Remaining a key partner for Germany

What have been the biggest highlights in trade and investment cooperation between Vietnam and Germany with the advent of the EU-Vietnam Free Trade Agreement (EVFTA)?

German Ambassador to Vietnam Dr. Guido Hildner

Over the last 25 years, more and more German companies have been investing in and trading with Vietnam. Among those companies are big brand names as well as many small- and medium-sized enterprises. About 350 German companies have built up an active presence in Vietnam, many of them with first-class production sites. Investment from Germany aims mostly at manufacturing high quality products, not just for the Vietnamese market, but also for the Southeast Asian region and worldwide. Already today, German-invested manufacturing in Vietnam represents a significant share of global value chains. Some German textile companies produce up to half of their worldwide production in Vietnam.

The same applies for medical supplies. For example, one important German company known for its first-class medical equipment is producing one-third of specific global items in Vietnam. The importance of the market in Vietnam has become very visible recently due to the closure of many factories, with global value chains heavily affected and partly interrupted.

With more and more links to Europe, Vietnamese companies have also started to invest more in Germany. Machinery, industrial equipment, electronics, and chemicals dominate bilateral trade from Germany to Vietnam, while trade from Vietnam to Germany mainly comprises electronics, textiles, agricultural products, and wood items.

The EVFTA has been a big step forward. It is not just about eliminating tariffs and opening the markets in both directions. It is also about higher production standards and higher social and environmental standards in our trade and investment cooperation.

How important is the Vietnamese market to German investors and businesses and what sectors are the most attractive to them?

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, many highly-motivated and talented employees, 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.

Important sectors for Germany are machinery, electronics, metal parts, equipment, chemicals and other products for various industrial sectors, as well as textiles. The latest trend is growing investment from Germany into the energy sector – especially in renewables – as well as other greener and more resource-efficient technologies. The IT sector is a big focus also. One of the promising developments of recent years has been the direct high-tech cooperation between leading German companies such as Siemens, SAP, and BMW with important Vietnamese companies such as FPT and VinFast.

How have Vietnam and Germany cooperated in fighting the ongoing pandemic?

We can only defeat it if it is brought under control everywhere. This is why support and measures have to be coordinated internationally. Germany is the second-largest donor to the ACT-A-Accelerator pandemic tools access system, at €2.2 billion ($2.58 billion). About €1.62 billion ($1.9 billion) of this platform is used for the COVAX vaccine pillar and around half of that for developing countries. COVAX plans to distribute up to 3 billion doses by the beginning of 2022. In this way, 30 per cent of the population in developing countries could be vaccinated. Every fifth euro spent on these vaccines is provided by Germany.

Additionally, the German government has supported the Vietnamese vaccination campaign with 2.6 million AstraZeneca COVID-19 vaccine doses directly and an additional 850,000 doses administrated via COVAX. Besides vaccines, both countries have made remarkable efforts to support each other during this difficult time. For example, the government of Vietnam supported Germany with a donation of more than 100,000 masks at the beginning of the pandemic in 2020. This summer, German federal states provided one million rapid anti-gene tests as well as masks, bodysuits, and specialised refrigerators to our partners in Vietnam.

Germany also supports Vietnam with specific pandemic-related development projects. Up to €104 million ($122 million) will be used to implement ongoing and future activities in the areas of technical and vocational training, pandemic prevention, social security, digitalisation, and more besides. This includes the establishment of a pandemic prevention centre and advisory services to combat the illegal wildlife trade.

Vietnam wants to transform its economy into an industrial country over the next decade. What do you think is the key challenge facing the Vietnamese government on this journey?

The immediate task ahead is the economic recovery after the pandemic. In light of climate change, this should be done in a sustainable and environmentally-friendly way. One of the key challenges is to reconcile industrial development and the protection of the environment and the climate, which is possible. The energy supply is a central element. Here it is important to systematically and widely expand renewable energies and to increase energy efficiency. Furthermore, air and water pollution needs to be reduced.

Additional challenges include the need for adequately skilled labour and well-developed infrastructure. Germany stands ready to cooperate with Vietnam in these areas and to continue its long-standing support for making Vietnam’s economy greener and more sustainable.

What is your expectation of the trade and investment ties between Germany and Vietnam in the time to come?

The overall outlook is positive. The EVFTA will show more of its growth and modernisation potential after the pandemic crisis subsides.

However, global threats such as climate change and worldwide challenges such as digitalisation and the energy transition will put more and more pressure on our governments as well as on our business sectors to come up with environmentally-friendly solutions for industry and infrastructure. 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 between the companies of both sides.