Long-term prospects in Vietnam look promising for European businesses

The European Chamber of Commerce in Vietnam’s (EuroCham) latest Business Confidence Index (BCI) conducted by Decision Lab indicates optimism in Vietnam's economy, reaching its highest level since Q3 2022 at 52.8 in Q1.

Delegates share their views at a rencent EuroCham-hosted event. Photo: EuroCham

EuroCham Chairman Dominik Meichle said this positive trend underscores the European business community's view of Vietnam as a dynamic market with promising growth prospects.

"The fact that the index has once again risen above the 50 threshold confirms the country's growing attractiveness. Continued efforts to enhance stability and predictability will further strengthen Vietnam's global competitiveness and unlock its full potential," he added.

“The hard data from the Business Confidence Index paints a clear picture - investor optimism is steadily improving,” said Decision Lab CEO Thue Quist Thomasen. “Vietnam certainly has the capacity to become the region's preeminent investment destination, and proactive, investor-focused policies will further accelerate its rise.”

Vietnam recommended as top investment destination

The BCI highlights that European businesses are highly likely to recommend Vietnam as a top investment destination. A significant 54% of respondents indicated a high likelihood of recommending the country to other foreign companies, with ratings of eight or more out of ten. This highlights Vietnam's rapidly growing appeal within the European business community, while also suggesting potential to further increase its attractiveness to investors.

A screenshot from the BCI report's chart.

European businesses show optimism for Vietnam's economy in the near and long term. Positive sentiment is increasing, with 45% expressing optimism for the upcoming quarter, while pessimism remains low at 10%. Over half of the businesses expect higher orders and revenues in Q2, and 40% plan to expand their workforce. Investment confidence is also rising, as fewer firms intend to cut spending in the next quarter (15% compared to the previous 23%). These indicators point to a promising trajectory for Vietnam's economy.

The report noted that this optimism is strengthening, with 71% of businesses feeling positive about their long-term prospects in Vietnam over the next five years. "This positive outlook suggests that businesses see Vietnam as a stable and attractive environment for growth in the coming years," it wrote.

Despite high levels of optimism, European companies in Vietnam face regulatory barriers that hinder market entry and long-term investment. Major concerns include administrative burdens (cited by more than 50% of respondents), unclear regulations (36%), difficulties with permits and licenses (28%), and barriers to work visas (26%). To attract more foreign investment, companies emphasize the need for simplified administration, a strengthened regulatory framework, and improved infrastructure.

The EuroCham Chairman noted: “Vietnam has tremendous economic potential, and addressing regulatory challenges is key to fully realizing it. Streamlining procedures and establishing more transparent regulations will empower both Vietnamese and foreign businesses to succeed. This will position Vietnam as a leading investment destination in the region, benefiting domestic businesses, attracting international capital, and strengthening economic partnerships.”

The quarterly Business Confidence Index serves as an important tool for understanding the perceptions of European and European-related businesses and investors in the Vietnamese market.

Conducted since 2011, the BCI gathers feedback from EuroCham Vietnam's extensive network of 1,400 members across a wide range of sectors. The survey provides valuable insights into the current business landscape in Vietnam, as well as a glimpse into future expectations.