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Less optimistic, Vietnamese firms still upbeat in 2011
Though Vietnamese private firms are slightly less optimistic about business outlook in 2011, 62 percent compared to 72 percent a year ago, the country still ranked 16th in business optimism in a recent survey over 39 economies worldwide.
This is significantly higher than the global average of +23 percent and higher than the Asia Pacific (Excluding Japan) average of +50 percent, according to the 2011 Grant Thornton International Business Report (IBR).
"Inflation and rising interest rates have had an impact on the levels of Vietnamese optimism, hence the decrease from the previous year, albeit at +62 percent this is still a relatively strong result,” Ken Atkinson, Managing Partner of Grant Thornton Vietnam, said.
Despite declining optimism, businesses in Vietnam continue to take a long term view.
A balance of +41 percent of businesses expect to increase expenditure on R&D (global average: +24 percent), +34 percent expect to increase investment in plant and machinery (Global average: +35 percent) and +78 percent (Global average: +29 percent) expect to increase employment.
Confidence levels in economic performance this year are higher in Latin America than any other part of the world, recording +75 percent. 2011 is the first year Latin America has led the world on optimism.
"In recent years the global focus for emerging economies has been on the BRIC economies of Brazil, Russia, India and China. However, this survey helps confirm that a wider view of Asian and Latin American economies reveals many other countries with strong levels of business confidence and high forecast growth rates in 2011," Ken Atkinson said.
Optimism in North America is just +26 percent, with Europe the least optimistic region at +22 percent. Globally, Chile (+95 percent) scored the highest optimism of any country surveyed followed by India (+93 percent), Philippines (+87 percent) and Switzerland (+85 percent).
Asia Pacific, last year’s leading region for business optimism, saw a fall in overall optimism from +64 percent to +50 percent as economies such as Mainland China (Down from +60 percent in 2010 to +42 percent), Australia (Down from +79 percent to +37 percent) and New Zealand (Down from +66 percent to +35 percent) showed large negative swings in optimism.
Businesses around the world expect weak investment in 2011 since the IBR reveals that business owners expect to see only moderate levels of investment in 2011.
Some 35 percent more businesses expect to see increases in investment in plant and machinery and only 24 percent more expect to see an increase in research and development (R&D). A notable exception to this trend is Mainland China where +47 percent of businesses expect to increase investment in plant and machinery and +61 percent expect to increase their R&D.
"Sooner or later businesses will need to invest if they want to continue to grow.
Governments in these economies need to create environments that encourage business investment. But with interest rates already at historic lows in some key economies, the option to reduce them further and stimulate investment is not available. Therefore they will need to be creative,” Matthew Lourey, Advisory Services Director at Grant Thornton Vietnam, said.
“Some of this creativity might be directed towards the banks where lending activity to businesses in a number of economies has been low as they seek to rebuild their balance sheets in the wake of the financial crisis," he added.
The Grant Thornton IBR is a survey of medium to large privately held businesses, researching the opinions of over 5,700 businesses in Q4 2010, and over 11,000 on an annual basis.
The target respondents are chief executive officers, managing directors, chairmen or other senior executives (Title dependent on what is most appropriate for the individual country) from 39 economies primarily across five industries: manufacturing (25 percent), services (25 percent), retail (15 percent and construction (10 percent) with the remaining 25 percent spread across all industries.
It provides insight into the views and expectations of over 11,000 businesses per year across 39 economies. This unique survey draws upon 19 years of trend data for most European participants and nine years for many non-European economies.
The research is carried out primarily by telephone interview lasting approximately 15 minutes with the exception of Japan (Postal), Philippines and Armenia (Face to face), mainland China and India (Mixture of face-to-face and telephone) where cultural differences dictate a tailored approach.
Data collection is managed by Grant Thornton International's core research partner - Experian Business Strategies.
Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. The Q4-2010 fieldwork took place in November/December 2010.
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