German investment in Vietnam – testament to strong partnership: delegation

German investment and favor for manufacturing activities in Vietnam are testament to the burgeoning partnership between the two nations, says the Delegation of German Industry and Commerce in Vietnam (GIC/AHK).

German investments in Vietnam soared last year, culminating in accumulative 463 projects with a total registered capital nearing $2.7 billion, making Germany the 17th largest investor in Vietnam, a GIC/AHK statement said.

Notably, more than half the German ventures are concentrated in key hubs including Ho Chi Minh City, Hanoi, Binh Duong, Dong Nai and Hai Phong, with the remainder scattered across 33 other provinces and cities nationwide, the delegation said.

Among approximately 500 German enterprises operating in Vietnam, over 100 have been actively engaged in manufacturing since 1993, underscoring not only the confidence of German businesses in the Vietnamese market but also the country's ascendancy as a premier destination for businesses seeking expansion within the Asian region, the GIC/AHK statement noted.

The largest German investments have been implemented by Bosch (automotive), Stada – Pymepharco (medical equipment) and Messer Gases (industrial gas).

Marko Walde, chief representative of GIC/AHK in Vietnam, Myanmar, Cambodia, and Laos, hailed Vietnam’s favorable investment climate, facilitated by the EU-Vietnam Free Trade Agreement (EVFTA).

He mentioned myriad benefits enjoyed by German businesses, ranging from tariff reductions to streamlined import procedures.

“The EVFTA's commitment to freedom and transparency serves as a catalyst for enhanced trade and investment between Vietnam and the EU, with Vietnam's steadfast dedication to these principles fostering a conducive business environment, thereby attracting heightened interest from German investors,” Walde said.

Asia-Pacific beacon

Findings from the "Going International 2024" survey by the German Chamber of Industry and Commerce (DIHK) have shown that the Asia-Pacific market (excluding China) has emerged as a “radiant beacon” in the global economic vista for German enterprises amidst the prevailing winds of trade protectionism and escalating international sanctions.

The survey, carried out from January 25 to February 11, 2024, attracted the participation of 79 Chambers of Industry and Commerce (IHK) in Germany, covering nearly 2,400 businesses headquartered in the country and operating in several countries abroad.

“In the labyrinth of global commerce, German companies find themselves navigating increasingly treacherous waters, beset by obstacles and challenges. The latest findings reveal a stark reality: a staggering 61% of enterprises, the highest proportion recorded since 2012, grapple with escalating trade barriers, casting shadows over international operations,” the statement stressed.

“Central to these challenges are the hurdles of local certification requirements and heightened security protocols, exacerbating the intricacies and costs associated with cross-border trade. Moreover, the specter of sanctions, particularly in dealings with Russia, looms ominously, alongside the opacity of legislation, elevated tariffs, and stringent local content regulations,” it added.

In the Asia-Pacific region (excluding China), German enterprises are embracing a brighter outlook compared to their counterparts in other regions. A significant 65% of businesses anticipate market stability, with an additional 15% foreseeing positive advancements.

“Notably, this region stands out for its relatively less pessimistic business climate globally, poised to benefit from the strategic diversification of supply chains,” the delegation statement said.

“Illustrating this proactive approach, several German companies currently operating in China are expanding their supplier networks or establishing footholds in the Asia-Pacific region as part of the innovative ‘China +1 Strategy’", it added

The GIC/AHK statement did not contain findings specific to the Vietnamese market.

In an interview with The Investor earlier this year, German ambassador to Vietnam Guido Hildner had said that German companies generally view Vietnam's business environment positively, considering the country a promising investment destination. Vietnam’s consistent economic growth and the government's efforts to improve the business climate through various reforms and policies have created a conducive environment for foreign investors, he noted.

However, there are certain concerns that German companies have when expanding their investments in Vietnam. These include issues related to transparency, administrative procedures, intellectual property rights protection, access to skilled labor, and infrastructure development. Addressing these concerns would further enhance the attractiveness of Vietnam as an investment destination, Hildner said.

The AHK World Business Outlook Spring 2023 study shows that 91% of German companies in Vietnam intend to expand their investment. Notably, 57% of German companies are seeking new, additional suppliers in Vietnam as they diversify their supply chains, it says.