Viet Nam News speaks with Marko Walde, the chief representative of AHK Viet Nam / German Industry and Commerce Viet Nam, about investment flows from Germany into Viet Nam and trade between the two nations.
Tell us about the trade relations between Viet Nam and Germany. What are the major items traded by the two countries and how do you see future prospects?
Germany considers Viet Nam an important partner in ASEAN. Trade and economic exchanges between the two countries grew to US$7.7 billion in 2013 (18 per cent higher than in 2012), with Vietnamese exports to Germany growing by 15 per cent. Top products exported from Germany are machinery, transport equipment, pharmaceutical products, chemical products, and vehicles. Major items imported to Germany are telephones, textiles, footwear, and seafood. We are very optimistic when looking at the future with the signing of the Free Trade Agreement between EU and Viet Nam.
What are the most attractive sectors for investment in Viet Nam for German investors?
German foreign direct investment (FDI) in Viet Nam surpassed $1 billion. [There are] more than 270 German companies in Viet Nam, which are creating jobs. The most attractive sectors are manufacturing, technology, IT, construction, education, and finance.
Germany is also keen to invest in hi-tech industries and sectors like rural development, green technologies, renewable energies, and smart engineering solutions as well as in education and training.
The Vietnamese consumer market is highly promising, yet German wholesaler Metro sold its business to a Thai company. What do you think of this?
The Vietnamese market has big potential. That is why Metro has been investing intensively in this market for the past 12 years. The wholesaler has developed a modern supply chain, providing direct market access for local farmers and producers and ensuring supply for traditional traders, with up to 90 per cent of goods being locally produced. The company decided to transfer its business in Viet Nam as the company believes that the new owner will be able to build on the existing core competencies and is willing to commit to further expansion, thus taking the business to the next level in a manner that Metro was not planning in the mid-term perspective due to a reprioritisation of objectives.
Some fear that the Metro sell-off shows German investors' reluctance to invest in Viet Nam, especially its retail market. Does it have a basis in truth?
I believe that Metro in Viet Nam is a success story. They have become the largest international player in the sector and have built 19 stores across 14 cities with nearly 1 million customers. The decision to invest or to exit is quite normal for any business, especially in the retail sector, which is characterised worldwide by acquisitions and reorganisations, especially in dynamic and emerging markets. At the same time we have many other German investors in various industries that continue to strengthen and expand their existing investments in Viet Nam massively.
|Customers at a German-owned distribution centre in HCM City. Retail is one of the many sectors in Viet Nam to have attracted German investments. — VNS Photo
What are the biggest obstacles that German companies face when investing in Viet Nam? Have these affected investment flows into the country?
According to our survey of German investors in Viet Nam in May 2014, lack of skilled labour, complex government policies, and bureaucracy remain the most significant hurdles for an engagement in Viet Nam. Other significant factors are import trade barriers (63 per cent), the existence of corruption (63 per cent), inflation (50 per cent), and the tax burden (46 per cent).
Potential investors need to take into account long-winded approval procedures. Unfortunately, Viet Nam is still far from a one-stop-shop (one approval covering the whole project), and recent foreign-financed projects have been delayed due to bureaucracy, sometimes for years.
What should the Vietnamese government do to attract more German FDI and develop bilateral trade?
Viet Nam should create a new investment incentive model that rewards investors and companies who are looking for sustainable growth and a long-term commitment. In terms of the future, Germany has the technologies, resources, and experience to deliver thriving services, industries, and socio-economic improvement.
German companies need a climate of mutual trust, a reliable legal framework for investment, and a transparent decision-making process from Vietnamese authorities.
One of the most important issues is to improve the qualification of the workforce to meet the demand of German companies and to meet German standards. Together with German investors in Viet Nam, German Industry and Commerce Viet Nam is now launching a German-Vietnamese vocational training programme with German qualification standards and giving students practice and experience on the job in order to set a base for a better trained and qualified workforce.
From November 20 to 22 the 14th Asia-Pacific Conference of German Businesses will be held in HCM City with many German companies participating. Can you tell us something about it?
The conference has been organised bi-annually in Asia since 1986 and has evolved into the largest German networking event in the region, attracting political as well as business leaders. The economies in the Asia-Pacific region combined are playing an ever more important role in global trade, as is their share in world population and GDP. During the two-day conference, some 750 participants will have ample opportunities to speak, listen, network, and contemplate concepts and solutions for a sustainable future. This year's conference theme is "Understanding Trends and Perspectives." The 14th edition of the Asia Pacific Conference of German Business 2014 will focus on industries and trends of the future, where co-operation between businesses in Germany and the Asia-Pacific can thrive. — VNS