Vietnam Receives Positive Reviews for Improving Business Environment

According to survey results by international organizations and opinions of experts, Vietnam has received positive reviews on improving the investment and business environment.

Some foreign organizations such as EuroCham, KCCI and JETRO highly appreciate the Vietnamese Government's decision on the policy of flexibly adapting to the pandemic and gradually opening up the economy. Many optimistic predictions suggest that Vietnam's economy will have a V-shaped recovery in 2022.

In the latest report of Fitch Ratings, Vietnam's economic recovery roadmap is given more impetus in 2022, when domestic demand rebounds, exports maintain strong momentum and the vaccination rate is improved. Fitch Ratings expects Vietnam's economic growth to reach 7.9% in 2022 and 6.5% in 2023.

According to market research company IHS Markit, Vietnam's manufacturing industry recorded a strong increase in output and orders, and the number of jobs also increased for the second consecutive month since the beginning of the year. Purchasing Managers' Index (PMI) in Vietnam's manufacturing sector in January 2022 reached 53.7 points, up from 52.5 points in the previous month, showing the biggest improvement in economic conditions since 2018.

Many European businesses are planning to step up operations in Vietnam. According to the survey results of the European Chamber of Commerce in Vietnam (EuroCham), Vietnam's Business Climate Index (BCI) reached the highest score after the fourth outbreak of the COVID-19 pandemic, with the positive score of 61 points, an increase of 42 points since the third quarter of 2022. While the index remains well below its pre-pandemic peak, it is still a clear reflection that confidence is recovering in the market. In addition, the survey also showed that 43% of European businesses said they would increase investment in Vietnam.

Mr. Takeo Nakajima, Chief Representative of the Japan External Trade Organization in Hanoi (JETRO Hanoi), said that according to a survey by JETRO, the percentage of Japanese enterprises that intend to expand their business in the next 1-2 years in Vietnam is 55.3%, leading the ASEAN region.

The chief representative of JETRO Hanoi said that Vietnam has many advantages in terms of investment environment compared to other countries in the ASEAN region, including market ability, development potential, stable political and social situation and high-quality staff. 67% of Japanese enterprises investing in Vietnam mainly export goods to Japan. “The rate of preferential use from free trade agreements is 60% and increases year by year,” said Mr. Takeo Nakajima.

Mr. Takeo Nakajima said that, compared with other countries and regions, the percentage of businesses that said that they would "minimize" production activities in Vietnam is low, only after Pakistan, which also shows that Vietnam still wins the trust of Japanese investors. Accordingly, the reasons why Japanese enterprises decided to expand their investment and business in Vietnam, include: Japanese enterprises in Vietnam expect to increase revenue in the local market; Vietnam has high potential and growth; and revenue is increased due to expansion of export markets.

Mr. Yun Ok Hyon, Chief Representative of the Korean Chamber of Commerce and Industry in Vietnam (KCCI), said that it is expected that Korean investment in Vietnam will increase rapidly if the pandemic situation is no longer serious. “Korean investors always consider Vietnam as a destination to expand production and business. Trade cooperation between the two sides will certainly have a further breakthrough because of the two sides' trade facilitation efforts," emphasized Mr. Yun Ok Hyon.

Despite certain advantages, the survey results among many foreign enterprises investing in Vietnam also show that these enterprises are also facing many challenges due to the recent rapid increase in labor costs. Even many businesses are especially concerned that labor shortage, difficulty recruiting workers to stabilize production may occur when workers return to their hometowns due to the COVID-19 pandemic. In addition to the above factors, the lack of transparency in tax policies and administrative procedures, the low localization rate and the lack of high-quality human resources, are also issues of concern to Japanese businesses. They hope that the Government and competent ministries and branches will continue to remove them in the near future.

By Huong Giang, Vietnam Business Forum