Despite COVID-19, German companies hell-bent on investing in Vietnam
Despite COVID-19, German companies hell-bent on investing in Vietnam
German companies are understandably concerned about the effects of coronavirus on their business in Vietnam but remain optimistic with 72 per cent of German companies intending to keep investing in Vietnam, according to the AHK World Business Outlook Survey.
Despite concerns about the effect of the coronavirus on businesses, German firms are still optimistic and have higher expectations for the Vietnamese market
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Accordingly, German companies’ revenue expectations dropped significantly due to the coronavirus. The survey shows that 82 per cent report adjusting revenue targets downward because of the epidemic. 9 per cent have serious problems and expect a significant decline of more than 50 per cent. 63 per cent calculated with a loss of 10-50 per cent.
Almost all German companies in Vietnam have already got a taste of how the epidemic would affect their business activities since the coronavirus broke out. They have been feeling the initial impacts, especially because of the travel restrictions (86 per cent). 59 per cent of German companies reported that coronavirus has disrupted their supply chains while 55 per cent are experiencing cancellations of contracts and 50 per cent are rescheduling new investment plans due to the outbreak of coronavirus.
Despite the challenges, over 70 per cent of German companies in Vietnam stay committed to investing in the country and 27 per cent assume an increase in future employment. As a result of the Vietnamese government's commitment to creating the most favourable conditions for foreign investors and businesses as well as the upcoming FTA between the EU and Vietnam (which will probably come into effect this summer) economic growth will be boosted and more investors will be attracted to Vietnam.
German companies expect the EU-Vietnam Free Trade Agreement (EVFTA) and Investment Promotion Agreement (EVIPA) to improve the business climate in Vietnam in the long run. They could enjoy investment protection with trade facilitation and increase investment in Vietnam. For the mid-term, there will be many FDI flows for high-value projects in Vietnam. German investors will bring their famous technology in management and training to the country, allow more value-added production, and reduce the waste of materials and resources.
However, German companies also express increasing concerns about demand and the economic policy framework this year. Many companies (68 per cent) think that they have taken a big hit in 2020 from the coronavirus with a major decrease in demand. 59 per cent of companies cite economic policy as one of the great factors of uncertainty for their businesses in 2020 in Vietnam. Other issues such as financing, infrastructure, and a lack of skilled workers might threaten their businesses here.
