Press Conference: AHK World Business Outlook 2019 took place on 20.06.2019

21.06.2019

Survey by the network of German Chambers of Commerce Abroad (AHKs).
The AHK World Business Outlook (AHK WBO) is based on a regular DIHK survey among member companies
of the German Chambers of Commerce Abroad, delegations and representative offices (AHK). Since 2015, it
encompasses the feedback from more than 3,500 German companies, branches and subsidiaries worldwide
and in Vietnam as well as international companies with close links to Germany.

Thanks to the active participation of German companies in Vietnam and wordwide, AHK WBO is seen by leaders, decision-makers, entrepreneurs , media and business professionals globally and in Vietnam as a barometer of the business confidence among German companies and as a key indicator of German business situation, business expectation as well as economic expectations.

Vietnam: 30% of respondents stemmed from industry and construction, 27% from the service sector and a further 43% from the retail trade. Small companies with less than 100 employees account for 42% of responses. 21% of the companies employ 100 to 1,000 employees. Large companies with more than 1,000 employees account for 37% of the respondents.

Positive economic climate and outlook of Vietnam

2018 was a successful year of Vietnam with a number of positive developments, such as the GDP growth (7.1 percent) or FDI disbursement (13 bn US$). Similar to FDI, import export turnover reached a new record high of 465 bn US$ with a export surplus of 13 bn US$. The Vietnamese government shows the commitment to support and create the most favourable conditions for foreign investors and businesses. In addition, a wide range of free trade agreements such as TPP11 (CPTPP – the comprehensive and progressive agreement for Trans-Pacific partnerships) 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. Experts have forecast the Vietnamese economy will continue to grow 7% this year thanks to export turnover and the drastic development of the manufacturing, processing, and service sectors as well as to the integration process into the world economy of Vietnam. While 52 percent had a positive view of the local economic development in 2018, 67 percent expects an improvement in April 2019. Half of the companies (51 percent) claim conditions regarding the economic policy framework to be the greatest risk for their businesses in Vietnam. 28 percent is afraid of disadvantages due to trade barrieres.

Positive view with business situation and expectation in Vietnam

German businesses operating in Vietnam assess both their own business situation and future business expectations significantly better than in 2018. 77 percent rate their current business situation in Vietnam as good and 3 percent as poor. While in 2018 only 56 percent had a positive view of their situation in Vietnam. The balance points increase from 52 points to 74 points. The great increase in business expectations is really surprising. While the positive ratings rise from 56 to 72 percent, the number of negative ratings fall from 4 to 0 percent. Accordingly, the balance climbs significantly from 52 to 72 point and achieve the high level of German business confidence in Vietnam.

Investment and employment intentions boom

55 percent of German companies in Vietnam intend to expand their activities in Vietnam and 59 percent assume an increase in employment.

Economy policy creates uncertainty in Vietnam

Concerning about the economic policy framework are increasing. After 44 percent in 2018, 51 percent of companies city economic policy as the greatest factor of uncertainty for their businesses in 2019 in Vietnam. Another issues such as lack of skilled workers as well as labour costs might threatn their businesses here.

Conclusion of RCEP (Regional Comprehensive Economic Partnership), 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 as well as the rule of law

Lack of skilled workers in Vietnam

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

German reputation in Vietnam

Germany and Vietnam have an excellent economic relations and German enjoys an outstanding reputation in Vietnam which is really unique in this form in the ASEAN region. 46 percent of German companies agree with that.

Recommendations

One of our concerns is how to 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. Therefore, businesses can easily develop together by taking advantages of experience and technological exchanges. A fact has shown that FDI businesses account for 73 percent of the export value and more than 50 percent of the overall industry outputs, while domestic businesses only produce a small amount of outputs, in both quantitative and qualitative, compared to FDI businesses.

Secondly, 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 sustainale development in the long run.

Last but not least, 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.