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Vietnam stands out in ASEAN in investment attraction from German businesses
Minh Anh 14:46, 2019/06/21
Up to 55% of German companies in Vietnam intend to expand their activities in Vietnam in the next 12 months, higher than an average of 44% in Southeast Asia.
Vietnam has remained the top choice in Southeast Asia for German businesses as the country possesses many competitive edges, including a fast-expanding economy and a government committed to opening up, according to a recent survey by the German Chambers of Commerce Abroad.

Up to 55% of German companies in Vietnam intend to expand their activities in Vietnam in the next 12 months, higher than an average of 44% in Southeast Asia and 52% recorded in the previous survey, according to the findings of the AHK World Business Outlook that were released last week.
 
Overview of Vietnam’s result – AHK World Business Outlook Index 2019
Overview of Vietnam’s result – AHK World Business Outlook Index 2019
Meanwhile, 59% of the surveyed businesses plan to increase employment in Vietnam, higher compared to 48% across ASEAN nations and 56% for 2018.  

Other results show that German businesses operating in Vietnam have significantly higher expectations for their own business situation and future business than in 2018.

According to the survey, 77% rate their current business situation in Vietnam as good and 3% as poor, compared to 56% and 4% in 2018, respectively. In addition, 67% of German companies are upbeat about economic development of Vietnam in the mid-term, while the rate for ASEAN is 42% and 52% in Vietnam in 2018.
 
Source: AHK WBO
Source: AHK WBO
“The Vietnamese government shows the commitment to support and create the most favorable conditions for foreign investors and businesses. In addition, a wide range of free trade agreements such as TPP11, now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnerships – CPTPP, as well as the FTA between EU and Vietnam, which probably comes into effect this summer, will boost the economic growth of this country.

That might be the reason that German business leaders in Vietnam maintain positive view with the economic expectation as well as with their situation in Vietnam and they look forward to a bright 2019 and 2020,” said the report.
 
Marko Walde, chief representative of the German Industry and Commerce in Vietnam (GIC).
Marko Walde, chief representative of the German Industry and Commerce in Vietnam (GIC).
Marko Walde, chief representative of the German Industry and Commerce in Vietnam (GIC), noted that German companies are not large-scale investors that bring billions of US dollars to other countries, but they are committed to long-term business. Therefore, they bring in the best equipment and technologies and at the same time require a proper and encouraging business environment.

Concerns remain
The survey pointed out that half of the companies (51%) consider conditions regarding the economic policy framework the greatest risk for their businesses in Vietnam. Meanwhile, 44% are worried about the lack of qualified workers.

Conclusion of the Regional Comprehensive Economic Partnership (RCEP), domestic and international demand as well as the political stability have very high influence for the German engagement in Vietnam in terms of market supply and demand as well as economic environment.

Another factors that might affect German businesses in Vietnam are corruption, lack of skilled workers, a rise in labor costs, disadvantages due to trade barriers, legal uncertainty, and cost of energy, electricity and gas.

German companies in Vietnam find it quite difficult to find the technical qualified staff with both university and vocational level.

Recommendations

Therefore, GIC recommends the government support domestic businesses in order to enhance their competitiveness and to ensure the sustainable development, because they are seen as a backbone of the economy in Vietnam.

Building and developing domestic supporting industries, typical industrial clusters with advantages according to various regions can help to create the collaborate opportunities among domestic and foreign businesses, the survey suggested.

The GIC also recommended developing a practice-oriented vocational education system with the opportunities learning by doing will help to build a new skilled generation with profound knowledge, practical and communicative skills. “This is a competitive advantage of Vietnam which can assure the sustainable development in the long run.”
In addition, building a fruitful and creative ecosystem for startups as well as providing financial, educational and environmental assistances will give domestic startup companies, small and medium sized businesses the ability to reach foreign investors and modern technology. 
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