Legislative changes negatively impact businesses

Thien Thanh Sanitaryware joint company

Legislative changes negatively impact businesses

Half of European enterprises in a survey say that legislative changes during 2013 have negatively impacted their business operations and this trend is expect to continue next year.

The findings are revealed in the 13th quarterly EuroCham Business Climate Index (BCI) survey on business confidence and outlook among over 750 European businesses in Vietnam released on Wednesday by the European Chamber of Commerce (EuroCham). The Business Climate Index for the quarter scores 50, which is unchanged for the third straight quarter.

According to the survey, key challenges that European enterprises face when doing business in Vietnam are corruption (72%), lack of or inconsistent implementation of legislation (67%), administrative difficulties (52%) and lack of transparency (45%).

While 50% of the respondents say their business are negatively impacted by legislative changes, only 7% say such changes during the year are positive.

“So many of the respondents still fear the legislative changes could negatively impact their business in 2014,” said EuroCham Chairman Preben Hjortlund. Therefore, the Government needs to take into account and incorporate opinions of the business community in the legislative process to avoid adverse effects of legislation when it is implemented, he added.

Besides, half of the enterprises in the survey expect legislation will continue to negatively impact their business next year. However, 32% hope for a positive legislative environment in 2014. 

“It is worrisome to see that EuroCham’s Business Climate Index comes out at 50 for the third time. Furthermore, it is interesting to see that so many of the respondents still fear that legislative changes could negatively impact their business in 2014,” Hjortlund said.

Despite such a stagnating index on business confidence, European enterprises still have plans to increase investments in Vietnam owing to the stabilizing macro economy, according to the survey.

Up to 41% of the respondents expect to increase investments in Vietnam compared to 34% recorded last quarter. Besides, the number of the respondents planning significant investment increase in Vietnam rises from 8% in the previous quarter to 16% this quarter.

In line with this development, the number of expected business orders also increases to 67% from 61% and 53% of the two previous quarters. 14% of the respondents expect a decline in business orders compared to last year’s 36%.

The survey also shows that falling inflation has eased the concern among European investors.

The initiatives undertaken by the Vietnamese Government to reduce inflation have been effective, which is clearly demonstrated by the survey findings; the number of respondents expecting inflation to have a “significant or threatening impact” on their business has been substantially reduced to 29% compared to 43% last quarter and 50% last year, according to the survey.

Respondents also remain somewhat confident in the macroeconomic outlook, with 47% expecting a “stabilization and improvement” of the situation and 35% expecting no change.

Eurocham in the release on Wednesday also noted that it would publish the Whitebook 2014 on 11 November 2013, with more specific indications on the business environment in Vietnam.

By Son Nghia - The Saigon Times Daily