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EuroCham says business climate improving

Update: February, 03/2012 - 10:30

HCM City — Results of the sixth quarterly EuroCham Business Climate Index survey, conducted in January this year, showed that business confidence and outlook among European businesses in Viet Nam stabilised and experienced a modest increase after a steep 11 point drop in the last quarter of last year.

According to the European Chamber of Commerce (Euro-Cham) in Viet Nam, concerns about the current business situation and outlook appear to have eased slightly among EuroCham member companies that participated in the survey. However, their business outlook and assessment of the current situation remained sombre. About 40 per cent of the businesses that participated in the survey were active in the services industry, about a quarter in both manufacturing and trading and the rest in other activities.

The Eurocham also said that compared to its last survey, there was little change in respondents assessing their current business situation. Around 38 per cent of companies reported their situation was "neutral," slightly down from 45 per cent in the last survey. A "good" or "excellent" view was held by 36 per cent or respondents, up slightly from 32 per cent last quarter. This is still much lower than the 64 per cent that reported they were content with their current business situation at the same time last year.

The number of businesses having a negative view on their current situation has remained nearly unchanged since last quarter, but at 26 per cent, it is 14 per cent points higher than a year ago.

However, the survey also found signs of optimism in business outlook of companies. Around 39 per cent stated a "good" or "excellent" outlook, an increase of 12 per cent compared to the last quarter.

This figure, however, is put into perspective by the 72 per cent of positive respondents this time last year. A quarter of respondents had a pessimistic outlook. These results, while not decidedly positive, reveal that the continuous downward slide of business sentiment has halted.

The survey also asked all respondents to estimate the expected percentage of the Vietnamese dong depreciation. The average number of all answers was 8.33 per cent.

Furthermore, about 53 per cent of companies expected inflation to have a significant impact on their business, while 36 per cent expected to be impacted in some way. Only 8 per cent stated that inflation was actually threatening their business.

Meanwhile, a significant 65 per cent of companies expected the difficult macroeconomic situation in Viet Nam to further decline, while 35 per cent expect the situation to stabilise and gradually improve. Thus an underlying uncertainty among investors runs throughout the Vietnamese economy.

When asked whether the current economic crisis in Europe was affecting their company's decision to invest in Viet Nam, 55 per cent stated that the crisis affected them, although most of them stated only in a "slight" way. On the contrary, 44 per cent said that the crisis in Europe did not affect their decision to invest in Viet Nam at all.

About 30 per cent of businesses said they were planning to increase investments "slightly" or "significantly", while 31 per cent wanted to maintain their current level of investment and 24 per cent were planning to decrease investments. This showed an easing of the "wait and see" attitude from the last quarter.

In addition, 47 per cent of businesses expected an increase in revenue in the medium-term, compared to that of 45 per cent last quarter. Fewer companies (27 per cent) expected their number of orders to remain constant than the last quarter, where this view was shared by 34 per cent of respondents. There was an increase in expected turnover failure; at 22 per cent, it was the highest of several quarters. In particular, about 40 per cent of respondents expected to hire more staff in the medium-term, 39 per cent expected to maintain the same level and only 14 per cent were looking to reduce their staff in Viet Nam.

EuroCham Chairman Alain Cany said: "The slight increase of the EuroCham Business Climate Index at 56 points shows a halt in the downward trend of business confidence we saw in 2011. However, business confidence is still far below last year's level. Uncertainty amongst investors remains. Key structural issues have not been resolved, such as privatisation of State-own enterprises and a stabilisation of the macroeconomic environment to name a few".—VNS

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