Stable politics, transparent policies, technological innovation, abundant labor, and increasingly improved infrastructure are important factors that make Hanoi in particular and Vietnam in general become a potential investment destination for German FDI investors.
In recent years, Vietnam has increasingly attracted many foreign investors, in which Hanoi is one of the leading localities in the country in attracting FDI capital, especially investors from Germany. With fields such as manufacturing machinery, components, logistics, energy, and more, FDI enterprises from Germany have been contributing to the economic development of Hanoi in particular and Vietnam in general.
According to a survey by the German Chamber of Commerce and Industry, in the first 10 months of 2023, German businesses have made a strong step forward in consolidating their presence in the Vietnamese market, with 26 investment projects having been implemented. With a total investment capital of nearly 221.5 million USD, Vietnam is considered a potential investment destination for German businesses.
With such high appreciation from German businesses, are there still any bottlenecks in attracting FDI investment in Vietnam in general and Germany in particular? What policies have been and are really effective and what are the factors that FDI enterprises expect and wish to remove to make it more convenient for German FDI enterprises to invest in Vietnam?
In a recent interview with the Hanoi Radio & Television Broadcasting, the GBA Co-Chairman Mr. Torben Minko discussed the topic of “Vietnam: potential market for German FDI”. He gave his perspective on the benefits and difficulties of doing business in Vietnam, particularly in Hanoi, where many German #FDI companies are active in various fields such as machinery, logistics, energy, etc. He also emphasized the success and impact of German FDI companies on the economic growth of Hanoi and Vietnam. Mr. Minko commended the Vietnamese government for its efforts and policies to foster a conducive business climate and lure more foreign investors. He also recommended some areas for enhancement and collaboration, such as infrastructure, human resources, legal framework, and market access. He expressed his optimism and confidence in the future of Vietnam-Germany economic relations and the potential of Vietnam as a destination for German FDI.
Watch the full interview here>>> (in Vietnamese)
Question 1: Recent reports have shown that Hanoi has become a destination for many FDI enterprises, including German enterprises. How do you evaluate this?
Torben Minko: I believe that Hanoi in particular and Vietnam in general are the top investment destinations at this time, especially when we look at the very difficult world situation. The Vietnam investment destination offers stability. Of course, Vietnam’s favorable location, especially its proximity to China, attracts many investors who are leaving the Chinese market. For German investors, Hanoi and Vietnam are appealing destinations. As they diversify their investment portfolios, Vietnam offers them an opportunity to find stability and a good investment environment. I think Vietnam can meet their expectations.
Question 2: As you just shared, it can be seen that Hanoi and Vietnam have become destinations for many FDI enterprises. How long has your business been present in Vietnam and what makes German businesses feel satisfied and choose Vietnam as a destination to invest and expand their market?
Torben Minko: What are Vietnam’s strengths in Southeast Asia today, sir? Guest 2: B.Braun Company has been operating in Vietnam for more than 30 years. We started to establish a representative office here in 1992 in Ho Chi Minh City. Now, after more than 30 years, we are one of the largest German investors in Vietnam. We are certainly one of the largest pharmaceutical and medical equipment companies in Vietnam, producing pharmaceuticals and medical equipment for the local market and also for export. From the beginning, Vietnam was one of the main markets for us in terms of sales, but gradually we saw the potential to build a production base in Hanoi and boost export activities in the past few years. In total, we invested about 150 million USD and we also want to invest more. We plan to double our investment in the next 3 to 4 years. We have about 1,600 employees working for B.Braun in Hanoi. We also aim to double that number, especially to serve our export activities. Vietnam and specifically Hanoi are an important part of our pharmaceutical and medical equipment supply chain to the world. Looking back at the past, we see that there have been many very good changes. For example, infrastructure, education, as well as administrative procedures. Since 1992, there have been many positive changes, so we believe that Vietnam’s investment destination, especially Hanoi, will continue to be our destination in the future.
Question 3: The capital city of Hanoi is one of the leading localities in attracting FDI. Besides the advantages for Hanoi to attract FDI, what are the current bottlenecks that German businesses face in Hanoi? Is there any improvement in FDI investment?
Torben Minko: In general, Hanoi is the top destination, as I said. There are several reasons for this. First, Hanoi is very close to China, which is an advantage. Roads and traffic are getting better. In addition, China and Vietnam also have direct trade relations. Second, Hanoi is also very close to the sea. All goods produced in Hanoi or around the city can be easily transported to Hai Phong and to deep-water ports from there to be shipped around the world. So I think, from a location perspective, that’s a big plus. Another reason is that Hanoi, as the capital of Vietnam, benefits in terms of infrastructure. Hanoi has universities, high schools, a workforce and a population of 8 to 9 million people living and working in Hanoi. All of those factors are considered when we look for investment locations. When companies make their decisions, they look at those factors. And I find everything in Hanoi suitable. That is the reason why not only our company but also German companies in general consider investing in Hanoi. Of course, there are always elements that need to be improved. The same goes for investment destination Hanoi. We believe that the infrastructure can be improved further. Not just in Hanoi but in general. Investing in infrastructure is an important part. It is also clear that Hanoi and the areas surrounding Hanoi need to invest in education. Education is the key. If you want to attract high-quality investment, research and development projects, and production, you need to invest in education. Thus, education is also an important part. Last but not least, we also look at administrative procedures, especially in Hanoi. When investors come in, they need to go through procedures quickly. We cannot wait too long. We would like to see some easier and smoother administrative procedures, which will attract investors to invest and stay.
Question 4: That’s with Hanoi. So what about Vietnam? In your opinion, what are the difficulties and challenges for German businesses in general and your business when investing in Vietnam?
Torben Minko: As I said, Vietnam is currently the top destination for investors. Companies around the world, especially German companies, are looking to diversify. Vietnam is definitely one of the best options. There are opportunities in Vietnam that German businesses are exploring. First of all, it is an attractive destination. It has a young generation and an attractive market. On the other hand, when consultants come, they not only look at the local market but also see, for example, how to set up a production facility and what Hanoi and Vietnam can offer in return. Another indispensable part is green energy. This is driven primarily by customer demand. They look for sustainable products produced in good environments. Therefore, it is important now and in the future that companies find green energy sources. That is the main factor for companies to still choose Vietnam as a destination in the future. If that is not met, it will be difficult to attract high-quality investment and export to the Western world, such as Europe, where customers demand products to be manufactured under stable conditions.
Question 5: For an FDI enterprise to choose to invest in a locality or country, in your opinion, what are the prerequisite and important factors, sir?
Torben Minko: Yes. Mainly, if German companies look for somewhere in the world to invest, they obviously look for a stable place. That is definitely something that Vietnam can offer them. Companies also look for tax incentives or any other incentives. The third thing is labor. There needs to be a ready workforce. Fourth is infrastructure. Infrastructure needs to be in place. That is also what Vietnam can provide. And last but not least, green energy, green transition and everything related to sustainable development need to be addressed now and be available in the future.
Question 6: Germany is one of the developed countries and many global businesses have been present in Germany for many years. So can you share about Germany’s policies in attracting FDI investment? And how effective have those policies been in attracting FDI to Germany, sir?
Torben Minko: If we look at the macroeconomic situation, I would say that the situation in Vietnam is better than in Germany and everywhere else in the world. Inflation is well controlled. GDP grew quite well. If we look at Germany, we see that inflation is much higher, GDP is much lower. Even Germany today has to think about how to attract new FDI. Finally, from a political point of view, Germany, Western countries, and Europe are moving towards sustainability, sustainable solutions, and sustainable production. That also affects all FDI to Germany. If you want to invest in Germany, then you must comply with this regulation. Similarly, when foreigners want to invest in Vietnam, they must comply with sustainability regulations. When you have all that, Germany is also a good place to invest.
Question 7: According to you, what kind of support do FDI enterprises need from localities like Hanoi to be able to expand their investment and develop in the long term?
Torben Minko: When we look at the Vietnamese market, as I said before, there are some things that need to be improved. That does not mean that the current situation is bad, it is already good but it can be better. Specifically, the infrastructure, not only the infrastructure in the city but also outside the city. For example, the transportation from Hanoi to Ho Chi Minh City and Da Nang, or the transportation to foreign countries to Europe, America. Transportation plays a crucial role especially when there are countless projects coming. If foreign direct investment increases by an average of 10% per year, then infrastructure must also go along. The next part is that the government should consider digitalization. Digitalization means that everything we need must be simpler, easier. We can see that there have been many achievements. The key in the future is still to make the process easier and smoother. The administrative procedures are the same. Digitalization can be improved further. And last but not least, we need more vocational training, we need skilled workers, who can do the job. If Vietnam wants to become a destination for long-term investment, then it needs to invest in people, so that it can become a destination for long-term investment.
The German Chamber of Industry and Commerce in Vietnam (AHK) surveyed 450 German enterprises in Vietnam and found that 93% plan to invest more and 64% expect better business in the next year. 36% are satisfied with their development and 73% believe they can increase their competitiveness in the Vietnamese market. Vietnam has emerged as a producer of electronic goods and a consumer of German products, such as cars and chemicals. The bilateral trade volume reached 18 billion euros in 2022, making Germany the most important EU partner and Vietnam the largest ASEAN partner for each other. Vietnam offers many opportunities for German companies, with a dynamic market, a developed infrastructure, a renewable energy sector, and a stable political system. The EVFTA has also improved the position of German companies in Vietnam. Vietnam is also attractive for Germany in terms of geopolitics, as many countries have set up production bases there. However, Vietnam still needs to improve some aspects to attract more FDI investors, including German ones.