HO CHI MINH CITY – Today, the results of the AHK World Business Outlook Fall 2023 survey were unveiled, providing valuable insights into the perspectives of German investors worldwide and in Vietnam. The survey, conducted from September 25 to October 20, focused on assessing the business situation, expectations, investment activities, and associated risks faced by German companies operating in Vietnam.
Here are its key takeaways:
Concerning the development of the global economy, German companies and companies with close ties to Germany are divided at their international locations. According to their assessments, there is still no sign of a strong global upturn. The momentum in the global economy has slowed over the years. By historical standards, inflation rates and commodity and energy prices are still high in some regions.
In addition, the rise in interest rates, particularly in the Eurozone and the US, China’s weakness on the demand side, and geopolitical risks are weighing on the business of globally active companies. In fall 2023, German companies are less optimistic about economic development at their international locations than they were in spring – according to the more than 3,600 companies surveyed by the AHKs.
The global economic slowdown and high-interest rates are reflected in companies’ lower investment intentions. However, the investment intentions of companies at their international locations are still generally more expansionary than in Germany, as a comparison between the investment intentions in the AHK World Business Outlook and the DIHK economic survey shows.
Risks and Challenges
According to the survey, German companies in Vietnam encounter significant challenges, with 49 percent identifying the substantial issue of low global demand as a primary hurdle. The structural
challenge of skill shortages closely follows, with 41 percent of respondents expressing concern, along with potential disruptions in the supply chain at 37 percent. Other notable risks include economic policy (24 percent), energy prices (24 percent), and financing challenges (22 percent).
Investment Plans and Factors Shaping Local Investments
When it comes to investment plans, the survey reveals that 42 percent of German companies in Vietnam prioritize diversifying production and manufacturing, indicating a strategic focus on varied production capabilities. Sales and marketing (41 percent), services (35 percent), and logistics (31 percent) closely follow, underscoring a comprehensive approach to business development.
The survey emphasizes the influence of factors shaping local investments, with 50 percent recognizing the growth potential of the Vietnamese market as a pivotal consideration. Customer proximity/localization follows closely at 43 percent, highlighting a keen interest in aligning strategies with local dynamics. Skilled labor availability is also crucial, with 37 percent emphasizing the essential role of a qualified workforce.
Over the past 10 months, Germany has taken a bold step in further solidifying its presence in Vietnam. A total of 26 Foreign Direct Investment (FDI) projects have been initiated, representing a combined investment of nearly $221.5 million. This not only reflects the confidence of German companies in the Vietnamese market but also positions Vietnam as a promising destination for those seeking to diversify their interests in Asia.
As Vietnam continues to showcase its potential as a robust and strategic investment location, the survey results indicate a positive trajectory for German businesses looking to implement the “China plus one” strategy, with an emphasis on new green investments. The Vietnamese market stands ready to welcome and support such ventures, offering a platform for growth, diversification, and sustainable business practices.