Advantages and disadvantages of attracting FDI from Germany in Viet Nam
According to KPMG - one of the largest auditing companies in the world, with a gross domestic product (GDP) of 4,186 billion Euros in 2023, Germany is the third largest economy in the world after the United States and China, becoming the largest economy in Europe. In order to continuously expand the scale of the economy, data from the German Federal Bank shows that in 2023, German enterprises invested about 75 billion Euros worldwide, of which capital flows to Asia were strongly promoted. Therefore, Viet Nam is having the opportunity to capture foreign investment flows from Germany in the coming time.
On the basis of establishing a strategic partnership, the friendly cooperation between Viet Nam and Germany has achieved many positive results in recent times. The two countries have signed many agreements such as cultural cooperation, investment encouragement and protection, maritime and aviation cooperation, etc. In terms of economy, trade and investment, Germany continues to be Vietnam's largest trading partner in the EU and one of the EU's largest investors in Vietnam. Trade turnover between the two countries reached over 11 billion USD in 2023; Germany's investment in Vietnam ranked 17th out of 143 countries and territories investing in Vietnam with 463 projects, reaching nearly 2.7 billion USD. Recently, two German enterprises, Ziehl-Abegg and Kärcher, attracted attention when implementing investment activities in Viet Nam. Among them, Ziehl-Abegg is a world-leading company in ventilation technology, control technology and motors.
In his speech at the Germany - Viet Nam Business Forum for Green Growth Cooperation last month, Mr. Alexander Ziehe, Chairman of the German Business Association in Viet Nam (GBA), shared that in the past, Germany focused its FDI capital on countries in the Southeast Asian region including Singapore, Thailand and Malaysia. The reason is that these countries all have long-established German industrial groups, such as the automotive industry in Thailand and research and development centers in Singapore. However, in recent years, this trend has gradually changed as Viet Nam is considered an increasingly attractive investment destination. Because the Vietnamese market has lower input costs, a favorable geographical location and a supply chain close to China and other major markets. Vietnam is also attractive to German investors because of its growing middle-class consumer market. This also proves that German businesses are increasingly confident in the Vietnamese market as an emerging strategic center of the global supply chain in industrial production and innovation.
Ziehl-Abegg's new factory in Dong Nai province (Photo: internet)
However, according to Mr. Alexander Ziehe: “Viet Nam offers German businesses many attractive opportunities, but adapting well to the legal framework is not easy. Therefore, we need to work with local agencies to continue simplifying procedures, creating a more transparent environment for foreign investors”. In addition, the lack of synchronous infrastructure planning is also one of the challenges for German businesses. Although infrastructure in Viet Nam has been greatly improved, there are still many points that need more attention, including the transport and logistics network.
What should Da Nang City do to promote FDI attraction from Germany?
In Da Nang, as of the end of the first 6 months of 2024, Germany had 11 valid projects with an investment capital of 10.3 million USD. In 2023, the export and import turnover between Da Nang and the German market reached 27 million USD and 20 million USD, respectively. The number of German tourists to Da Nang city in 2023 reached nearly 19 thousand.
For 3 consecutive years from 2022 to 2024, the city has organized investment promotion delegations in Germany. Many German political delegations have also come to work in Da Nang. In 2023, a working delegation from the state of Thuringia led by the state's Prime Minister visited and worked in Da Nang city with the participation of more than 80 members, including 54 accompanying economic and scientific delegations and organizations. Many enterprises and organizations have expressed their desire to connect investment and trade in the city. On that basis, during the working trip of the leaders of Da Nang city to Thuringen state last May, Da Nang city and Thuringen state signed a Memorandum of Understanding to establish a cooperative and friendly relationship.
Da Nang City signs MOU with Thuringia State (Photo: internet)
The Oktober Festival organized by the German Business Association in Viet Nam (GBA Vietnam) in Da Nang for two consecutive years in 2023 and 2024 attracted many participants. Within the framework of the 2024 Festival, the Investment Promotion Agency has organized additional investment promotion activities.
Based on the fact that more and more German investors are interested in and surveying investment in Da Nang city, the Investment Promotion Agency has signed a Memorandum of Understanding on investment promotion with the Economic Development Agency of Bremen State in 2022 and the German Business Association in Viet Nam (GBA Vietnam) in 2023.
It can be assessed that there is still a lot of room for Da Nang city to promote investment in the German market because this is a market with great potential to attract semiconductor, high technology, 4.0 technology, maritime, supporting industries, etc that the city is focusing on calling for investment in the coming time.
The Investment Promotion Agency will promote investment promotion activities with this market through organizing investment promotion delegations in Germany, direct or online investment promotion seminars with potential partners.
In addition, to improve the effectiveness of promoting the city's image and investment environment, it is necessary to focus on:
- Promoting the attraction of green economic sectors, committing to sustainable production that German investors are pursuing.
- Promoting the work of accompanying and promptly supporting businesses in investment procedures; moving towards simplifying procedures for investors to increase competitive advantages.
- Strengthening connections with Vietnamese diplomatic agencies abroad to receive effective support in investment promotion activities abroad in particular and trade, tourism and economic diplomacy promotion activities in general.
- Further promoting economic diplomacy to indirectly promote investment promotion (through city-level cooperation commitments).
- Supporting information, encouraging suitable businesses to participate in the investment promotion delegation of Da Nang city to connect businesses (B2B), improving the effectiveness of investment and business promotion in the city.
- In particular, it is necessary to enhance the role of people-to-people diplomacy channels such as the Viet Nam - Germany Friendship Association to connect the people of both sides, calling on Vietnamese expatriates in Germany to return to their homeland to invest and do business, as well as calling on German businessmen to come and learn about the business and investment environment in Da Nang.
IPA Da Nang
