-understand manner basic principles how increase climate-adaptedness and energy-efficiency related to residential housing.

EuroCham observes a great potential in the reduction of greenhouse gas emissions particularly related to buildings in Vietnam against the background of climate change. So far, energy is heavily subsidized and the local awareness to save energy is not very distinct, especially among the so-called new consumers, the rapidly emerging urban middle class population with an sky-rocketing ecological footprint. With this handbook, based on the scientific work of the project team, the handbook is trying to convince Vietnamese people to save energy rather than to force them.

This handbook is endorsed by the National Ministry of Construction and the Municipal Department of Construction in HCMC. Both institutions have been rather unsuccessful with top-down regulations and law enforcement in the field of sustainable buildings, so far. For them, such a handbook is an innovative measure to increase urban sustainability and create awareness amongst the Vietnamese people. 

http://www.eurochamvn.org/downloads/2011_edition_Handbook_for_Green_Housing_ENG.pdf

http://www.eurochamvn.org/downloads/2011_edition_Handbook_for_Green_Housing_VN.pdf

Business & Investment Opportunities

YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Consulting, Investment and Management, focusing three main economic sectors: International PR; Healthcare & Wellness;and Tourism & Hospitality. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programs. Sign up with twitter to get news updates with @SaigonBusinessC. Thanks.