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With pivotal FTAs due to take effect within the next two years, what sectors will attract German investment in the in- terim period? In the view of FTAs like the Trans-Pacific Partnership (TPP) and the EU-Vietnam Free Trade Agreement (EVFTA), and the establish- ment of the ASEAN Economic Community, we can expect high growth in investment from Germany to Vietnam, not only in the sectors like green tech- nology, and infrastructure, but also in education, sciences, as well as in healthcare and med- ical appliances. Germany’s principal ex- ports to Vietnam are machinery, motor vehicles, equipment, and chemical products. Vietnam has set its sights on becoming an in- dustrialised country by 2020. This means that the country will need more sophisticated production facilities, which is likely to translate into increased demand for machinery made in Germany. German food and drink ex- porters see Vietnam as an ideal export destination and an in- creasingly important market. In terms of absolute export value, milk products, baking seeds, malt, and potato products are the top four product categories. In the future, exports might in- crease further as Vietnam still cannot produce all of what it needs. Milk, for example, is in high demand in Vietnam, while there is an oversupply of milk products in Germany. What German firms are plan- ning to take advantage of the upcoming opportunities from FTAs? After the EVFTA takes ef- fect, nearly all customs duties – over 99 per cent of the tariffs – will be eliminated. Vietnam will liberalise 65 per cent of im- port duties on EU exports to Vietnam at “entry into force” and the remaining duties will be eliminated over the next ten years. The market will be opened for most EU food prod- ucts. Wine, spirits, and frozen pork meat will be liberalised after seven years, and dairy products within a maximum of five years. Furthermore, the agreement will contain an annex with provisions to ad- dress non-tariff barriers in the automotive sector. As Germany is the largest supplier of ad- vanced machines, equipment, and technology for the national industrialisation and moderni- sation of Vietnam, the German firms – as well as others within these sectors – are expecting to see growth opportunities in Vietnam and are eager to tap this potential. The FTA will also allow EU companies to bid for Viet- namese public contracts with bodies such as local ministries, state-owned enterprises, public hospitals, and the most lucra- tive contracts in Hanoi and Ho Chi Minh City. Furthermore, the Vietnamese market will be more open to EU service oper- ators. What does Vietnam need to do to lure more German in- vestors? German companies that have successfully tapped the potential of the Chinese market are now turning their attention towards other high-growth countries in the region, espe- cially ASEAN nations. Viet- nam will clearly play a role in this development, both due to the range and size of business opportunities, but also due to other ties such as the sizeable Vietnamese community in Ger- many. I am sure that German investment in Vietnam will continue to grow, especially in line with the further strengthen- ing of the legal framework. Currently, GBA has 192 members with growth rate of around 10 per cent each year. This figure is expected to in- crease in the future as more German companies are plan- ning to invest into Vietnam due to the lucrative benefits offered by a wide range of FTAs. From the government’s perspective, I would recom- mend that they first of all re- solve the difficulties relating to the taxation and customs mechanisms by removing un- necessary administrative for- malities which inconvenience enterprises. Also, duties and taxes arising from businesses’ negligible liabilities should be waived. Other outstanding is- sues include the annulment and unenforceability of arbi- tral awards in Vietnam, cer- tain trade restrictive measures in the field of import-export, burdens created for enter- prises in tax administration by the state authority, and espe- cially the corrosive and wide- spread corruption in Vietnam. These problems require stronger effort and urgent ac- tion by the government, build- ing upon the several attempts already made – which we re- ally appreciate.n Investing December 14-20, 2015 FTAs entice German investors This year marks the 40th anniversary of the Germany-Vietnam diplomatic relationship, and 20 years of the German Business Association (GBA) in Vietnam. The association’s chairman Jens Ruebbert spoke with VIR’s Thanh Van about the prospect of increasing German investment in Vietnam in light of the EU-Vietnam Free Trade Agreement and the Trans-Pacific Partnership deal, which are both expected to take effect in the next two years.
