Economic Climate & Business Practice

We provide you a present overview about all the important economic data, latest developments in Vietnam and information about the economic relationship between Vietnam and Germany.

Vietnam – in the heart of ASEANs

Vietnam is extremely German-friendly and really provides interesting potentials in almost all kinds of sectors, which may enhance the business approaches for all middle-sized companies by good preparation of the market entry. 

Vietnam is a member of the ASEAN association. In 2015, on December 31, the political merger was extended to a common economic area by the so called ASEAN-economic-community (AEC). Henceforth, the four fundamental freedoms shall apply to the 649 million people living within ASEAN, which are already applied to the EU: free movement of goods, freedom of services, free movement of capital and free movement of labor.

Due to the strong effort of the government to integrate Vietnam into the international economic area, the economy receives additional impulses. Of particular importance are two additional trade-political developments within the region. In August 2015, Vietnam concluded a free trade agreement with the European Union (VN-EU FTA), which is expected to be applied in summer 2020. 99 percent of all import tariffs between the EU and Vietnam shall be abolished in the next 10 years. Similar to Singapore, Vietnam is also a pioneer within the ASEAN region. Furthermore, Vietnam is also a member of the CPTPP which consists of 11 countries on the Pacific. After years of negotiations, Japan, Vietnam and nine other Pacific countries concluded a historical free trade agreement called “The Comprehensive and Progressive Agreement for Trans-Pacific Partnership” (CTPPA), which came into force in January 2019 from which Vietnam should benefit considerably. Due to the fact, that only few countries evolve equally as Vietnam, the country gains a better position for receiving foreign investments.

Vietnam in the corona crisis

Vietnam has a dynamic investment environment and fast economic growth and showed a remarkable transformation over the past 10 years. Despite COVID-19 epidemic, Vietnam recorded economic growth of 2.9 percent in 2020 and is expected to achieve a growth rate of 7.5 percent this year, according to the Deutsche Bank. Due to a recent World Bank study, the simultaneous implementation of the EVFTA and CPTPP Agreement will help Vietnam's GDP increase by up to 3.2% in the decade 2021-2030. Vietnam will become a strategic investment destination in the process of restructuring the global and regional supply chain, a potential domestic market to attract international corporations. Vietnam is still one of the countries with the fastest economic growth in Southeast Asia. FDI enterprises, especially German businesses also show optimism about Vietnam's economy in the medium and long term. According to our AHK World Business Survey in Fall 2020, half of German survey participants expected their business development of their companies in Vietnam will be improved in 2021.

It’s obvious that these results show Vietnamese government has taken decisive and forceful action against the impact of the corona crisis. These measures should be taken as fast as possible to counter the economic impact of the coronavirus, in order to bring the economy back onto a growth path as quickly as possible. Moreover, the Vietnamese government creates the most favorable conditions for foreign investors and businesses as well as EVFTA and this committment will boost the economic growth of this country and attract more investors to Vietnam. Vietnam has been implementing a number of activities and effective methods in oder to achieve the dual objectives: promoting socio-economic development and effectively preventing epidemic in the “new normal” condition of Vietnam.  

About German-Vietnamese business relations

Since 2011, Germany and Viet Nam have had a “strategic partnership” involving cooperation projects at all levels and in numerous policy fields. Germany and Viet Nam regard themselves as partners in endeavours to uphold the rules-based order, respect for international law, multilateralism, global free trade and investment, and environmental and climate protection. Currently, with a trade volume of almost 14 billion euros in 2020 (3 times larger than in 2011), Germany is Viet Nam’s one of the most important ASEAN trading partners in the EU. Over 500 German companies are represented in Viet Nam and total investment has reached to more than 2.3 billion US dollars (calculated on Jan 20th, 2021). This investment has created around 47,000 quality jobs in Viet Nam.

 

German companies in Vietnam

Our German companies have experienced how well Vietnam has responded to the Covid-19 epidemic from the very outset, preventing its spread. The coronavirus is a serious challenge for our whole society and Vietnam took decisive and forceful economic and fiscal policy measures to support the economy. Vietnam’s government has announced more economic aids for businesses and workers which are highly recommended and essential, such as facilitating access to credit and tax, cutting administrative procedures and recovering affected sectors like tourism and aviation industry, etc.

German businesses think that more investors and experts from Germany and the EU will have incentives coming to Vietnam for diplomatic and business purposes, as a result of the Vietnamese government's commitment to creating the most favorable conditions for foreign investors and businesses to enter Vietnam for short period as well as the Free Trade Agreement between the EU and Vietnam.

According to our survey 2021 – AHK World Business Outlook in Spring, German businesses operating in Vietnam assess both their own business situation and future business expectations significantly better than in 2020. 55 percent rate their current business situation in Vietnam as good and 11 percent as poor. While in 2020 only 36 percent had a positive view of their situation in Vietnam. More details on our survey you could find here >>>

Global Integration

One factor that makes Vietnam more attractive is the global integration through FTA network. German companies expected the upcoming EU-Vietnam FTA and EU-Vietnam IPA would improve the economic policy in Vietnam in the long run. European and German companies can enjoy protection of investments with trade facilitations and increase investments in Vietnam. The elimination of bilateral tariffs and export taxes, together with the reduction of non-tariff barriers affecting the cross-border exchanges of goods and services, are expected to boost bilateral trade considerably and to create new ­opportunities emerge to access markets across a range of ­sectors, covering goods, ­services for German companies in Vietnam.

Moreover, the outstanding economic growth, the open investment environment, stable government, strategic geography as well as the competitive labor costs would give Vietnam great potential to advance to the next levels in the global value chains

China +1 Strategy

There are currently a lot of expansion plans of German enterprises from China to Vietnam. They are complementing their existing Chinese operations with new activities in Vietnam regarding sourcing and investments. This trend had started before the “trade conflict” as German investors in China are looking to diversify their operations by adding another location in Asia. Their concrete reasons for that are their diversification strategies, the reliability of Vietnamese partners as well as rising wage costs in China. And when it comes to alternatives in the ASEAN region, German firms choose Vietnam first.  Companies that increase investment in Vietnam despite Covid-19 pandemic: tesa - German company- begins building 55 million Euro plant at DEEP C Industrial Zones Vietnam in Hai Phong. This manufacturing site will employ about 140 employees. SOP is slated for 2023. The brand and the company belong to the Beiersdorf conglomerate which is listed in the DAX-30 index.