Chairman of the European Chamber of Commerce in Viet Nam (EuroCham) Alain Cany shared with the WVR the business environment of Viet Nam in the present and in the future.

Chairman of the European Chamber of Commerce in Viet Nam (EuroCham) Alain Cany.

What is driving Viet Nam’s economic growth?

The country has thus far done a good job of handling its challenges. Viet Nam's economy remains stable despite many challenges.

Even further, as Minister of Planning and Investment Nguyen Chi Dung said, Viet Nam's economy still has much room for growth. The World Bank forecasts that in 2022, global growth will weaken to only 2.9 percent, while Viet Nam is expected to grow by an impressive 7.5 percent.

The driving force behind this growth is Viet Nam’s workforce of 56 million young, dynamic, and increasingly tech-savvy workers. Both in absolute and relative terms, Viet Nam has one of the largest labour forces in the world. With a supply of high-quality and affordable labour, it is not surprising that foreign investors want to move their production to the country.

Economic growth is also boosted by export-oriented manufacturing and the attraction of foreign direct investment (FDI).

A number of high-profile foreign direct investments have recently come to Viet Nam, bringing capital and innovation. FDI disbursed in the first nine months of this year reached a record high of 15.4 billion USD, an increase of 16.2 percent over last year. In terms of GDP, Viet Nam is now consistently among the region's leading FDI attractors, second only to Malaysia.

In the context of multinational companies seeking to expand operations in Viet Nam, partly due to the "China + 1" strategy and partly thanks to the 15 free trade agreements that Viet Nam has signed, there is no doubt that Viet Nam's investor-friendly policies will continue to attract an impressive amount of foreign capital.

Could you please tell us about European businesses’ assessment on Vietnamese business environment at the moment in the future?

Viet Nam's future is bright. In speaking with our members, it is clear that the country currently offers a wide range of incredibly attractive business and investment opportunities. European business optimism has soared since Viet Nam entered the post-COVID period. Additionally, the EU-Viet Nam Free Trade Agreement has made it easier for our members to do business here, while Viet Nam's exports to Europe are also on the rise. Its commitment to green growth is also very promising, which means many exciting new opportunities. As a result, European businesses are very enthusiastic about Viet Nam's prospects in the medium- to short-term.

However, a number of external and interconnected factors have reduced short-term optimism. Multinationals and small businesses alike are concerned about slowing global growth, rising inflation, labour shortages and increasing commodity prices. As a result, EuroCham’s Business Climate Index (BCI) declined for the second quarter in a row, down 6.4 percentage points from Q2 and 10.8 points from Q1.

Even so, the BCI results are still really encouraging, with 62.2 percent of respondents saying they are optimistic about Viet Nam's business environment. Even though we may be less optimistic now than we were at the beginning of the year, this number is still very positive. The fourth quarter will likely be less positive than the second or third quarters, but Viet Nam will certainly be in a better position two or three years from now, demonstrating its place among the world's most exciting and dynamic business and investment destinations.

Vietnam still has a lot of room to develop green growth. (Source: VGP)

How do foreign investors view Viet Nam’s green growth prospects?

Approximately 90 percent of EuroCham members believe that Viet Nam should enhance its green economic development to attract foreign direct investment. Policymakers are indeed taking action to address this.

At COP26 in 2021, Prime Minister Pham Minh Chinh made a very strong commitment to reach net-zero carbon emissions by 2050, while Viet Nam's lawmakers have made great strides to enact legislation to make this commitment achievable. Viet Nam's National Strategy on Green Growth for the Period 2021-2030, for example, has given the country further strength and direction.

As Viet Nam implements its ambitious policy agenda, foreign investors are excited, particularly in the country’s green growth sectors. Renewable energy development prospects in Viet Nam specifically are highly attractive for foreign investors due to the country's natural advantages and its accelerating energy demand.

Viet Nam's coastline is approximately 3,200 kilometres long and is constantly subject to strong winds. Due to this, it is ideally suited to host offshore wind farms and has significantly greater wind potential than its neighbours. By 2021, the country had only used 0.8 percent of its wind power potential, so there's plenty of room for growth.

The same goes for solar. Viet Nam's central and southern regions have large amounts of sunshine hours, making them perfect for solar farms. Viet Nam's solar power boom at the end of the 2010s made it the largest supplier of solar power in Southeast Asia, but there is still a lot of growth potential.

Up to now, foreign investors have played a big role in Viet Nam's renewable capacity development, and now they're ready to take it to the next level.

What are the main obstacles to Viet Nam’s green growth?

Climate change is a big threat to Viet Nam. Saltwater intrusion and flooding caused by rising sea levels are destroying homes and livelihoods. This issue will only worsen as rising sea levels flood the Mekong Delta and Viet Nam’s coastal areas. Viet Nam's economy and people will likely be impacted beyond imagination.

Viet Nam is also highly dependant on coal power, with coal demand set to peak in 2030, according to the Ministry of Industry and Trade. This aggravates Viet Nam's air pollution issues and works against its development goals.

It's also impractical to just quickly add renewable capacity because Viet Nam's grid and energy transmission infrastructure are already overloaded. The upfront costs of addressing these issues will be massive.

The green transformation is well underway for European companies and in Europe generally. Due to their lessons learnt, technological capabilities, and funds, these firms are uniquely positioned to assist Viet Nam.

This is why EuroCham is excited to host the Green Economy Forum and Exhibition (GEFE) 2022 in Ho Chi Minh City from November 28-30. Our mission is to bring green European technologies, expertise, and funds to Viet Nam so it can become more environmentally sustainable. GEFE will bring together policymakers, business professionals, scholars, students and industry experts from Europe and Viet Nam to discuss, discover, and implement green European solutions.

Among the three-day agenda is a high-level plenary conference featuring top European and Vietnamese policymakers, a conference bringing the world's leading thinkers together to discuss essential green development topics, as well as an exhibition hosting the best green tech and initiatives Europe and Viet Nam have to offer.

Thank you so much!