Images: Freepik (pressfoto) Overview of GERMAN INVESTMENTS IN VIETNAM & THE LINKS WITH VIETNAMESE BUSINESSES Status: August 2022 Overview German Investments OVERVIEW – GERMAN INVESTMENTS IN VIETNAM GERMAN INVESTMENT OVER TIME 1988: FDI made legally possible 1992: First German investments of Bültel (Binh Duong) and Tatonka (HCMC) 60 No of invest projects p.a 1986: Vietnam officially starts reforming its economy with “Doi Moi” reforms 50 40 2007: WTO ascension leads to an increase in investments 2011: Angela Merkel visits Vietnam; start of “Strategic Partnership” 2020: The Free Trade Agreement between Vietnam and EU came into effect Today: Roughly 500 companies from Germany invested in Vietnam 30 20 10 2015: New enterprise and investment law makes foreign company foundation easier Definitions The data in this report represents local legal entities (LLCs, JVs etc.) as well as representative offices (RO) It not only reflects direct bilateral investments from Germany but also transactions from third-country subsidiaries of German companies to Vietnam A “company” is defined as a legal entity such as an LLC or an RO A company is “German” if it either has a mother company with headquarters in Germany or a German national as its main investor While we tried our best to research all German companies in Vietnam and to sort non-active companies out of public sources, we cannot guarantee for the accuracy of the numbers stated in this report OVERVIEW – GERMAN INVESTMENTS IN VIETNAM Centers of German Activity GERMAN INVEST FAST FACTS 2,000 Germans, most in HCMC 500 Hanoi – Haiphong Economic Corridor investment projects in Vietnam, over 50% in HCMC 81 manufacturing companies, predominantly in the Da Nang – Quang Nam – Quang Ngai Greater HCMC Region and Hanoi-Haiphong Corridor Phu Yen – Binh Dinh Roughly Over 50,000 jobs created by German investors 2.9 billion USD invested Images: flaticon.com (freepik, srip, DinosoftLabs, Pause09, smashicons), map from Openstreetmaps Greater HCMC Region OVERVIEW – GERMAN INVESTMENTS IN VIETNAM INVESTMENTS BY INDUSTRY 1/3 of investments with service background (see services, BPO, logistics) Because of low labor costs / high workforce quality companies have settled down in Vietnam 60 BPO 9% Industry and construction is expanding p.a luring in providers of building technologies, chemicals and machinery While traditionally apparel OEMs used to invest in Vietnam, the past years have seen textile suppliers also settling down OVERVIEW – GERMAN INVESTMENTS IN VIETNAM INVESTMENTS BY FUNCTION Sales/Service Entities by Industry Building Industry, Building Materials 10% Electronics 7% Machinery and Appliances 31% Medical Appliances, Healthcare 15% Chemicals 15% Logistics 15% Includes engineering companies (such as Fichtner) and building planners (such as InrosLackner) as well as QC companies (TÜV Rheinland/TÜV Süd) Sourcing offices partly for big German corporates (e.g Kaufland) or trading houses serving German retailers (e.g Delta-Sport) Programming and post-processing is mostly BPO e.g programming of websites and applications or post-processing of digital images (e.g Digi-Texx, Hella) Biggest sales operation led by Zott with 750 employees The company bought its local distributor in 2017 and is now serving the Vietnamese retail with products such as „Monte“ pudding INVESTMENTS BY REGION Number of Investment Projects by Province/City (Selection) HCMC 255 North 22% South 69% CENTER Center 9% Da Nang Others 74 Dong Nai 11 13 Binh Duong 16 Hanoi 69 Share of Investment Projects by Region NORTH OVERVIEW – GERMAN INVESTMENTS IN VIETNAM • First economic reforms in the 1980s/1990s have been rolled out here and led to cluster effects • Stronger economic development and higher GDP/capita leading to many companies starting sales/sourcing operations here • Perceived higher openness of population/business partners than in the rest of the country SOUTH Most German investments are located in Southern Vietnam/HCMC because of the following reasons: OVERVIEW – GERMAN INVESTMENTS IN VIETNAM SPOTLIGHT: GREATER HCMC REGION Greater HCMC Region comprised of provinces + HCMC Binh Duong German Invest Functions Greater HCMC Region Others Sourcing Dong Nai Most investments within 40 km of HCMC center Long An HCMC Region contributes ca to the national GDP echnical Consulting 40% GDP/capita (USD) 75% share of invests in Vietnam Sales Ser ice Programming Post Processing Manufacturing HCMC Image: Openstreetmap 78% share CMC Region Vietnam 57% share The HCMC megalopolis has about 16 million residents Population is growing by 6% p.a Image: Pixabay (Quangpraha) OVERVIEW – GERMAN INVESTMENTS IN VIETNAM SPOTLIGHT: GERMAN ITO IN VIETNAM* HCMC Da Nang *Selection of companies with evidence of operation (e.g running website) Hanoi Pictures by Pixabay (QuangPraha, Gamovn) OVERVIEW – BILATERAL INVESTS SPOTLIGHT: GERMAN M&A IN VIETNAM 165,000,000 USD ??? USD STD & S Co., Ltd Took over local distributor and integrated her into own VN LLC Turnover: EUR 4.5m in 2020, 13 employees Took over local distributor for better market access 30,000,000 USD Bought competitor to obtain key personnel Holds majority share of PetroVietnam Insurance Holds majority of 2nd largest local pharma generics producer Pymepharco 250,000,000 USD Delys Group Pictures by Pixabay (Gamovn) AHK World Business Outlook 2022 Spring - A barometer of the business confidence among German companies FACTORS THAT IMPACT BUSINESS ACTIVITIES IN VIETNAM 10 20 30 40 50 60 70 Political stability 76 Quality of education (non-technical fields) 63 Availability of qualified workers (non-… 56 Quality of education (technical fields) 50 Availability of qualified workers (technical… 46 Transportation and logistics 44 Legal predictability and certainty 44 Customs barriers to trade 36 Non-tariff barriers to trade 36 Inflation rate 29 Tax burden 25 Level / perception of corruption Access to finance 80 21 17 AHK World Business Outlook 2022 Spring - A barometer of the business confidence among German companies FACTORS INFLUENCING BUSINESS DEVELOPMENT 10 20 30 40 50 60 Cost of raw material Demand Financing Labour costs Economic policy Infrastructure Trade barriers/ Preference of domestic companies Legal certainty Exchange rate 80 75 Costs of energy, electricity and gas Lack of qualified workers 70 57 36 Images: Pixabay (Free-Photos) LOOKING INTO THE CRYSTAL BALL INVESTMENT TRENDS 28 LOOKING INTO THE CRYSTAL BALL DRIVERS FOR FUTURE INVESTMENT Open investment environment Global integration through FTA network 100% foreign subsidiary OK + CIT 20% + Dividend remittances tax free etc., etc Competitive labor costs / high workforce quality Stable government Shop floor wages USD 200 – 300 (roughly 1/3 of China) Geography (proximity to China/SEA) Soft factors (great food, weather etc.) Images: flaticon (freepik, Eucalyp, smashicons, Vectors market, Payungkead, Nhor Phai) LOOKING INTO THE CRYSTAL BALL DRIVERS FOR FUTURE INVESTMENT: CHINA +1 Companies re-orienting because: Rising labor costs Tripled over past ten years Sudden shocks e.g Copyrights issues, 2018: Environmental regulations, 2019: US-CN trade dispute, 2020: COVID-19, 2022: Prolonged COVID lockdowns – Zero COVID Strategy Diversification of supply routes To avoid cluster risks emanating from concentration on China Vietnam as an additional, not as an alternative location Images: Wikipedia, Freepik (macrovector, naulicreative), flaticon (freepik, swifticons) GERMAN COMMUNITY AND LINKS WITH VN BUSINESSES 31 GERMAN FDIs IN VIETNAM LINKAGES BETWEEN GERMAN FDIs and LOCAL COMPANIES STRONG SUPPLIER BASE ONLINE PORTAL FOR MATCHMAKING AND NETWORKING COMPLIANCE AND SUSTAINABILITY EDUCATION AND TRAINING 32 GERMAN DUAL VOCATIONAL TRAINING 40 28 INDUSTRIAL MECHANIC MECHATRONICS CHEF RESTAURANT SPECIALIST FREIGHT FORWARDING AND LOGISTICS AGENT INDUSTRIAL FASHION TAILOR (21 graduates in 2020) 24 DRAFTSMAN/ DRAFSWOMAN TOTAL NUMBER OF APPRENTICES 19 46 15 AUTOMOTIVE MECHATRONICS TECHNICIAN SPECIALIST IN THE GASTRONOMY SPECIALIST IN HOTEL BUSINESS (FROM 2023 ON) 28 NUMBER OF COMPLETED BATCHES IN ALL OCCUPATIONS 455 TOTAL NUMBER OF GRADUATES SOUTH 60 CENTER 280 12 25 NORTH EDUCATION AND TRAINING German Training Projects THANK YOU! www.vietnam.ahk.de We can support you! Images: flaticon (freepik), freepik (brgfx Looking for Investment Locations? Images: flaticon (freepik), freepik (brgfx Our Site Selection Services ✓ Research of locations ✓ Site evaluation ✓ On-site visits Further info: https://vietnam.ahk.de/en/services/inv estment-location-analysis/ Contact Delegation of German Industry and Commerce in Vietnam (AHK Vietnam) Phone: +84 (28) 3823 9775 Email: info@vietnam.ahk.de Website: www.vietnam.ahk.de Images: flaticon (freepik), freepik (brgfx) Successful Site Selection Projects by AHK Vietnam