EVFTA on track to bring new German investors

What is your assessment of German businesses’ performance in Vietnam now and their future prospects?

For German companies, Vietnam is seen as a first-class investment destination. According to international assessments, the business prospects are bright and the willingness of Vietnam to welcome foreign investment remains very satisfactory.

In general, German companies in Vietnam intend to expand their activities, and this corresponds with the export initiatives of the German federal government to promote German business abroad, which include renewable energy, energy efficiency, healthcare, and special programmes for German small- and medium-sized enterprises.

World-famous German textile companies investing in Vietnam have presented their expansion intentions to the prime minister. They intend to expand their investments, creating highly qualified jobs, a transfer of technology, and state-of-the-art labour conditions.

However, I deplore that the lack of flexibility by the Vietnamese administration to meet the requirements of German companies remains an obstacle for these plans. I understand that in Vietnam, the “art of doing business” is different from European and world standards. But in accordance with the Party Central Committee’s resolution on the integration of Vietnam into the globalised world issued in October 2016, Vietnam’s administration has to understand that attracting foreign investment demands an adaptation to international standards.

It cannot be expected that the world will do business in the Vietnamese way, which is still far too often connected to personal relations including mutual financial and family dependencies. These are just other words for corruption in the modern definition of “non-compliance”.

The EU and Vietnam are conducting final procedures for the signing of the EU-Vietnam Free Trade Agreement (EVFTA) next summer. How important is the EVFTA to Germany’s businesses and investors in Vietnam?

The EVFTA opens new opportunities for both Vietnam and Germany. Both governments have expressed their commitment to creating beneficial conditions in order to increase bilateral trade volume to $20 billion by 2020. The EVFTA will help tremendously to reach this objective. Reduction of duties will further enable the import of high-tech solutions, both in machinery and services.

For Vietnam’s exports to Germany and to the European Union as a whole, new opportunities will present themselves. These will pay off when Vietnamese companies accept that productivity has to be increased, particularly with a systematic reform of vocational training. In Germany and Europe we call it “life-long learning”.

On the other hand, the EVFTA urges Vietnam to speed up its modernisation, not only in the economic field. The implementation of the International Labour Organization’s conventions is crucial. Free exchange of information, respecting new ideas – even if they are in a certain way revolutionary at first sight, and seem to be incompatible with the traditional way of doing business or regulating social affairs – and new forms of interaction between employers and employees are the litmus test for the functioning of the EVFTA.

What are the key challenges that German firms and investors are facing in Vietnam?

I may refer to the first question. The German Embassy is far too often asked by German companies to intervene at the political level due to lack of a working judiciary. Although Vietnam has a good set of legal provisions, the competency of the staff working in the administration, particularly on the provincial and local levels, is weak.

Decisions are often discretionary or made without profound knowledge of the legal rules, or both. Rules and procedures are changed fast, sometimes without taking into account existing rules which contradict the new ones. Pharmacy and agriculture are the most recent examples, the automotive sector another.