Foreign executives cautious over Vietnam investment: EU business body

FOREIGN managers expect no major changes in investment in Vietnam this quarter, after inflows fell in the first three months of the year, according to a survey published on Tuesday (Apr 11) by the European Chamber of Commerce in Vietnam.

The quarterly business climate index confirmed that the South-east Asian manufacturing powerhouse remained a top destination for foreign corporate investment, but lower global demand and uncertainty over the political and regulatory domestic situation led most managers to remain cautious.

The survey, which focuses on European companies and individuals operating in Vietnam, showed that 58 per cent of the more than 200 surveyed managers did not plan to change their investment plans in Vietnam this quarter.

Vietnam received US$4.3 billion in foreign direct investment (FDI) in the first quarter, down 2.2 per cent from a year earlier, according to the latest government data released in late March.

The Netherlands, France, Luxembourg and Germany are the EU’s top investors in Vietnam, according to official data, with combined invested capital exceeding US$20 billion. This is still a fraction of the investment from countries like South Korea and Japan — although FDI is often is channelled through Singapore and other financial hubs.

A majority of managers said Vietnam should increase political stability and improve its regulatory environment to attract more FDI. The country has seen major recent political reshuffles, including the dismissal of the president and other senior officials as part of a broad anti-graft campaign spearheaded by the ruling Communist party.

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Meanwhile, 55 per cent of managers said they did not expect to hire more people this quarter, and 16 per cent forecast job cuts. Roughly one in four remained sanguine about their headcount planning.

Vietnam’s gross domestic product grew 3.32 per cent in the first quarter, down from 5.92 per cent in the fourth quarter of 2022, amid slower exports due to weakening global demand.

Thousands of jobs have been cut this year in Vietnam’s footwear and garment industry which is one of the world’s top production hubs for giants such Germany’s Adidas and Nike. REUTERS