Reducing cost is top priority for Vietnamese businesses as high inflation has affected 94% of businesses surveyed in 2022, according to a new study by the Singapore-based United Overseas Bank (UOB).

Between December 2022 to January 2023, the bank’s Business Outlook Study 2023 (SME & Large Enterprises) surveyed more than 4,000 businesses in Asia including 505 in Vietnam, mostly located in Ho Chi Minh City and Hanoi.

The survey found that while remaining positive on 2023 outlook, top priorities for surveyed Vietnamese companies are reducing cost, tapping new customer base, diversifying supply chains, re-skilling/up-skilling existing talent and developing source of revenue.

It showed that 57% of the surveyed businesses have seen an increase in cost of materials and 56% of the businesses have seen an increase in cost of operations. To mitigate inflation, over one in every two businesses in Vietnam focus on improving productivity and 45% of businesses surveyed said that they apply cost cutting on company activities.

The study found that a majority of businesses in Vietnam have seen an impact to their supply chains. More than a half of the respondents said that their supply chain has been impacted by geo-political issues and find rising supply cost as the main challenge in managing their supply chain.

Top support measures for supply chain management include tax incentives or rebates, easier access to funding or grant, and opportunities to collaborate with industry, government-linked or large businesses, the study suggested.

Particularly, digitalisation can play a key role in helping business improve productivity to mitigate the impact of inflation on their business.

The study finds that nearly nine in every ten businesses in Vietnam have adopted digitalisation in at least one department. As many as 86% of businesses plan to spend more on digitalisation in 2023. Digitalisation creates better impact for companies by improving productivity to mitigate the impact of inflation on their business, helping them become more customer centric by enabling their customer outreach efforts and improving customer experience.

According to UOB, about nine in every ten businesses in Vietnam are looking to expand overseas in the next three years. The interest in overseas expansion is leading to higher interest in cross-border digital trade platforms. Over six in ten businesses are ‘Very interested’ in using such platforms.

More than a half of the surveyed business said that they are motivated to expand overseas to grow their revenue, improve profitability and build reputation as an international business.

As many as 72% of businesses in Vietnam eyes Southeast Asia for their future expansion plans and Thailand, Singapore and Malaysia are preferred./.