Fresh wave of German funds pending arrival

June 19, 2020 | 14:00
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The EU-Vietnam Free Trade Agreement (EVFTA) will further bolster the Vietnamese-German economic partnership and is expected to drive a wave of German investors into Vietnam.
1496p 10 fresh wave of german funds pending arrival
Fresh wave of German funds pending arrival

Since 2011, Germany and Vietnam are nurturing their strategic partnership involving co-operation projects at all levels and in numerous policy fields, especially in business relations. With a trading volume of almost €14 billion ($15.3 billion) in 2019, Germany is Vietnam’s most important trading partner in the EU.

Over 380 German companies are represented in Vietnam, and their total investment amounts to more than $2.3 billion, creating around 40,000 quality jobs in Vietnam. Most of the German-invested projects are located in the business hub in southern Vietnam, including Ho Chi Minh City and Dong Nai and Binh Duong provinces.

Both countries have excellent economic relations and Germany enjoys an outstanding reputation in Vietnam, which is unique in this form in the ASEAN region. There are also many historical connections. With around 120,000 members, the Vietnamese community in Germany is relatively large.

We are all aware that this year is particularly challenging the global economy, as the pandemic continued to wreak havoc across the world. Our AHK World Business Outlook survey showed that German companies in Vietnam are understandably concerned about the effects of coronavirus on their business here but still remain optimistic and have high expectations.

A stunning 82 per cent reported adjusting revenue targets downward due to the coronavirus but 59 per cent expect that their company’s operations and financial position will be stable at the end of the year.

In the mid-term, 20 per cent think that Vietnam’s economy could even be better despite this epidemic. Nearly three quarters of German companies in Vietnam intend to keep investing in the country, and 27 per cent assume an increase in employment.

As a result of the Vietnamese government’s commitment to creating the most favourable conditions for foreign investors and businesses and reaping the benefits of the EVFTA, economic growth will be boosted and more investors will be attracted to Vietnam.

Moreover, apart from Singapore, Vietnam is the only country in the ASEAN that is in all relevant free trade initiatives in the region on top of which it boasts the lowest market entry barriers for foreign firms.

Once the EVFTA comes into force, European and German companies can enjoy sound protection of investments with trade facilitation and increased investments in Vietnam. The elimination of bilateral tariffs and export taxes, together with the reduction of non-tariff barriers affecting the cross-border exchanges of goods and services, are expected to boost bilateral trade considerably and create new opportunities to access markets across a range of sectors.

This is particularly true in the automotive, green energy, electronics, IT, food processing, and healthcare industry.

For the long-term, we hope that German and European investors will increase investments in Vietnam based on the improved conditions here. We strongly believe that there will be many funds flowing into high-value projects.

German investors would bring their renown technology in management and training to this country, allowing for more value-added production and less waste of material and resources.

In addition, we see an increased interest and demand of German investors that look for suitable locations in Vietnam, following the China+1 strategy. This trend had started before the trade war as German investors in China were looking to diversify their operations by adding other locations in Asia.

Their concrete reasons for these diversifications are the reliability of Vietnamese partners as well as the rising wage costs in China. And when it comes to alternatives in the ASEAN region, German investors choose Vietnam first.

* Marko Walde - Chief representative Delegation of German Industry and Commerce in Vietnam

By Marko Walde

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