Strengthening trade and investment ties

14:35 | 26/06/2017 MUTRAP Corner

(VEN) - Vietnam Economic News’ My Phung talked with Marko Walde, Chief Representative of German Industry and Commerce Vietnam (GIC/AHK Vietnam) about promising trade and investment relations between Vietnam and Germany as the two countries aim for bilateral trade of US$20 billion by 2020.

strengthening trade and investment ties
Former Federal Minister of Foreign Affairs and new President of the Federal Republic of Germany, Dr. Frank-Walter Steinmeier, visited Hanoi on October 31, 2016

How will the EU-Vietnam Free Trade Agreement (EUVFTA) benefit Vietnamese-German trade relations? What is extra effort required for both sides to reach of US$20 billion in bilateral trade by 2020?

As Germany is the largest national economy in Europe and German’s export market continues to be one of the largest in EU, this agreement is expected to boost bilateral trade and economic growth in both Vietnam and Germany over the coming years. EUVFTA will strengthen further the close ties between the two countries and create additional positive effects to our trade relation.

German and Vietnamese companies should be well prepared to take advantage of the EUVFTA. Companies from the both countries should search market information, understand customers’ need and their business styles of their potential customers, improve their trading competence and the quality of their products as well as diversify their product range on purpose of increasing the export volumes to the EU. Increasing competitiveness and modernizing production processes are important elements. Moreover, the right framework for the smoothly implementation of EUVFTA should be needed.

Trade volume between Germany and Vietnam (Billion USD)

2011

2012

2013

2014

2015

2016

Import from Germany

2.2

2.4

2.9

2.6

3.2

2.8

Export to Germany

3.4

4.1

4.7

5.2

5.7

6.0

Surplus

1.2

1.7

1.8

2.6

2.5

3.2

After the ASEAN Economic Community (AEC) was established at the end of 2015, the Association of Southeast Asian Nations (ASEAN) has become a more single market and all the import export duties will be reduced and eliminated for all ASEAN nations. Due to the transportation cost, German companies with their factories, for example in Thailand or the Philippines, will take advantage of this removal of tariff barriers to save the transportation cost and send their “made in Thailand or made in the Philippines” products directly to Vietnam, instead of delivering directly from Germany. Less and less we could not recognize the real bilateral trade relations between Vietnam and Germany in our statistics, as statistic figures (import export volume by country) refer normally to the total value of goods and services that imported or exported directly from and to this country.

strengthening trade and investment ties

Marko Walde, Chief Representative of GIC/AHK Vietnam

The Ministry of Industry and Trade of Vietnam and the Federal Ministry for Economic Affair of Germany signed a joint declaration for establishment of a Fast Tract System for businesses and investors of the two countries. Do you think this will help to attract more German companies to Vietnam due to the more favorable business climate?

Key objectives of the Fast Track System are to identify and solve problems faced by German companies and investors with their operations in Vietnam and Vietnamese companies and investors with their operations in Germany.

Apart from this, the Fast Track System will serve as a platform for discussing general suggestions from the point of view of German companies and investors with regard to the ease of doing business in Vietnam. The German Embassy in Vietnam, in close cooperation with us, German Industry and Commerce Vietnam and relevant ministries in Germany will present German side in this system.

We think that this one-stop-shop will facilitate the investment and business in Vietnam and in Germany as well. It should create the faster dialogue to the government in Vietnam and it will be one of our arguments to attract German investors to Vietnam.

Moreover, thanks to this system, German companies will trust in the legal and business framework in Vietnam, therefore the investment location of Vietnam will recreate higher confidence.

Germany has invested a total of US$1.4 billion in Vietnam through 271 foreign direct investment (FDI) projects.

What do you think is the new trend of investing in Vietnam for German companies in the years to come?

At the beginning, German investors engaged in the textile industry as the salary in Vietnam was low, at that time. Then German investment expanded into other sectors like metal processing and currently many suppliers in the automotive branch from Germany had their own factories in Vietnam. Vietnam is also attractive for research and development (R&D) activities in some sectors, such as software development. Based on an increasingly attractive business climate, and Vietnam’s recent and future free-trade agreements (FTA) with foreign partners, all industries in Vietnam should be potential for German companies. There is now a new trend where German companies are shifting part of their functions to Vietnam, as wages and labor costs are rising in China and Vietnam give an attractive complement to the Chinese market.

strengthening trade and investment ties

Could you tell more about the progress of founding the binational German Vietnamese Chamber of Commerce?

The basic idea of establishing our binational German - Vietnamese Chamber of Commerce is to create daily cooperation and daily business networking where German and Vietnamese companies could learn from each other and share experiences and know-how in different matters and issues, such as in production capacity, export, import, R&D activities, education and training, etc. It also plays an essential role in boosting support industries and making it more competitive to enter the global supply chain. German companies that are based in China and with the demand of developing a supply chain will go to Thailand rather than to Vietnam to invest, as they could not find suitable suppliers in Vietnam with international standards.

Vietnamese companies are not prepared to become qualified suppliers for foreign direct investors now. To increase their competence and their competitiveness to attract more foreign investment for Vietnam, we would establish the binational German Vietnamese Chamber of Commerce to create the exchange and daily cooperation opportunities. Such concept works very successfully in more than 80 countries.

Daily business networking means that Vietnamese companies have also the rights to be voted to the Managing board of the Chamber, to contribute actively to the organization and to create effective cooperation forms between German and Vietnamese companies, together with other German board members of this binational German Vietnamese Chamber of Commerce. Therefore, this binational chamber will create more advantages for Vietnamese companies.

My Phung