Most German firms plan to continue operating in Vietnam

Illustrative photo (Source: moit.gov.vn)

Hanoi - Almost 93 percent of German companies already operating in Vietnam will continue to invest in the country and over 64 percent of them expect their business to develop better in the next 12 months, a survey from AHK World Business Outlook–Spring 2022 has revealed.

The survey was conducted by the German Chambers of Commerce Abroad, Delegations and Representative Offices (AHKs).

Vietnam’s border reopening and the Government’s drastic and timely policies have created a boost for post-pandemic economic recovery, said the survey.

German businesses are more optimistic about economic development in Vietnam over the next 12 months than they were in the autumn of last year.

Over 46 percent of them plan to recruit more employees in the coming year. The surveyed businesses also demonstrate that the most important factors for their trade and investment decisions in Vietnam are political stability, availability of skilled workers in technical and non-technical fields, and transport and logistics.

Thanks to Vietnam’s participation in free trade agreements (FTAs), the country has favourable conditions to attract foreign direct investment (FDI) flows.

More than 73 percent of German businesses believe that the implementation of the EVFTA from August 2020 increases their competitiveness in Vietnam.

They regularly leverage the ASEAN-China FTA (ACFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Implementing their business activities in Vietnam, German businesses evaluate the most important factors are the availability of skilled labour in technical fields (58.3 percent), quality of education in technical fields (58.3 percent), and tariff trade barriers (56.5 percent).

Although German enterprises have shown resilience in post-pandemic recovery, they are facing risks and challenges caused by global uncertainties that make them more concerned about their business development in the coming year.

Currently, they regard the greatest risk as the price of raw materials, followed by energy prices, and a shortage of skilled labour. The Russia-Ukraine conflict has also had an economic impact on their companies.

Higher costs for energy, raw materials and supply chain and logistics disruptions are their most worrying issue. This results in changes to their international business investment activities, such as adjusted risk assessment on locations and economic decoupling of world regions.

In the context of restrictions from the COVID-19 pandemic and supply chain disruptions, allocating and diversifying investment and production activities has become a top priority of German businesses, said Marko Walde, Chief Representative of AHK, at the press conference announcing the survey in Hanoi on June 8.

“Instead of focusing on a specific market and production base, German businesses are expanding their supply chains, and 95 percent are looking at Southeast Asia, specifically Thailand and Vietnam,” he said.

At the present time, Walde said that Vietnam has an important position in the flow of international trade.

“Among the 10 ASEAN member states, Vietnam is one of the four countries participating in the CPTPP, and together with Singapore, it is the only two countries with a free trade agreement with the EU so far,” he emphasised.

More importantly, the advantage with Vietnam as a production base also lies in the fact that German and European enterprises could set up enterprises with 100-percent-foreign capital, hardworking and inquisitive workers, as well as the close economic, social and cultural connections between the two countries.

To further promote investment capital from Germany into Vietnam, Walde emphasised the importance of Vietnam in developing a production supply network and high-quality human resources, which were capable of meeting investors’ demand.

The AHK World Business Outlook (WBO) is based on a regular DIHK survey of member companies of the German Chambers of Commerce Abroad, Delegations and Representative Offices.

It collected feedback from more than 4,200 German companies, branches and subsidiaries worldwide, as well as companies with close ties to Germany in March and April this year.

AHK WBO is seen as a barometer of the business confidence among German companies and as a key indicator of the German business situation and business expectations for Vietnamese economic development.