GERMAN INVESTORS CONTINUE TO BET ON THE VIETNAMESE MARKET

Vietnam has emerged as a potential investment destination for German companies, who are increasing their presence in the country.

On November 21, the results of the AHK World Business Outlook Fall 2023 survey were unveiled, providing valuable insights into the perspectives of German investors around the world and in Vietnam. The survey, conducted from September 25 to October 20, focused on assessing the business situation, expectations, investment activities, and associated risks faced by German companies operating in Vietnam.

Over the past 10 months, Germany has taken a bold step in further solidifying its presence in Vietnam. A total of 26 foreign-led projects have been initiated, representing a combined investment of nearly $221.5 million. This not only reflects the confidence of German companies in the Vietnamese market, but also positions Vietnam as a promising destination for those seeking to diversify their interests in Asia.

As Vietnam continues to showcase its potential as a robust and strategic investment location, the survey results indicate a positive trajectory from German businesses looking to implement the China+1 strategy – with an emphasis on new green investments. The Vietnamese market stands ready to welcome and support such ventures, offering a platform for growth, diversification, and sustainable business practices.

According to the survey, when it comes to investment plans, 42 per cent of German companies in Vietnam prioritise diversifying their production and manufacturing, indicating a strategic focus on varied production capabilities. Sales and marketing (41 per cent), services (35 per cent), and logistics (31 per cent) closely follow, underscoring a comprehensive approach to business development.

The survey highlights the influence of the factors that shape local investments, with half recognising the growth potential of the Vietnamese market as a pivotal consideration. Customer proximity and localisation follows closely at 43 per cent, underlining a keen interest in aligning strategies with local dynamics. Skilled labour availability is also crucial, with 37 per cent stressing the essential role of a well-qualified workforce.

However, German companies in Vietnam encounter significant challenges, with 49 per cent identifying the substantial issue of low global demand as a primary hurdle. The challenge of skill shortages closely follows, with 41 per cent of respondents expressing concern, along with potential disruptions in the supply chain at 37 per cent. Other notable risks include economic policy (24 per cent), energy prices (24 per cent), and financing challenges (22 per cent).

German companies and companies with close ties to Germany are divided in their choices for international locations. By historical standards, inflation rates and commodity and energy prices are still high in some regions. In addition, the rise in interest rates, particularly in the Eurozone and the US, China's weakness on the demand side, and geopolitical risks are weighing on the business of globally active companies.

In Autumn 2023, German companies were less optimistic about the economic development of their international locations than they were in the Spring – according to the more than 3,600 companies surveyed.

The global economic slowdown and high-interest rates are reflected in companies' lower investment intentions. However, they are generally more expansionary at their international locations than in Germany, as a comparison between the figures in the AHK World Business Outlook and the DIHK economic survey show.

Source: VIR