Majority of German firms set to continue with investment plans in Vietnam

8/4/2020| 11:02

Despite German businesses operating in Vietnam express their concerns about the negative impact of the novel coronavirus (COVID-19) on the nation's business situation, 72% of them will continue to pursue their investment plans, whilst 27% of them are poised to recruit additional employees.

The results from the annual Global German Business Confidence Survey were published by the Delegate of the German Industry and Commerce in Vietnam (GIC/AHK Vietnam).

GIC/AHK Vietnam distributed the survey among German investors and businesses based in the country from a range of different sectors, including industry-construction, making up 41%, services 50%, and commerce 36% of the total.

The remainder of the year is expected to pose challenges for the global economy due to the wide spread of the COVID-19 pandemic in recent weeks and its unpredictable nature.

Although the Vietnamese government promptly responded to prevent the spread of the virus, its impact on all socio-economic life, as well as on the investment climate of German businesses, has still been felt.

Indeed, the survey reveals that 43% of German businesses feel that the COVID-19 has impacted on the development of the Vietnamese economy in spite of impressive annual growth and a range of strengths.

One out of five respondents affirmed their belief that the country will be able to revive the economy and continue its forward development momentum in the medium term.

In response to the global spread of the epidemic, the government of Vietnam has been implementing bailout packages aimed at helping businesses get through the ongoing crisis.

With bailout packages set to be provided for enterprises swiftly, many respondents expect the economy to bounce back soon and continue to record growth in the near future.

Elsewhere, 14% of German businesses believe that their business performance this year will be worse than the figures posted last year. Slightly more optimistic were 59% of respondents, who expect to match 2019’s performance.

Despite this, only 27% of German firms are optimistic about 2020’s business development in comparison to that of 2019, with the index showing that 77% were optimistic when asked last year.

Compared with the average indicators assessed by German businesses and investors in Southeast Asia, the country’s indicators remain higher, outlining the optimism that German enterprises have about their future development in the nation.

9% of businesses estimate revenue will fall by over 50%

One notable aspect of this year’s survey is that the majority of German firms are significantly lowering their financial goals.

According to the results, 82% of them have seen simultaneous reductions to their sales due to the COVID-19, with 9% confirming that their revenue is set to drop by over 50% and more than 63% stating that their revenue will decline by between 10% and 50%.

The majority of German firms based in the country are already beginning to feel and experience the effects of the disease on their businesses with 86% of firms noting that temporary travel restrictions have greatly affected their situation. A total of 59% of respondents indicated that the disease has disrupted their supply chains.

Moreover, 55% of German enterprises have faced cancelations, with 50% of them being forced to indefinitely postpone their new investment plans as a result of the epidemic escalating.

High hopes on EVFTA

A positive feature of the survey was 72% of firms stating their intentions to continue their investment schemes in the country, with 27% of them drawing up plans to recruit more people to their workforce.

This shows the superb efforts being put in to improve the investment environment by the Vietnamese government, in addition to the positive effects of free trade agreements, especially the Europe-Vietnam Free Trade Agreement (EVFTA).

When the EVFTA comes into full force it is expected to serve as a lever to help the country’s economy rebound and return to its current growth rate, therefore attracting more major investors from Europe and Germany in both the medium and long term.

Market demand and economic policy are seen as the main challenges for the further development of German enterprises when operating in the nation moving forward.

According to the survey results, 68% of German firms believe that the COVID-19 pandemic will drastically reduce market demand, thereby leading to great losses for them in their Vietnamese investments.

The survey reveals that 59% of them think that the country’s economic policy will pose a challenge to their business development plans over the next 12 months.

Matters regarding finance, infrastructure, and a shortage of high-skilled workers also remain causes for concern among German businesses in the medium term.