The Business Climate Index (BCI) is a regular barometer of the business sentiment among European companies operating in Vietnam. It provides early signals of turning points in economic activity and tracks movements in business confidence.
Ho Chi Minh City, 6 August 2015, results of the 19th quarterly EuroCham Business Climate Index (BCI) survey, conducted in July 2015, shows that business confidence, outlook and expectations for the future among European businesses in Vietnam rose slightly from the previous quarter. During the second quarter 2015 the BCI rose to 77 points from the previous quarters score of 75. The score is in line and level with the results of the previous two quarters. Together this indicates stabilisation at a higher rate than formerly, expressing an improved confidence in the business climate by participants of the survey. “There is reason to believe this in line with the finalization of the EU-Vietnam Free Trade Agreement (FTA)”, says Michael Behrens, Vice Chair of Eurocham Vietnam.
A slight rise from previous quarters rating and continued indication of stabilization at a higher level of business confidence.
In response to the question of how businesses perceive their general business situation 57%, the largest group of respondents said it is “good” a notable rise from the previous quarter's 45%. The second largest group at 27% perceive the business situation as “neutral”, a slight decline from previous quarters 31%. “Excellent”, “not good” and “very poor” business situations were all in the single digit range and reported by 6%, 8% and 3%, respectively.
Continued positive outlook on the future business environment
The greater majority of respondents, like the previous quarter continued to perceive their business outlook as “positive” but the number (as during the previous quarter) saw a decline from 57% last quarter to 55% during this one. The second largest group of respondents remain “neutral” in their outlook at 27%, a decline from 30% last quarter. The remaining participants were divided between 8% expecting “excellent” conditions and 8% expecting “poor” conditions, with 1% of participants reporting “very poor” conditions.
Continued overall confidence in the macroeconomic outlook for Vietnam but with some concern
In the participants assessment of the macroeconomic outlook for Vietnam 52% expects stabilization and improvement, a decline from last quarter’s 63%. Participants expecting the situation not to change grew from 25% to 33%. A slightly larger number of participants from previous quarter expect deterioration of the macroeconomic conditions, shifting from 12% to 14%.
Concerns for inflation and its impact on the business environment
Two out of three (66%) of the participants in the BCI expects that inflation will have a minor impact on their business over the months to come. and 19%, close to one in five of the respondents holds concerns of significant impact to their business due to inflation. The remaining 15% of the participants believe no noticeable impact will come from inflation.
A reduction in the expected inflation rate
The participants expect that over the next 6 months the market will see a reduction in inflation from 5.25% to 3.40%.
For headcount development the largest group constitutes 48% of participants, said that they are considering increasing slightly the number of employees. With the second largest group at 35% saying that they expect to maintain the number of employees at the current level.
This is also true for investment plans in the medium term where the largest group remains unchanged at 41% saying that they consider increasing their investment in Vietnam slightly. This is followed by the second largest group at 39% expecting to maintain their level of investment.
In terms of expected orders/revenue the largest group with 55% of participants said they expect a slight increase. The second largest group at 21% said they expect to maintain the same level.
The profile of the participants of the BCI survey varies and the number of employees range from less than 50 to above 500. The largest group of respondents during this quarter are engaged in the service sector and the second largest group of respondents are in manufacturing.
The hot topic of the quarter
In light of recent issues in regards to the speed and accessibility of internet, our hot topic of the 19th BCI survey focused on internet reliability and asked the participants 4 questions in regards to this.
When asked how the internet reliability has affected their business the largest group of participants at 47% replied that their business has been “notably affected”, with the second largest group of participants at 31% stating that it has “somewhat affected” their business. Only 2% of users said they noticed “no interruption” at all. 13% said the interruptions were “hardly noticeable” and 8% said their business was “severely affected”.
In regards to how the households/non-business was impacted by the internet reliability similarly the largest group at 42% report “noticeable slowdowns”. The second largest group at 33% in difference from businesses reports more or less “loss of access”, with the group of “somewhat affected” coming in as the third largest group at 17%. 8% said the reliability issues were “hardly noticeable” and 1% reports “no interruptions at all”.
When asked of the price of internet in Vietnam, in comparison with other markets the largest group at 49% find internet prices to be “reasonable”. The second largest group at 30% said internet is “comparably expensive”, followed by the third largest group at 17% perceiving internet as “affordable”. 5% replied that internet is “too expensive”.
When asked if participants of the EuroCham BCI would be willing to pay more for a better quality internet the greater majority at 72% replied that they would be willing to pay more if internet was faster and un-interrupted. The second largest group at 20% said they would not be willing to pay more for faster or more reliable internet. 8% reported they would be willing to pay more for the same speeds if it was un-interrupted.