The European Chamber of Commerce in Vietnam (EuroCham) commented in a report on the quarterly business climate index (BCI) released on Thursday that that its member participants in the survey turned even more cautious about their business prospects in Vietnam.
When compared to previous survey results, EuroCham highlighted a decrease of 11 points to 52 points in the new business climate index survey, conducted in early October.
About half of the 200 respondents were in the services industry, a third in manufacturing and the rest in trading or other sectors.
EuroCham Chairman Alain Cany said the latest BCI indicated a declining confidence in Vietnam as an investment destination.
“Coupled with the 28 percent drop in FDI through the first nine months of 2011 and high inflation rates, it is fair to say that European companies are increasingly concerned about the business and investment environment in Vietnam,” he said.
In addition to inflation, EuroCham Executive Director Matthias Dühn attributed the further index fall to slow progress in many other old and new issues, including lack of adequate infrastructure, administrative burdens, a number of new "market access" issues, such as restricting the importation of goods into Vietnam.
The survey witnessed the number of respondents who assessed their current business situation as “good” or “excellent” drop to 32 percent from 46 percent in the second quarter and 64 percent in the first quarter of 2011.
On top of that, no respondents stated their current situation as “excellent” but shifted their opinions toward a neutral assessment.
The number of businesses with a negative view on their situation also rose to 22 percent from 16 percent.
A large number of businesses joined the survey with a bleak view as the findings revealed only 27 percent ticked the “good” or “excellent” option. This was poorly compared to 42 percent last quarter and 72 percent with a positive business outlook in the first quarter of this year.
In terms of investment plans, the respondents also expressed more caution as the survey reflected that 38 percent wanted to maintain their level of investment and 36 percent were looking to increase their investments in Vietnam, down from 52 percent last quarter.
The result also indicated that 22 percent were looking to scale down their overall investment in the country, up from 13 percent last quarter.
In the current situation, EuroCham members have a mixed view of their revenue and orders in the medium term.
EuroCham said for the first time since it launched the BCI, the majority of respondents expected their revenue to remain the same, but 34 percent projected a slight increase in revenue in the medium term.
When asked about their concerns and the challenges, the respondents pointed out high inflation and 48 percent of them expected this to have a significant impact on their business, though this percentage went down from 56 percent last quarter.
The latest survey showed two-thirds of the respondents thought of a further deterioration of an already difficult economic situation when talking about the macroeconomic outlook for Vietnam over the next 6 months.
Only one-third have a positive view that the situation will stabilize and gradually improve.