GDP growth in the first quarter of 2023 of Vietnam reached 3.32%. This is a relatively low growth rate and is based on the low base of the first quarter of 2022, when the economy is still being affected by the blockade orders and social distancing. How do you rate this result?

Chairman of the European Chamber of Commerce in Viet Nam (EuroCham) Gabor Fluit.

The manufacturing industry has been severely affected by ongoing global inflation, which, despite marginal reductions, has continued. Importers in crucial markets like Europe, the US, and China have reduced Vietnamese products' stock levels because of rising capital costs. The situation has been very different from before and after the pandemic, during which importers increased their stocks.

The result has been a decrease in Vietnamese export revenues and a decline in employment opportunities within export-oriented industries. Given the large role the manufacturing sector has played in fueling economic growth, these effects have had widespread consequences throughout the economy. The situation has been complicated by troubles with public investment execution and approval, as well as ongoing concerns about liquidity and cash flow.

However, we still believe there are indications of modest recovery. For instance, during the first quarter of the year, retail sales in Vietnam grew by 13.9% year-on-year, suggesting that despite the global economic downturn, consumer confidence in the country remains strong and is helping to drive the economic rebound.

EuroCham is committed to supporting Vietnamese economic development by advocating for policies that enhance competitiveness, create an environment conducive to innovation and business growth, and facilitate sustainable and inclusive economic growth. We believe that with the right policies and actions, Vietnam will overcome these challenges and continue to thrive long into the future.

Right from the beginning of 2023, many organizations and economic experts predict that Vietnam's economy will face more difficulties than in 2022. What do you think about this prediction and how to minimize the difficulties facing Vietnam at the moment?

Vietnam's economy is likely to face more troubles in 2023, with inflation and trade tensions posing a significant threat to the country's export-oriented industries. To mitigate these challenges, it is essential to diversify export markets, promote domestic consumption, and support industries with growth potential and resilience to global shocks, such as digital services, logistics, and healthcare.

Vietnam's infrastructure will also continue to impede growth due to the slow pace of project approval and completion, resulting in various quality and capacity issues. Targeted infrastructure investment, public-private partnerships, and innovative and sustainable infrastructure solutions are needed to address this. Foreign investment should also play a crucial role. Specifically, enhancing transparency and strengthening regulatory frameworks can make public investment projects more attractive to foreign investors.

For example, energy investors have been waiting quite some time for the finalization and approval of the Power Development Plan (PDP VIII). This delay has stalled much-needed energy infrastructure investment. Additionally, clear guidance on the Law on Public-Private Partnerships and bringing existing regulations up to international standards can enhance the attractiveness of Vietnamese PPP projects for foreign investors.

Furthermore, Vietnam's labour force still faces challenges in skills and education, limiting its economic growth and innovation potential. EuroCham's latest Business Climate Index revealed that only a third of respondents were satisfied with Vietnamese labour availability and quality. Investing in education and training programs, promoting lifelong learning, and advocating for policies that foster diversity, equity, and inclusion can minimize these difficulties.

The EVFTA has helped Vietnam diversify its export markets and increase its global competitiveness, attracting a large amount of FDI in the manufacturing and services sectors. (Photo by Review of Finance)

The International Monetary Fund (IMF) forecasts that in 2023, Vietnam will surpass Singapore and Malaysia to rise to the third position in ASEAN, after Indonesia and Thailand in terms of economic size. In your opinion, can Vietnam achieve this? If yes, what helps Vietnam rise to third place in ASEAN?

Vietnam has a promising economic outlook, and EuroCham is confident it will meet this forecast. While challenges may arise, Vietnam has several strengths that can help it navigate them.

Vietnam's dedication to trade agreements, including the EU-Vietnam Free Trade Agreement (EVFTA), is one of the country's key strengths. The EVFTA has helped Vietnam diversify its export markets and increase its global competitiveness, attracting a large amount of FDI in the manufacturing and services sectors. This FDI influx has contributed to the creation of new jobs and driven economic growth.

Vietnam's government has facilitated this by implementing economic reforms and promoting private sector development, which has made it easier for domestic and foreign businesses to operate in the country.

Vietnam's sizable population of nearly 100 million, with a median age of 32, also provides an advantage for the country's workforce, while its strategic location provides easy access to other ASEAN countries, China, and the Pacific Rim. This makes it an attractive destination for investors seeking to expand their operations in the region, boosting Vietnam's global competitiveness.

According to the latest Business Climate Index (BCI) report conducted by EuroCham and Decision Lab, the business sentiment measurement index of the European business and investor community in Vietnam remains stable at 48.0 points in the first quarter of 2023. Can you share about the operation situation of European enterprises in Vietnam?

Although the business sentiment of the European business and investor community in Vietnam has remained stable from Q4 2022 to Q1 2023, European business leaders continue to face challenges. Nevertheless, there are some modest positive indicators that provide a bit of hope, and EuroCham is cautiously optimistic about the future.

Despite the challenges faced by foreign businesses, we recognize that the Vietnamese government has been responsive to business needs. We believe that with further effort and productive measures, the situation will improve. In particular, we welcome the upcoming reforms to work permit and travel visa procedures, as well as improvements in liquidity and access to finance.

With this in mind, Vietnam still remains an attractive destination for foreign direct investment for European businesses, with 36% of respondents ranking it among their top five global investment destinations. This is a testament to Vietnam's long-term economic success.

However, we also believe that improvements in regulatory frameworks, and tax and tariff regimes are necessary to enhance Vietnam's appeal as a dynamic investment locale. By implementing these improvements, Vietnam can continue to attract foreign investment and increase its global competitiveness.

What do European businesses expect in Vietnam in 2023 and beyond?

In 2023 and beyond, European businesses are eager about Vietnam's prospects. Vietnam's favorable business environment, focus on economic reforms, and gradual improvements in infrastructure have positioned it as a top destination for foreign investment. We expect this trend to continue, especially with the EU-Vietnam Free Trade Agreement (EVFTA) opening up big opportunities for European businesses to access the Vietnamese market and increase trade relations.

As a result of the pandemic, there is an increased need for businesses to adopt digital technologies. In this regard, European businesses expect Vietnam to prioritize digital transformation in the coming years by developing digital infrastructure, adopting digital payment systems, and implementing e-government services. We also anticipate that e-commerce will continue to grow, providing European businesses with opportunities to expand their online presence in Vietnam.

Sustainability and corporate social responsibility are also becoming increasingly important for European businesses, and we expect Vietnam to make further progress in sustainable development. This includes efforts to reduce greenhouse gas emissions, promote renewable energy, and address plastic pollution. Moreover, we believe that Vietnam will focus on developing a skilled workforce by investing in education and training programs and by making efforts to attract and retain talent.

To fully grasp the European business community's priorities for 2023 and beyond, we highly recommend reading EuroCham's annual Whitebook. It offers sector-specific analysis and recommendations that will undoubtedly be valuable to anyone seeking to understand our joint efforts with the Vietnamese government to foster a favorable business environment in the country.

Green economy is an issue that many countries want to work towards and Vietnam is no exception. How do you assess the potential for green economic development, attracting "green FDI" in Vietnam? What plans does the European business community in Vietnam have in this area?

With abundant natural resources combined with the growing awareness of environmental issues among the population, Vietnam has a unique advantage in green growth. Moreover, the Vietnamese government's commitment to reducing greenhouse gas emissions and promoting renewable energy through ambitious targets is commendable and demonstrates the country's dedication to sustainable development.

European businesses are increasingly placing sustainability and corporate social responsibility at the forefront of our investment decisions. Vietnam has great potential to attract green FDI from European companies looking to invest in renewable energy, sustainable agriculture, and other environmentally-friendly industries.

To promote green economic development, the European business community in Vietnam, through EuroCham, the Green Growth Sector Committee, and individual enterprises, is actively working to advocate for policies that foster sustainable growth, invest in renewable energy projects, promote sustainable tourism, and provide training and support for local businesses to adopt sustainable practices.

However, there are several challenges that need to be addressed to fully realize the potential of green economic development in Vietnam. These include limited funding and resources for renewable energy projects and other green initiatives, limited public awareness and understanding of environmental issues and sustainable development, limited technical capacity and expertise in sustainable agriculture and forestry practices, and inadequate infrastructure to support sustainable transportation.

EuroCham Vietnam is devoted to working with local partners and the Vietnamese government to address these challenges and promote sustainable development in Vietnam. We believe that a collaborative effort from all stakeholders is essential to ensure a green and sustainable future for Vietnam.

Thank you very much!