Foreign direct investment (FDI) in Vietnam in 2024 is estimated to reach over 25.3 billion USD, an increase of 9.4% compared to the previous year and the highest level ever. Among this, German investment in Vietnam reached a record high, with more than 530 German enterprises operating, totaling 3.6 billion USD, despite the global economy still facing many challenges. This shows that FDI inflows into Vietnam are increasing, and the policies and investment environment for FDI investors are becoming more favorable.
🎙️ In a recent episode of “Capital and the World” on Hanoi Radio & Television Broadcasting, GBA Chairman Mr. Alexander Ziehe discussed the issues and stories of expanding investment by FDI enterprises in general and German investors in particular.
Explore the full interview (in Vietnamese) here>>> and below is the English script.
Question 1: Recently, Eurocham released a survey report showing that European business confidence in Vietnam is increasing. At the same time, the German Business Association also reported that German investment in Vietnam reached a record high, with more than 530 German enterprises operating, totaling 3.6 billion USD in 2024, despite the global economy still facing many challenges. This reflects the confidence of German businesses in the investment environment in Vietnam. What is your opinion on this?
Answer: European investors, particularly Germans, demonstrate a long-term investment orientation. They prioritize strategic importance and potential long-term growth over short-term results. This approach is evident in Vietnam, where numerous foreign direct investment (FDI) enterprises are keen to invest. Despite the challenges of 2023 and early 2024 during the post-COVID recovery, foreign businesses recognize Vietnam’s value as an investment destination due to its integration into the global supply chain. Additionally, the strong interest from the Vietnamese government and ongoing policy improvements create a more favorable environment for investors.
Question 2: In the context of many global difficulties, what are the important and favorable factors that German investors see in Hanoi as well as in Vietnam?
Answer: Hanoi’s network and transportation system, including the Hanoi-Hai Phong expressway, provide convenient connections with China. This robust infrastructure has positioned Hanoi, and Vietnam as a whole, as a strategic center for manufacturers needing parts supply from China. Additionally, many businesses are interested in manufacturing in Vietnam for global export.
Vietnam’s success in integrating into the regional and global supply chain is evident. Regional centers like Singapore, Jakarta, Bangkok, and even smaller markets like Laos and Cambodia are close to Vietnam, fostering a regional production strategy and market connectivity. This proximity helps Vietnam become a business hub in ASEAN.
Vietnam boasts a diverse industrial infrastructure, aiding construction and positioning it as a central player regionally and globally. With a population of about 100 million, many of whom are young, dynamic, and eager to learn, Vietnam’s workforce is seen as dynamic, hardworking, and skilled. This is crucial for companies relying on local human resources.
Politically, Vietnam has strong global partnerships and numerous free trade agreements with key countries and regions. Political stability further enhances Vietnam’s attractiveness compared to other destinations.
The foreign business community in Vietnam feels welcomed and is encouraged to provide suggestions for improvement. In summary, the combination of stability, strategic location, and skilled human resources makes Vietnam an ideal destination for FDI businesses.
Question 3: Regarding risks and challenges, many FDI enterprises, including German companies, believe that in the Vietnamese market, factors such as the cost of input materials and fierce competition from local businesses are currently challenges for many FDI enterprises. What is your opinion on this? How are these factors affecting foreign investors in Vietnam, including German companies?
Answer: Vietnam is still in the development stage, necessitating many improvements along the way. This is quite normal, and we advocate for fair competition.
Currently, new infrastructure and highways are being constructed, which is very positive. However, there are still bottlenecks in accessing port areas, and some industrial zones lack adequate infrastructure. Additionally, the new airport needs to become operational to handle international flights efficiently if Vietnam aims to be an international business hub. Infrastructure, particularly electricity and data centers, is also crucial.
To attract FDI in the high-tech sector, it is essential to have a stable power grid and robust data center infrastructure, enabling technology companies to develop and choose Vietnam as a hub.
Administrative procedures remain a barrier, although we appreciate the Government’s efforts to promote and reform them. Another important factor is the domestic market.
Stable politics and ongoing administrative reforms are key factors that attract FDI flows into Vietnam.
Question 4: What is the investment strategy of German enterprises in Vietnam in the near future? Which fields do German enterprises have strengths in and will promote investment in Vietnam in the near future?
Answer: The reduction of administrative procedures in Vietnam will boost the confidence of new potential businesses looking to invest in the country. This streamlining will create a solid foundation for foreign investors. Recently, the Prime Minister of Vietnam announced the establishment of an international financial center, which has garnered significant interest from many German companies. Germany, known for its prominent financial firms in insurance and banking, is keen to establish a dedicated center in Vietnam.
Many foreign companies, including those from Germany, require more decentralized production centers to internationalize their products and export to various countries. Consequently, Vietnam is poised to become a crucial production hub, alongside traditional destinations like China. The Vietnamese Government has taken numerous actions to support this development, and there is a desire for further support from the private sector and other stakeholders in Vietnam.
Question 5: As a representative of the German business association, what are your expectations for Vietnam’s investment environment in 2025? What are the important points that FDI investors in general and German FDI in particular expect next year?
Answer:
The year 2023 was certainly challenging, and the beginning of 2024 does not appear very promising either. However, by the end of 2024, we have observed improvements in many areas, particularly in industrial exports, which brings a new level of confidence. We hope this will lead to success in 2025. Vietnam’s economic recovery is ongoing, which will help our members in the German Business Association in Vietnam continue to grow and choose Vietnam for their business strategies.
Personally, we believe that 2025 will be a successful year for many FDI businesses. However, some areas may experience a slower recovery. In the consumer and real estate sectors, there are still issues that the Vietnamese Government needs to address. The government must support businesses in these sectors to encourage production.
We expect that in 2025, the Vietnamese Government will achieve its goals regarding the administrative apparatus and the digitization of procedures, allowing more time for business and production instead of paperwork. We believe in the Vietnamese Government’s direction and the improvement of administrative procedures and apparatus, making Vietnam an increasingly ideal destination for foreign investors in the ASEAN region and the world.
Currently, many other countries in the region have competitive policies against Vietnam. Therefore, Vietnam should focus on policies to truly stand out and surpass the competition in attracting FDI projects, becoming the most attractive destination in the region.