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Successfully investing in Vietnam

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last updated on 27 May 2020 | reading time approx. 2 minutes

 

 

How do you assess the current economic situation in Vietnam?

Over the past 30 years, the Socialist Republic of Vietnam has experienced a remarkable economic development. The reforms under “Doi Moi”, initiated in 1986, have driven rapid economic growth and development, transforming Vietnam from one of the poorest countries in the world to a country with a steadily growing average income.
 
Since joining the World Trade Organisation (WTO) in 2007, the country's economic situation has continued to grow steadily and strongly – although the high growth rate has slightly decreased in 2011 and 2012. During the last few years, however, a clear economic upswing can be observed again. The investment index for the year 2019 (published by the European Chamber of Commerce) still exhibits an exceptionally investment-friendly level of 80 out of 100 points (Source: https://www.eurochamvn.org/bci). Vietnam scores particularly well as an interesting diversification option to China.
 

How would you describe the investment climate in Vietnam? Which sectors offer the largest potential?

Vietnam's economic focus is constantly getting more and more future-oriented. With its rapid and transparent investment transactions, the liberal market economy holds great potential for foreign investors, particularly in the fields of renewable energy, high-tech and IT (not least thanks to its tax-friendly policies). Vietnam offers a good basis for foreign investors due to its rapidly growing middle class and a high number of consumers. The focus on traditional agricultural and labor-intensive industries, such as textiles and timber, is still there, but is currently shifting.
 
Renewable energies are still very underdeveloped in Vietnam – a fact that has been recognised by the countries government which, also in this field, is trying to position itself more future-oriented. Vietnam should definitively be kept in mind in this area.
 

What challenges do German companies face during their business ventures into Vietnam?

German companies investing in Vietnam do actually face a number of challenges: From infrastructural problems, such as the underdeveloped road network, to severe corruption issues. Contradictory legislation and inefficient bureaucracy remain serious problems that Vietnam still has to manage.
 
Thanks to various free trade agreements, customs regulations have been significantly reduced. However, customs procedures still remain largely non-transparent. On the Transparency International Corruption Index, Vietnam just recently slipped further down and now ranks 117th, one of the lowest in the region. For foreign investors, however, it is possible to present all desired procedures in a transparent manner. Although, each schedule should allow sufficient time for complex processes.
 

What opportunities does the latent US trade conflict with China hold for Vietnam's economy?

Vietnam has continuously developed into an attractive diversification option to China. China's trade conflict with the United States is leading to increased tariffs across the board. Vietnam offers a more cost-efficient trade with the USA through a variety of free trade agreements. The liberal market entry and the fact that dependence on local partners is not mandatory in most areas results in a strong investment inflow.
 
Vietnam will not become a substitutional alternative to China in the future. But the country will continue to be seen as a valued diversification option. From a risk management point of view, dependence on China must be reduced, and Vietnam offers an opportunity to do so.
 

In your opinion, how will Vietnam develop?

Despite noticeable deficits in the areas of legislation, regulations, bureaucracy, corruption, internal processes and an average infrastructure, Vietnam continues to develop positively. Socialism continues to shape the countries stable political landscape, and the economic situation is flourishing. Remaining shortcomings are gradually being reduced in order to make the country even more attractive – especially for foreign investors.

 

Vietnam will continue to work hard on the development of its industry and towards the countries modernisation, effectiveness and sustainability, in order to generate a higher competitiveness as a stable basis of an industrialised nation. The political system is resilient and predictable. Adopted policy guidelines are pursued.

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