EuroCham

Business Confidence Index

Quarter 2, 2023
Content

Introduction 03

BCI, the macroeconomy, and the business outlook 04

Vietnam FDI attraction 09

EVFTA implementation & beyond 13

Current Events 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
01I BCI, the macroeconomy, and the business outlook

The BCI dropped by 4.5 points, highlighting business

leaders’ worsening sentiment towards the economy
At 43.5, the current BCI is lower than when Vietnam was experiencing the banking crisis of 2012.
The drop in the index score could be attributed to low scores in the Transportation and Logistics,
Automotive, and Energy sector.

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 77.3
80.0
74.0 75.0 75.0 73.9 73.0
70.0 VN
VN marine life 77.0 entering 68.6
70.0 66.0 disaster, USA CP T% 63.6
63.0
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 43.5

40.0 Vietnam 2012

banking crisis 33.6
COVID-19
30.0 fourth wave
lockdown
26.7
20.0
COVID-19 first
18.3
lockdown
15.2
10.0

Sep
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2

Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

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

and improve next quarter” deteriorate next quarter”

28% vs. 30% 32% vs. 37%

Q1 2023 Q2 2023 Q1 2023 Q2 2023

Compared to Q1 2023, 5% more businesses think that the macroeconomics conditions will
deteriorate, reflecting the drop in the BCI. While there is a 2% increase in numbers of business
leaders thinking the economy will improve or stabilize, only 10% out of these say it is likely to
improve.

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

The lower BCI was due to the decrease in both current

business assessment and projected outlook.
Those who gave negative responses for current situation grew by 10% and the negative sentiment
for next quarter also grew by 6%. However, business leaders seem to still have some confidence in
their business in the next quarter, with 9% more feel positively about their business in Q3 2023.

Business assessment of current situation from Q3 2019 to Q2 2023

6% 6% 6% 2% 3%
23% 20%
39%
50%
57%
33%
39%

33%
29% 30%
28% 24%
13% 18%
8% 10% 14%
1% 3% 3%
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023
Very poor Not good Neutral Good Excellent Mean

Q: How do you feel about the current business situation of your enterprise in Quarter 2 of 2023? |
n=232 | Base: Total

Business outlook from Q3 2019 to Q3 2023

6% 6% 2% 3% 3%
28% 30% 29%
39%
50%
33% 30%
35%
33%
29%
34% 27% 31%
13% 18%
3% 4% 4% 5% 7%
Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023

Very poor Not good Neutral Good Excellent Mean

Q: How do you feel about the business outlook for your enterprise in Quarter 3 of 2023? |
n=232 | Base: Total

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

Businesses expect worse revenue/order outcomes

and reductions in investment in future quarters .
While 4% more businesses expect reductions in revenue/orders, businesses are more likely to
reduce in investment rather than headcount in Q3 2023, with 7% more businesses say they plan
to cut back on investment whereas headcount planning stays at last quarter’s level.

Headcount Planning

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

51% 55% 56%

54%
49% 39%

12% 11% 14% 12% 15%

4% 1% 1% 3% 4% 3%
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023
Q: How do you expect your company's headcount to develop in Quarter 3 of 2023? |
n=229 | Base: Total (eliminating ”Not sure” responses)

Investment Planning

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

53% 58% 57%

58%
49% 51%
15% 10% 15%
4% 5% 8% 7%
2% 3% 4% 5% 5%
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023
Q: How do you expect your company’s investment to develop in Quarter 3 of 2023? |
n=223 | Base: Total (eliminating “Not sure” responses)

Revenue/ Orders
9% 3% 6% 7%
14% 20%
31% 32%
39% 35%
52% 50%
32%
31% 35%
29%
25% 19% 24% 19%
16% 15%
7% 7% 6% 9% 8% 8%
2% 4%
Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023
Q: How do you expect your company’s revenue to develop in Quarter 3 of 2023? | n=225 |
Base: Total (eliminating “Not sure” responses)

Significant reduction Mo derate reduction Ma intain the same level Mo derate increase Significant increase

7
01 I BCI, the macroeconomy, and the business outlook

Amidst the cautious business climate, regulatory

reforms and availability of skilled labor resources gain
importance as primary drivers for growth.
Key factors for growth

Regulatory reforms to streamline business processes 37%

Availability of skilled talent and human resources 37%

Me asures to promote sustainable development and

environmental protection 24%

Improved access to international markets and export

opportunities 23%

Programs to enhance the skills and productivity of the

workforce 19%

Investment incentives for domestic and foreign companies 16%

Upgraded digital infrastructure and adoption of technology 15%

Tax incentives for specific industries or regions 13%

Q: What are the key factors driving growth for your company in Vietnam? | n=232 | Base: Total

The key factors for growth remain similar among different sectors. Regulatory reforms are the top
factor for growth in the Services and other sectors. Meanwhile, availability of skilled labor takes
the first place as key factors for growth in the Manufacturing sector.

Key factors for growth by Sectors

Manufacturing Services Others

(n=58) (n=59) (n=118)

Availability of skilled Regulatory reforms Regulatory reforms to

talent and human 34% to streamline 43% streamline business 37%
resources business processes processes

Regulatory reforms to Availability of skilled Availability of skilled

streamline business 29% talent and human 40% talent and human 36%
processes resources resources

Measures to promote Measures to promote

sustainable Upgraded digital sustainable
development and 25% infrastructure and development and 25%
adoption of 22%
environmental environmental
protection technology protection

Q: What are the key factors driving growth for your company in Vietnam?

8
02 |
Vietnam FDI attraction

9
02 I Vietnam FDI attraction

Vietnam remains attractive to foreign investors as 48%

of European business leaders still expect their
company’s FDI in Vietnam to increase
Nevertheless, the negative sentiment in the business climate could be seen in the FDI
expectation, with about 4% more businesses say they are not planning any increase in
investment. There is also a 4% rise in those who expect marginal increase while there is a
drop among those who expect moderate or slight increase in FDI.

More than one-third of businesses still consider Vietnam within their top 5 investment
destination against the negative business backdrop.

FDI Expectation

40%
36%
Q4 2022 35%
Q1 2023
Q2 2023
18% 18%19% 16% 17%
16% 16%
13% 13%12% 11%12%

3% 3% 3%

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 next quarter? | n=232 | Base: Total

Vietnam ranking as investment destination, Q2 2023

20%
18%

14%
13%
13%
9% 10%

2%
1%

Top Top 2-3 Top 4-5 Top 6-7 Top 8-9 Top 10 Outside of No planned Not
investment top 10 investment applicable
destination

Q: What is Vietnam's present ranking as a global investment destination for your company? | n=232 | Base: Total

10
02 I Vietnam FDI attraction

Improving the regulatory environment and businesses’

access to financing are the most significant ways to
enhance Vietnam’s attractiveness to attract FDI

Factors to improve ability to attract FDI

Mean rank*

Enhance the regulatory environment 62% 24% 14% 1.53

Improve infrastructure 49% 24% 26% 1.77

Improve access to financing 38% 31% 31% 1.93

Reduce administrative difficulties for foreign

firms 30% 43% 27% 1.97

Improved access to the Vietnamese market 24% 52% 24% 2.00

Improve the legal system 20% 49% 31% 2.12

Reduce visa difficulties for foreign experts 27% 28% 45% 2.18

Green sector development 21% 38% 40% 2.19

Lower taxes and tariffs 21% 38% 41% 2.21

Improved dialogue with government officials 9% 50% 41% 2.32

Provide more incentives for foreign investors 21% 25% 54% 2.33

Increase political stability and security 17% 24% 59% 2.41

Increase the quality and availability of skilled

labor 16% 26% 58% 2.42

Rank 1 Rank 2 Rank 3

Q: What are important for Vietnam to improve its ability to attract FDI? | n=232 | Base: Total

11
02 I Vietnam FDI attraction

Unclear regulations and difficult administrative

procedures remain the top barriers to attract FDI
53% and 50% of businesses say that unclear rules and administrative issues are the
most significant regulatory obstacles for them to do business in Vietnam respectively.
This is an increase from last quarter.

At the same time, visa issues seem to have somewhat been addressed in Q2 2023, as
6% fewer businesses report it was a problem in attracting FDI.

Obstacles to do business

53%
Rules and regulations that are unclear
51%

50%
Administrative issues and difficulties
44%

25%
Visa and work permit difficulties
31%

24%
Customs procedures
25%

22%
Enforcement of regulations and rules on a
discretionary basis
21%

21%
Legislative uncertainty
22%

17%
Inadequacies in anti-corruption legislation Q2 2023
25%
Q1 2023

Q: What are the top three most significant regulatory obstacles for your company when doing business
in Vietnam? | n=232 | Base: Total

12
03 |
EVFTA implementation

13
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

Five percentage more businesses report that they do not understand the
agreement and its implication at all, the highest since Q1 2022. There is also a
4% rise in those who say that it is irrelevant to their business.

EVFTA Understanding EVFTA Relevance

Q2 2023 7% 13% 45% 20% 15% Q2 2023 16% 25% 22% 15% 16%
Q1 2023 7% 18% 44% 22% 10% Q1 2023 11% 34% 22% 16% 12%
Q4 2022 3% 17% 43% 27% 11% Q4 2022 15% 32% 22% 16% 12%
Q3 2022 4% 22% 37% 28% 9% Q3 2022 16% 32% 17% 22% 11%
Q2 2022 6% 22% 43% 21% 8% Q2 2022 18% 30% 21% 21% 10%
Q1 2022 6% 19% 47% 20% 8% Q1 2022 16% 29% 26% 16% 9%

Very relevant Relevant Neutral

Very well Reasonably well Adequately
Slightly relevant Irrele vant
Inadequately Not well at all

Q: How well do you understand EVFTA and its Q: How relevant is the EVFTA, either directly or
implications? | n=232 | Base: Total indirectly, to your business? | n=232 | Base: Total

14
03 I EVFTA implementation and beyond

More than half of businesses say that their businesses

have benefitted from the trade agreement
Amongst those who do, the EVFTA could realize its intended purposes of reducing tax barriers
to trade and increasing access to the Vietnamese market, with 35% of business leaders saying
that they benefitted from the tariff reductions and elimination of imports from Vietnam.

Businesses benefitted from the EVFTA

31%

23%

15% 14%
12%

6%

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=232 | Base: Total

Ways EVFTA benefit businesses

Tariff reductions or elimination on imports from Vietnam 35%

Increased market access to the Vietnamese market 28%

Improved competitiveness in the Vietnamese market 24%

Expanded business opportunities and new partnerships with

22%
Vietnamese companies

Strengthened legal framework for business operations in

Vietnam 14%

Streamlined customs procedures and reduced trade barriers in

Vietnam 9%

Enhanced protection for intellectual property rights in Vietnam 3%

Access to Vietnamese government incentives or support

programs 2%

Q: How has your company benefitted from the EVFTA? | n=128 | Base: Those benefitted from EVFTA

15
03 I EVFTA implementation and beyond

Administrative procedures are still the leading barrier

for businesses to benefit from the EVFTA
Having dipped 5% in Q1 2023, administrative procedure as a barrier to EVFTA benefits rose
in prominence again in this quarter. At the same time, lack of understanding remains as one
of the top barriers to benefit from the EVFTA.

Main barriers to benefit from EVFTA

35%
Administrative procedures 30%
35%
16%
Lack of understanding of the agreement 20%
16%
11%
Infrastructure 6%
10%
11%
Technical barriers to trade 14%
11% Q2 2023
9%
Lack of partnerships 10% Q1 2023
7%
6% Q4 2022
Foreign language 5%
5%
4%
Other 3%
7%
2%
Wage costs 3%
2%
The EVFTA does not bring relevant benefits 19%
22%
to my business 21%

Q: What are the main barriers for you to benefit from the EVFTA in your business? | n=232 | Base: Total

Technical barriers to benefit from EVFTA In Q2 2023, about 11% of

businesses identified technical
issues as a barrier to benefit
55%
from the EVFTA.

35% Of those, more than half say

that they find standards as a
barrier, while labelling and
10% testing are less of an issue.
5%

Standards Certification Labelling Testing

Q: Please specify which technical barriers you are currently

experiencing. | n=20 | Base: Those facing technical barriers to
EVFTA

16
04 |
Current events

17
04 I Current Events

1
Global Minimum Tax

Potential compliance challenges –

The global minimum tax
Global minimum tax implementation in Vietnam
implementation raised
concerns for close to 40% of
surveyed respondents Not
Very Neutral concerned
concerned 38% at all
10% 7%

Somewhat Somewhat Not sure

concerned unconcerned 9%
27% 9%

Q: Are you concerned about any potential compliance

challenges arising from the implementation of the global
minimum tax in Vietnam? | n=232 | Base: Total

2
Personal Data Protection Decree

Compliance requirements understanding – Similarly, around 42%

Vietnam’s Personal Data Protection Decree
reported inadequate
understanding of Vietnam’s
Personal Data Protection
Not well Adequately Decree, highlighting the need
Very well
at all 33%
7% for further education on the
13%
Decree.

Inadequately Reasonably
29% well Not sure
9% 8%

Q: How much do you understand the compliance requirements

outlined in Vietnam's Personal Data Protection Decree? |
n=232 | Base: Total

18
04 I Current Events

3
Visa issues

Obtaining visa/work permits for foreign workers appear to be a challenge, as >80% of

surveyed enterprises faces at least some difficulties in this regard. This negatively impacts
the transfer of knowledge & expertise from foreign workers for at least ¾ of companies.

Number of enterprises having experienced Impact of visa/work permit challenges on

challenges with obtaining visas & work permit knowlege & expertise transfer

I don't
No, we have know
not faced any Yes, 6% Not at all
difficulties significant Significantly
17% 20%
17% difficulties
34%

Marginally
11%

Some Moderately
difficulties, but 23% Slightly
manageable 23%
49%
Q: Have you experienced difficulties in obtaining visas Q: Have the difficulties in obtaining visa/work permits for
and work permits for your foreign employees in foreign employees prevented you from transferring knowledge
Vietnam? | n=211 | Base: Those with foreign workers & expertise to local employees?| n=175 | Base: Those who
face difficulties with obtaining visa/work permit.

Long processing time is the most prominent issue plaguing companies who want to obtain
visa/work permit for foreign personnel. Close to 50% of companies also struggle to explain
the need to employ foreign workers.

Most challenging aspects of obtaining visas/work permits for foreign personnel

Lengthy processing time 74%

Difficulty in the process of explaining the need to

employ foreign workers 46%

Difficulty in having your educational background

38%
match the intended job

Difficulty in proving foreign worker's experience 37%

Difficulty in completing the procedures through the

national public service portal 34%

Other 5%

Q: Which aspects of the visa and work permit process in Vietnam do you find most challenging?
| n=175 | Base: Those who face difficulties with obtaining visa/work permit

19
04 I Current Events

4
Carbon Border Adjustment Mechanism

Only around 27% of respondents know about the Carbon Border Adjustment Mechanism. Of these,
only 43% said CBAM is relevant to their business. The top 3 concerns about the CBAM revolve
around compliance, administrative procedure, and adapting business processes.

Awareness of the Carbon Border Adjustment Perceived relevance of the Carbon Border
Mechanism (CBAM) Adjustment Mechanism (CBAM)

I am well- Very
aware of it relevant Irrelevant
9% 11% 14%
I have heard
Slightly
of it, but don't
understand it relevant
10%
clearly
18% Relevant
I have NOT 32%
heard of it
I might have 59%
heard of it, but Neutral
cannot recall 33%
where
14%
Q: Have you ever heard of or known about the EU's Carbon Q: How relevant do you think the EU's Carbon Border
Border Adjustment Mechanism (CBAM)? | n=232 | Base: Adjustment Mechanism (CBAM) is to your business? | n=63 |
Total Base: Those aware of CBAM

Top 10 main concerns regarding CBAM’s impact on business

Compliance with new regulations and reporting

36%
requirements
Complex administrative procedures and paperwork 34%
Adapting business processes to meet CBAM
requirements 34%

Uncertainty about how CBAM will be implemented 30%

Difficulty in calculating and verifying carbon
30%
emissions for products
Limited availability of low-carbon alternatives or
technologies 20%

Potential disruptions in supply chains 14%

Need for additional resources or expertise to comply
with CBAM 11%

Increased costs for imported goods 9%

Implications for international trade relationships 9%

Q: What are your main concerns regarding the potential impacts of the EU's Carbon Border
Adjustment Mechanism (CBAM) on your business? | n=63 | Base: Those aware of CBAM

20
04 I Current Events

5
Relocation

Intended & reported relocation from China to Vietnam are low in Q2 2023. 81% of
companies have not relocated any of their operations from China to Vietnam. Among
these, only 3% are considering and 2% actively planning to relocate.

Relocation from China to Vietnam

81%

3% 5% 9%
1% 1%
Not at all Marginally Slightly Moderately Significantly I don't know/I
don't want to
answer

Q: Has your company relocated any of its operations from China to Vietnam? | n=232 | Base: Total

Plan/consideration for relocating from China to Vietnam

Yes, we are
considering it.
3%

Yes, we are
actively planning
No, we are not it.
considering or 2%
actively planning it.
95%

Q: Is your company considering or actively planning to relocate any of its operations from China to Vietnam
in the near future? | n=188 | Base: Those who have not relocated from China to Vietnam

21
04 I Current Events

6
Power shortages

European business leaders

Ratings of Vietnam’s infrastructure development appear to perceive Vietnam’s
infrastructure development as
2 3 relatively less developed
1 47% 41% 4 5 compared to similar countries
6% 6% Mean
0% in the region.
2,5
Under-
Advanced
developed

Q: How would you rate the level of infrastructure development in Vietnam?

(compared to similar countries in the region) | n=232 | Base: Total

Power shortages pose some Perceived impact of power shortages

challenges to around 60% of
companies, with around 10%
Not at all Slightly
being severely impacted. 38% Significantly
17%
9%
Power shortages impact
mostly operational efficiencies,
employee productivity & Marginally Moderately No answer
morale, and production/service 23% 9% 3%
disruptions.
Q: Have power shortages in Vietnam impacted your business operations? | n=232 |
Base: Total

Impact of power shortages on business operations in Vietnam

Operational inefficiencies 43%

Reduced employee productivity and… 39%
Production/service disruptions 37%
Customer dissatisfaction and loss 28%
Financial losses 26%
Supply chain interruptions 23%
Lost business opportunities 21%
Safety and security risks 20%
Reduced competitiveness 19%
Delayed investment decisions 12%
Q: What has been the specific impact of power shortages on your business operations in Vietnam? | n=137 | Base: Those who
have been impacted by the power shortage

22
05 |
Methodology

23
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
business connections to Europe, such as suppliers or
Data Collection 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

24
Reach out to us

European Chamber of
Commerce in Vietnam

www.eurochamvn.org
+84 93 400 8024

5th Floor, Deutsches Haus

33 Le Duan, District 1, HCMC

Decision Lab
[email protected]
www.decisionlab.co
+84 28 7101 0199

2nd Floor – The Sentry Connect, Sonatus Building

15 Le Thanh Ton, District 1
Ho Chi Minh City, Vietnam

Decision Lab is the exclusive partner of YouGov in Vietnam.