German groups expanding major operations in Vietnam

The Delegation of German Industry and Commerce in Vietnam (AHK Vietnam) is now working with authorities of Binh Dinh province on a plan to organise a conference on German investment in the south-central locality.

AHK Vietnam will select and invite German businesses and investors for this event.

“Binh Dinh has some potential for German investors, and we hope that they will be able to find out some opportunities for cultivating projects in the province,” said AHK Vietnam chief representative Marko Walde.

German thin film tech group Leonhard Kurz has recently worked with Binh Dinh authorities, committing that it will invest around 30-40 million in the first stage into producing high-tech film products in the province. The total capital will be raised to $100 million for the 2-stage project covering 10 hectares.

Binh Dinh has pledged to create the best conditions for the project to be constructed and become operational as soon as possible.

Elsewhere, PNE AG is building an offshore wind power project in the same province, hoping to turn Vietnam into a competitive wind power supplier in the southeastern region and beyond. PNE operates in 13 countries on four continents and is expected to invest around $4.8 billion in this project. Its plan is to build between over 50 wind turbines, with the potential of reaching as many as 165 turbines, with a total capacity of up to 2,000MW.

“This project is highly feasible, providing a considerable amount of electricity to Binh Dinh province and the national power system from 6.6-7 billion kWh a year,” Walde of AHK said.

German companies in manufacturing, tech, wind power, and more are pumping millions of US dollars into new or expanded ventures here. Photo: Siemens

Intensifying efforts

Since he became Vietnamese Ambassador to Germany, Vu Quang Minh has actively worked with German authorities and localities to connect them and their enterprises in trade and investment activities in Vietnam.

Last month Minh met with Saxony’s State Secretary for Economic Affairs and Labour Thomas Kralinski and was told that German companies, and those in Saxony in particular, are interested in raising investment in Vietnam.

“The German locality has experience in researching and developing renewable and green energy, and it is willing to connect with research institutes and universities of Vietnam to promote cooperation in this sphere,” Kralinski said.

Minh said that the embassy “will continue to boost the organisation of networking activities on the economy, trade, and investment between the business communities of both nations so that they can well take advantage of their respective markets and of the benefits from the EU-Vietnam Free Trade Agreement.”

The first German investments flowed into Vietnam shortly after the country opened its doors to foreigners. In 1992, Bültel, producing fashion for brands such as Camel Active, settled down in the southern province of Binh Duong. In the same year outdoor brand Tatonka opened a backpack production line in Ho Chi Minh City.

German investments started to really gain steam when Vietnam ascended to the World Trade Organization in 2007 and received another impetus with the 2015 amendment of the enterprise and investment law.

According to Vietnam’s Ministry of Planning and Investment, today over 430 companies from Germany have registered $2.31 billion in Vietnam, creating some 50,000 jobs. In the first eight months of 2022, Germany’s total newly-registered capital, stake acquisition, and capital contributions were $49.4 million, including 19 new projects.

Magnetec, a German producer of electric spare parts, in July completed procedures on investment registration at Nam Dinh Vu Industrial Park in the northern city of Haiphong. Also, cleaning technology company Kärcher recently selected Vietnam as its new production base overseas.

Many other German investors are exploring investment opportunities in Vietnam, said AHK Vietnam.

The most important investment destination by far is Ho Chi Minh City, with over half of all German companies in Vietnam established there. When taking a look solely at sales/service functions, three-quarters is located in Ho Chi Minh City. Hanoi comes in as a distant second while Binh Duong and Dong Nai provinces are first and foremost attractive locations for manufacturing operations.

While Germany has 16 states, over half of the investments in Vietnam come from companies headquartered in just three: Baden-Württemberg, Northrhine-Westfalia, and Bavaria.

The most significant German investments have been implemented by Bosch (automotives), Stada-Pymepharco (medical equipment), and Messer Gases (chemicals). Bosch is employing a major manufacturing complex for push belts in Dong Nai while also operating a research and development centre in Ho Chi Minh City. Stada-Pymepharco manufactures pharmaceuticals in its factory in the south-central Phu Yen province. Messer is supplying gases to local customers such as Hoa Phat from its main production hubs in the northern province of Hai Duong and the south-central province of Quang Ngai.

Brighter horizons

German Ambassador to Vietnam Dr. Guido Hildner once told VIR that more and more German companies have been investing in and trading with Vietnam, as well as building up first-class production sites.

“For German companies, the Vietnamese market has become an important destination in Asia. The characteristics of this market are a large and still rather young population; a fast-growing middle class with more and more spending power; and an investment-friendly location in a geographically central position within the Indo-Pacific region,” Hildner said.

Important sectors for Germany are machinery, electronics, metal parts, equipment, chemicals and other industrial products for various industrial sectors, and textiles, Hildner added. “The latest trend is strongly growing investment from Germany into the energy sector, especially building up renewables, other environment-related, greener, more resource-efficient technologies, and the IT sector,” he said.

One of the promising developments of recent years has been the direct high-tech cooperation between leading German companies such as Siemens, SAP, or BMW with important Vietnamese companies such as FPT and VinFast, Hildner explained.

“The overall outlook of German’s investment in Vietnam is positive. However, global threats such as climate change and challenges such as digitalisation and the energy transition will put more pressure on our governments as well as on our business sectors to come up with environmentally-friendly solutions for industry and infrastructure,” the ambassador said.

“This means that the most creative, innovative, and resource-efficient companies of both of our countries will win. There is enormous potential for creating new, qualified jobs and for innovative solutions in the renewable energy sectors, in smart and green agriculture, in greener steel and cement production, and so on. There will be ongoing diversification of production sites and trade relationships for the companies of both sides.”

According to Vietnam’s Ministry of Industry and Trade, during 2010-2020, two-way trade turnover increased from $4.11 billion to $11.13 billion in 2021. Vietnam’s export turnover from Germany soared from $2.37 billion to $7.28 billion in that time. In the first seven months of 2022, Vietnam earned $5.1 billion from exports to Germany, up 23.2 per cent on-year.

Currently, Vietnam and German are now making preparations for an official visit by the latter’s chancellor to the former. The visit is strongly expected to help further increase both nations’ bilateral strategic partnership forged in 2010. It is also hoped that further cementing sustainable development and clean energy, as well as trade and investment, will be high on the agenda.

On March 3, Vietnamese Party General Secretary Nguyen Phu Trong held phone talks with German Chancellor Olaf Scholz. The Party chief invite the German leader to visit Vietnam and the latter accepted the invitation.

General Secretary Trong stated that Vietnam attaches importance to its strategic partnership with Germany as part of its foreign policy of multilateralisation and diversification, and of being a friend, reliable partner, and an active and responsible member of the international community.

The Vietnamese leader also suggested amplifying the bilateral cooperation in investment, trade, energy, science, technology, education, national defence, and security to a new level in conformity with their strategic partnership.

Chancellor Scholz reaffirmed that Germany attaches great importance to the strategic partnership, which is developing robustly and has much potential for further growth.

Thai Lai Pham - President and CEO, Siemens ASEAN and Vietnam Siemens and Vietnam have been enjoying a very successful cooperation on the basis of equality and mutual benefit for almost three decades since our official establishment in Vietnam in 1993. Siemens has participated successfully in numerous Vietnam’s infrastructure projects, and is nowadays having a strong presence in many vital sectors of the national economy such as industry, infrastructure, transport, and healthcare. Siemens has also actively been supporting Vietnam in leading the digital transformation journey and embracing Industry 4.0’s various opportunities. We are now in the last quarter of fiscal year 2022 and I can reveal that it’s going to be another successful year for Siemens ASEAN and Vietnam. I am particularly proud of the team because, besides impressive performance and business results, they have demonstrated a strong sense of growth mindset and an increasing level of efficient collaboration across divisions and business units. Vietnam’s economy was heavily impacted by the pandemic outbreak in 2021. But the country seems to have overcome the most difficult period of the pandemic and is able to maintain a good growth momentum thanks to tremendous efforts to boost socioeconomic recovery and development from the Vietnamese government. I’m confident that Vietnam will be able to achieve a positive growth rate in 2022.