EuroCham

Business Confidence Index

Quarter 3, 2023
Content

Introduction 03

BCI, the macroeconomy, and the business outlook 04

Vietnam FDI attraction 08

EVFTA implementation 12

Sustainability and Regulations Alignment 17

Methodology 23

2
Introduction
The Business Confidence Index (BCI) is a regular barometer of the
business sentiment among European companies operating in
Vietnam. Because of the active participation of EuroCham members
in this survey since 2011, the BCI is seen by decision-makers, media,
and business professionals in Vietnam as a key indicator of
economic activity in the country.

The BCI consolidates perceptions of European and Europe-related

companies operating in Vietnam regarding the state and evolution
of the business environment in the country.

Since Quarter 2 of 2018, the quarterly BCI survey has been conducted
by Decision Lab, a Vietnam-based market research agency with the
mission to deliver agile, connected and decision focused market
research. Decision Lab is the exclusive partner of YouGov in Vietnam.
We help clients by delivering the best possible basis for decision
making. Our value chain is a virtuous circle of a highly engaged
online community, powerful analytics technology, delivery of
syndicated data products, expert insights and an authoritative
media presence.

We don’t just collect data, we connect data.

Read more about our services at www.decisionlab.co

3
01 |
BCI, the macroeconomy, and
the business outlook

4
01 I BCI, the macroeconomy, and the business outlook

The business climate is displaying a trend towards

stabilization, accompanied by a modest upturn.
Despite the Business Confidence Index (BCI) persisting below the midpoint at 45.1,
marking Vietnam’s fourth consecutive quarter in this position, this observation holds
promise and signifies a potential for optimism.

100.0

90.0 86.0
85.0 84.0 84.0
82.0 81.0 79.9
79.5 77.0 79.4
78.0 77.0 77.0 78.0
77.0 78.0
80.0 77.3
74.0 75.0 75.0 73.9 73.0
70.0 VN
VN marine life
77.0 enterin 68.6
70.0 66.0
63.0 disaster, USA g CP T% 63.6
withdrawing 61.0 62.2
59.0 from T%
56.0 57.5
60.0 50.0
52.0 53.0 52.0
50.0
48.0 48.0 48.0
50.0 45.0 50.0 Mid point 45.8
48.0 45.1

40.0 Vietnam 2012

43.5
banking crisis 33.6

COVID-19
30.0 fourth wave
lockdown
26.7
20.0 18.3
COVID-19 first
lockdown
15.2
10.0
Q2

Q2

Q2

Q2

Q2

Q2

Q2

Q2

Q2

Q2

Q2

Q2

Q2
Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1
Q3
Q4

Q3
Q4

Q3
Q4

Q3
Q4

Q3
Q4

Q3
Q4

Q3
Q4

Q3
Q4

Q3
Q4

Q3
Q4

Q3
Q4

Q3
Q4

Q3
Sep
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

“The economy is more likely to “The economy is more likely to

stabilize and improve next quarter” deteriorate next quarter”

30% vs. 41% 37% vs. 32%

Q2 2023 Q3 2023 Q2 2023 Q3 2023

An 11% increase in businesses expressing optimism regarding economic stabilization

and improvement, coupled with a decline in respondents anticipating economic
deterioration, presents encouraging news. This shift in sentiment underscores a more
positive outlook among businesses concerning the macroeconomy as we approach
the final quarter of the year.

5
01 I BCI, the macroeconomy, and the business outlook

The pattern of business confidence has mirrored the

sentiments of the last two quarters
The changes in business assessment between the two quarters are marginal.
Nevertheless, it is noticeable that the negative sentiment in the current business
assessment decreased by 3% from the last quarter.

Business assessment of current situation from Q3 2022 to Q2 2023 Business outlook

2% 3% 1% 1%
6% 6%

23% 20% 23%

29%

39%
50%

33% 34%
39%
38%

33%
29% 30%
31%
24%
25%
18%
13%
10% 14% 10%
3% 3% 7%

Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023

(Projected)

Very p oor Not good Neutral Good Excellent

Q: How do you feel
about the business
outlook for your
Q: How do you feel about the current business situation of your enterprise? n = 229 enterprise?

The business outlook is displaying increased optimism. The segment of respondents

expressing concern about the negative outlook for the upcoming quarter has decreased
by 9% in comparison to the business evaluation in quarter 3. Simultaneously, positive
and neutral responses increased by 6% and 4% respectively, signaling a trend of stability
and positivity in the near future.

6
01 I BCI, the macroeconomy, and the business outlook

Despite the outlook of the macroeconomy has

improved, this has yet significantly impact businesses’
planning for the last months of the year
Fewer businesses expect reduction in revenues/ orders. On the other hand, not many
plan to expand their headcount and investment in quarter 4.

Headcount Planning

8% 7% 3% 4% 4% 4% 2%
30% 29% 23% 23% 20%
38% 42%

56% 57%
51% 55%
54%
49% 39%

12% 11% 14% 12% 15% 19%

4% 1% 1% 3% 4% 3% 2%
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023

Q: How do you expect your company's number of orders/revenue to change in the next quarter? n = 223

Investment Planning

8% 11% 5% 3% 3% 3% 2%
19% 17% 14%
21% 20%
36% 31%

57% 59%
53% 58%
58%
49% 51%
15% 16%
8% 15% 10%
4% 5% 7% 8%
2% 3% 4% 5% 5%
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023
Q: How do you expect your company's number of orders/revenue to change in the next quarter? n = 219

Revenue/ Orders

14% 20% 9% 3% 6% 7% 4%
31% 32% 35%
39% 35%
52% 50%
32%
31% 35% 39%
29%
25% 19% 24% 15% 19%
16% 15%
7% 7% 6% 9% 8% 8% 7%
2% 4%
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023

Q: How do you expect your company's number of orders/revenue to change in the next quarter? n = 223

Significant reductio n Moderate reduction Maintain the same level Moderate increase Significant increas e

7
02 |
Vietnam FDI attraction

8
02 I Vietnam FDI attraction

More than 60 percent of businesses consider Vietnam as

one of their top 10 destinations for investment
Close to half of applicable respondents report that they expect their FDI in Vietnam
will increase by the end of the year. This positive anticipation underscores a
promising outlook for FDI inflows and highlights Vietnam's attractiveness as an
investment destination.

FDI Expectation (Base: applicable respondents)

48%

17%
13% 13%
6%
4%

Significantly Moderately Slightly Marginally Not at all I don't know

Q: Do you expect your company's FDI in Vietnam to increase by the end of Quarter 4? n = 199

Vietnam ranking as investment destination, Q3 2023 (Base: applicable respondents)

22%
19%
18% 18%
17%
16% 15% 16%
12% 12% 12%
11%

5%
4%
3%
1%

Top Top 2-3 Top 4-5 Top 6-7 Top 8-9 Top 10 Outside of No planned
investment top 10 investment
destination

Q2 2023 Q3 2023

Q: What is Vietnam's present ranking as a global investment destination for your company? n = 186

9
02 I Vietnam FDI attraction

Administrative and bureaucratic inefficiencies are

cited as the most significant regulatory obstacles
when doing business in Vietnam
Notably, other issues that were chosen by more than 20% of respondents are
also somewhat related to administrative challenges and regulations.

Data privacy, access to financing, and intellectual property rights are not as
pronounced in terms of concern for businesses.

Top 10 obstacles to do business

Administrative burdens and bureaucratic

59%
inefficiencies

Rules and regulations that are unclear and

32%
subject to varying interpretations

Issues obtaining necessary licenses, permits,

25%
approvals

Difficulties in visa, work permits, and restrictive

24%
labor regulations related to foreign workers

Lack of qualified local talent and expertise in

17%
specialized fields

Duplicative or inconsistent approvals across

12%
government bodies

Issues with customs procedures and valuation 12%

Inadequate enforcement of existing laws and

12%
rules

Import/export restrictions and trade barriers 11%

Discriminatory policies favoring domestic

10%
firms

Q: What are the top three most significant regulatory obstacles for your company
when doing business in Vietnam? n = 229

10
02 I Vietnam FDI attraction

Consequently, more than half businesses agree that

optimizing administrative and bureaucratic processes
stands as the primary factor to bolster Vietnam's
capacity for attracting FDI

Factors to improve ability to attract FDI

Administrative/bureaucratic streamlining 58%

Strengthening the legal system and enhancing

48%
the regulatory environment
Core infrastructure development - roads, ports,
32%
bridges, etc
Reduced visa and work permit difficulties for
22%
foreign experts
Increasing the quality and availability of skilled
21%
labor

Sustainability incentives (green policy) 16%

Upgrading electrical grids and infrastructure 14%

Improved e-government services and digital

13%
infrastructure
Improving the openness of the Vietnamese
12%
market
Providing more financial incentives for foreign
10%
investors (e.g. tax breaks, subsidies)

Q: What are important for Vietnam to improve its ability to attract FDI? n = 229

This quarter, more than 30% of respondents emphasized core infrastructure

development as crucial for enhancing Vietnam's business appeal. Sustainability
incentives also featured prominently within the top 10 factors, illustrating their
growing importance in business operations.

11
03 |
EVFTA implementation

12
03 I EVFTA implementation and beyond

The EU-Vietnam Free Trade Agreement (EVFTA) represents a notable change in EU-
Vietnam relations. It is designed to change three areas:

1. Tariff Reductions: The EVFTA will eliminate almost all tariffs between the EU and
Vietnam. It removed tariffs on 65 percent of the value of EU exports the moment the
FTA entered into force, with the remaining tariffs being phased out over the following
decade. Meanwhile, 71 percent of EU imports from Vietnam became tariff-free once
the EVFTA entered into force. This is expected to rise to more than 99 percent over the
following 7 years.

2. Customs Duties: Customs duties will be almost eliminated over a transitional period
of 7 years for Vietnamese goods and 10 years for EU goods. This is designed to benefit
both business and consumers in the form of lower prices and greater
competitiveness.

3. Market Access for EU Service Providers: In the EVFTA, Vietnam goes further than the
World Trade Organization (WTO) in terms of market access granted to EU service
providers. Additional (sub)sectors are set to be opened up, giving the EU the greatest
possible access to Vietnam’s market. The FTA also contains a ‘Most-Favored Nation’
clause.

Source: EuroCham EVFTA 2019 Report

Approximately 6 percent more respondents indicated that their businesses

benefited from EVFTA in quarter 3. However, the degree to which they
perceive these benefits has shifted towards a more marginal impact.

EVFTA Benefits

Q2 2023 Q3 2023 31%

29%
23% 23%
20%
16% 15% 14%
12% 10%
6%
2%

Significantly Moderately Slightly Marginally Not at all I don't know/I

don't want to
answer

Q: Has your company benefitted from the EVFTA? n = 229

13
03 I EVFTA implementation and beyond

The manufacturing sector experienced the most

substantial benefits from the EVFTA.
Nearly half of the businesses agreed that tariff reductions were the principal
mechanism through which the agreement positively impacted their operations.

EVFTA Benefits by Sectors

Services (n=43) 47% 23% 21% 9%

Manufacturing (n=52) 31% 21% 15% 29% 4%

Others (n=111) 27% 29% 26% 15% 3%

Not at all Marginally Slightly Moderately Significantly

Q: Has your company benefitted from the EVFTA? n = 143

Ways EVFTA benefit businesses

Tariff reductions or elimination 45%

Improved competitiveness in the

26%
Vietnamese market

Reduced trade barriers 26%

Expanded partnership opportunities with

25%
Vietnamese companies
Increased market access to the Vietnamese
24%
market
Greater transparency and predictability for
14%
doing business
Strengthened legal framework for business
14%
operations

Streamlined customs procedures 11%

Enhanced protection for intellectual

9%
property rights in Vietnam
Ability to resolve trade disputes through
5%
EVFTA appeal mechanisms

Q: How has your company benefitted from the EVFTA? n = 143

14
03 I EVFTA implementation and beyond

Customs procedures and valuations are reported as

the leading barrier to benefit from the agreement
Among those reporting no benefit from the EVFTA, most either cited a lack of
awareness about how they could benefit or stated that the agreement was not
applicable to their situation. However, customs procedures are set to be reviewed
and enhanced to maximize the benefits of the free trade agreement.

Main barriers to benefit from EVFTA

Customs valuations for imports to Vietnam 9%

Opaque and lengthy customs clearance procedures 9%

Technical barriers to trade 9%

Uncertainty or lack of understanding of agreement 9%

Difficulty obtaining fair legal recourse for disputes with

5%
Vietnamese partners

Logistics infrastructure 5%

Excessive inspections of shipments 3%

Inability to resolve EVFTA disputes/appeals 3%

Taxation of imports for further processing and re-

3%
export (like textiles)

I don't know/I don't want to answer 74%

Q: What are the main barriers that restrict your company's ability to take advantage of n = 66
EVFTA's opportunities?

Technical concerns have diminished in significance this quarter compared to prior

waves. Among the limited respondents reporting technical trade barriers,
certification and testing are indicated as noteworthy concerns.

15
04 |
Sustainability and
Regulatory Alignment

16
04 I Sustainability and Regulatory Alignment

A significant 80 percent of respondents deemed ESG a

high to moderate priority for aligning their operations
with ESG criteria in Vietnam.

Sustainability is now a cornerstone of modern business practices, ensuring

longevity and ethical operations.

Responding to global sustainability goals, Vietnam has enacted regulations

concerning environmental preservation, labor standards, corporate social
responsibility, and ethical business conduct.

Adhering to these regulations and integrating sustainable strategies into their

operations not only advances Vietnam's sustainable development goals but also
enhances businesses' competitive edge in the international arena.

ESG Priority Even though ESG is

reported as a priority,
only one-fifth of
43%
37% businesses are
actively aligning their
practices with EU
12% regulations, while
9%
close to 40% said they
are not considering
High priority Moderate Low priority No priority any adjustment.
priority
Q: How would you rate the level of priority your company assigns
to aligning its operations in Vietnam with ESG criteria? n = 229

EU Green Regulations Progress

20% 18% 24% 38%

Actively adjusting bus iness practices to ensure compliance and competitivenes s.

Monitoring developments but not plann in g significant adjustments at the moment.
Explorin g po ten tial adjustments but awaiting more clarity on th e regulatio ns.
Not currently cons idering adjus tments in response to th ese regulations.

Q: Regarding the impending EU green regulations, how is your company approaching alignment with
n = 229
these regulations while operating in the Vietnamese market?

17
04 I Sustainability and Regulatory Alignment

Sustainability initiatives are currently hampered by

regulatory uncertainty and gaps in governmental
support, as well as existing infrastructure that support
sustainable practices

ESG Barriers

Regulatory Uncertainty:
Regulatory Ambiguity and
Uncertainty
inconsistency in environmental regulations
Ambiguity and inconsistency in environmental and
regulations 41%
and policies that impact sustainability initiatives.
policies that impact sustainability initiatives.

Government
Government Support Gap:
Support Insufficient
Gap
governmenta
Insufficient l backing
governmental backingand
and incentives for
incentives for 38%
advancing
advancingsustainable
susta inabusiness practices.
ble business practices.

Infrastructure Limitations: Inadequate waste

Infrastructure Limitations
management systems andsystems
Inadequate waste management renewable energ y
and renewable 34%
energy infrastructure for supporting sustainable practices.
infrastructure for supporting sustainable practices.

Cultural and Behavioral Factors: Cultural norms

Cultural and Behavioral Factors
and behavioral
Cultural norms andpatterns tha
behavioral t hinderthat
patterns thehinder
a doption
the 26%
adoption of sustainable
of sustainable prapractices.
ctices.

Short-Term
Short-Term Profit Profit Focus
Focus: Pressure to prioritize short-
Pressure to prioritize short-term profits over
term profits over long-term sustainability goals.
26%
long-term sustainability goals.

Awa reness andand

Awareness Education Gap : Insufficient
Education Gap
understanding of susta inable practices
Insufficient understanding of sustainable practicesamong
among 24%
employees
employeesand
andstakeholders.
stakeholders.

Financial Barriers: High initial

Financial investment costs a nd
Barriers
a lack
High initialof a ttractiv ecosts
investment fina and
nciala incentives for
lack of attractive 22%
financial incentives
susta inafor
blesustainable
projects. projects.

Limited
Limited Accessto
Access toSustainable
Sustainable Technologies:
Technologies
Difficulty
Difficulty in accessingaffordable
in accessing andcutting-edge
affordable and cutting-edge 17%
sustainable
susta technologies
ina ble technolog ieswithin
withinVietnam.
V ietnam.

Supply Chain Complexity:

Supply Challenges in ensuring
Chain Complexity
susta ina
Challenges inbility across
ensuring the supply
sustainability chain
across thedue to
supply 17%
chainintricate
due to intricate
partner partner and supplier
and supplier rela relationships.
tionships.

Expertise Shortage: Scarcity

Expertise of skilled sustainability
Shortage
professionals
Scarcity of skilledor consultants
sustainability specializedorinconsultants
professionals relevant 15%
specializedareas.
in relevant areas.

Q: Please identify the three most significant factors that are currently preventing your company
n = 229
from advancing its sustainability practices in Vietnam

18
04 I Sustainability and Regulatory Alignment

Infrastructure Development and Regulatory Clarity

stand out as the key focal points for businesses aiming
to enhance their sustainability practices.
Interestingly, these are the same areas that, if improved, would also streamline
Vietnam's access to FDI.

ESG Support

Infrastructure Development:
Infrastructure Improved waste
Development
management systems, renewable
Improved waste management systems, renewable energy
energy 48%
infrastructure,
infrastructure, and sustainable transpoptions.
and sustainable transportation ortation…
Regulatory Clarity: Clearly defined
Regulatory Clarity and consistent
environmental regulations and policies
Clearly defined and consistent environmental that
regulations 40%
and policies that support sustainability initiatives.
sup port sustainability initiatives.
PublicPublic
Awareness Campaigns:
Awareness Government-led
Campaigns
ca mpaigns to campaigns
Government-led raise awareness
to raiseand ed ucate
awareness the
and 32%
educate the public about the importance of sustainability.
public about the importance of susta ina bility.
Financial Incentives: Government
Financial Incentives subsidies or tax
incentives
Government subsidies or tax incentivesof
to offset the initial costs to implementing
offset the initial 32%
costs of implementing
susta ina blesustainable
practices. practices.
Training
TrainingandandEducation Programs:
Education Workshops,
Programs
seminars, and training sessions to enhance
Workshops, seminars, and training sessions to enhance 31%
employee skills and knowledge in sustainability.
employee skills and knowledge in sustainability.
Collabora tive Pla tforms: Networking
Collaborative Platforms opportunities
Networking opportunities and partnerships with and
and pa rtnerships with other businesses other 19%
businesses and organizations
organizations to best
to sha re sharepractices.
best practices.

Expert Consultation: A ccess to specialized

Expert Consultation
susta ina bility consultants or experts
Access to specialized sustainability for guidance
consultants or experts 17%
for guidance in implementing
in implementing effective
effective strategies.
stra teg ies.
Certification Support: A Support
Certification ssistance in obtaining
sustainina
Assistance bility certifications
obtaining sustainabilityor labels to validate
certifications or labels 17%
to validate environmentally-friendly
environmentally-friendly practices.
practices.
Research and Data
Research andSharing: Access to releva nt
Data Sharing
Accessresearch, data,
to relevant and case
research, data, studies
and caseto inform
studies to 10%
inform decision-making
decision-making andstrategy
and strategy development.
development.

None of the above

None of the above 8%

Research
Research andand
Development Grants:
Development Funding for
Grants
research
Funding and and
for research development of of
development innovative
innovative 7%
sustainable
susta ina bletechnologies andasolutions.
technolog ies nd solutions.

Q: Which of the following approaches would your company find most beneficial in fostering its
n = 229
alignment with sustainable practices in the Vietnamese market?

19
05 |
Methodology

20
Methodology

The purpose of this survey is to collect European business

leaders’ opinions about their business situations, which reflects
the state Vietnam’s business environment and helps identify
any potential changes in the economic climate.
Purpose

The survey is conducted using an online questionnaire,

scripted and managed by YouGov’s surveying and data
management platform.
The survey is emailed quarterly to 2,382 business leaders
among representatives from EuroCham's members.

The respondents typically represent top management from

Research and European companies and Vietnamese companies with close
Data Collection business connections to Europe, such as suppliers or
distributors. A minority are European individuals working in
non-European companies in Vietnam.

Among the invited, 232 completed the full questionnaire in this

round. This represents a response rate of 10,22% which is
considered moderately high for a survey amongst the top
business executives.
Result

21
Reach out to us

European Chamber of
Commerce in Vietnam

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+84 93 400 8024

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33 Le Duan, District 1, HCMC

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