German investment reflecting rising confidence in Vietnam

August 08, 2023 | 11:00
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In the context of ongoing global economic uncertainties, German businesses still consider Vietnam as one of the developing markets with the most potential in Asia. Moreover, with Germany’s investment diversification strategy, Vietnam is being evaluated as a promising and reliable investment destination for German businesses. Today, about 500 companies from Germany have invested roughly $2.9 billion in Vietnam - this being an adjusted overall value; not foreign direct investment.
German investment reflecting rising confidence in Vietnam
Marko Walde - Chief representative in Vietnam, Myanmar, Cambodia, and Laos Delegation of German Industry and Commerce; Vice chairman, German Business Association in Vietnam

Most of the projects are concentrated in the southern region (60 per cent) and the northern region of Vietnam (22 per cent), specifically in Ho Chi Minh City with 280 projects, and Hanoi with 75 projects.

German investors have created some 50,000 jobs, thereby continuing to make positive contributions to bilateral economic relations. These German projects include large corporations but mainly small- and medium-sized enterprises, which have chosen Vietnam as an investment destination, thereby continuing to make a positive contribution to bilateral economic relations.

In the first seven months of 2023, investment from Germany to Vietnam has shown positive signs and reflects the growing confidence of German businesses in the Vietnamese market. According to Vietnam’s Ministry of Planning and Investment, from January to July 20, German firms registered $196.8 million worth of newly registered and newly added capital and stake acquisition and capital contributions, including 21 new projects in Vietnam with the majority focusing on the building industry/building materials sector. Cumulatively as of July 20, Germany’s total registered capital in Vietnam hit $2.54 billion for 459 projects.

According to the AHK World Business Outlook Spring 2023, the increased confidence of German businesses in their business development and positive expectations for economic growth in Vietnam compared to the fall of 2022 is a noteworthy development. A significant majority, 91 per cent, of German companies expressed their intention to continue investing in or expanding their production in Vietnam. Additionally, around 40 per cent of these companies are planning to increase their workforce in the next 12 months. These figures highlight the attractiveness and potential of the Vietnamese market for German investors.

Despite the challenges related to inflation, fragmentation of the global economy, and the increasing political influence on the supply chain, Vietnam is anticipated to experience a resurgence in its economic growth in the medium term.

This growth will be fuelled by various factors, such as free trade agreements, notably the EU-Vietnam deal, which opens up more opportunities for German firms to access the Vietnamese market. The implementation of the China+1 strategy, the global trend of shifting and diversifying manufacturing supply chains towards competitive hubs in Southeast Asia, and the inflow of green investments are also expected to contribute to Vietnam’s economic growth.

German businesses are expressing high expectations for the prospects of business development and strong commitment when investing in Vietnam. In July, Ziehl-Abegg, a German company specialised in electric motors, air conditioning equipment, and fans, announced its plan to launch a factory producing products related to air ducts in Vietnam with an investment capital of about $20 million. This marks a significant step towards expanding their global presence and committing to sustainable development by using natural resources responsibly.

In the financial and banking sector, Deutsche Bank revealed its plan to invest an additional $100 million into its branch in Ho Chi Minh City in May this year. Furthermore, pharma manufacturer STADA Vietnam is also establishing their new office in Ho Chi Minh City. This milestone underscores STADA Vietnam’s dedication to enhancing healthcare in Vietnam and its substantial long-term investment in the region.

The investment situation from Germany to Vietnam has demonstrated positive momentum and increasing confidence among German businesses. Despite the challenges and risks, the Vietnamese market remains attractive, and German companies are keen on expanding their presence and operations in the country.

To further improve investment in Vietnam and enhance its attractiveness as a destination for foreign investors, the government should continue its efforts to streamline administrative procedures, to invest in infrastructure development, particularly in transportation and logistics.

What is more, enhancing the competitiveness of local businesses, developing robust industry clusters, imparting specialised workforce training, adhering to international standards, and ensuring a stable electricity supply for sustainability are pivotal steps to enhance Vietnam’s investment appeal.

Tracking Germany’s investment journey in Vietnam Tracking Germany’s investment journey in Vietnam

The first German investments flowed into Vietnam shortly after the country opened its doors to foreigners

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Until now, the central coastal city of Danang has only enticed 11 investment projects from Germany with the total capital surpassing $10 million, leaving ample space for mutual investment cooperation in the future.

German business steadfast in investment intentions German business steadfast in investment intentions

German businesses are strategically leveraging Vietnam’s economy as manufacturing expansions, increased investments, and sustainable development projects showcase a resolute appetite for business growth.

By Marko Walde

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