AHK World Business Outlook - Fall 2023: Vietnam Focus

Ho Chi Minh City (November 21, 2023) – 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:

Introduction

With regard to 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 course of the year. 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 skills 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. 

German Investment in Vietnam 

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. 

About AHK World Business Outlook Survey (AHK WBO)

The AHK World Business Outlook is based on a regular DIHK survey of member companies of the German Chambers of Commerce Abroad, Delegations and Representative Offices (AHKs). In fall 2023, it collected feedback from more than 3,600 German companies, branches and subsidiaries worldwide, as well as companies with close ties to Germany. Thanks to the active participation of German companies in Vietnam and worldwide, AHK WBO is seen by leaders, decision-makers, entrepreneurs, media and business professionals globally and in Vietnam as a barometer of the business confidence among German companies and as a key indicator of German business situation, business expectation as well as economic expectations.  

Participants: 39 percent of the responding companies are from the industry and construction sector, 40 percent are from the service sector, 21 percent are from trading companies and the rest are from other sectors. Smaller companies with fewer than 100 employees account for 49 percent of the responses. 24 percent of businesses employ 100 to 1,000 people. Large companies with more than 1,000 employees worldwide account for 27 percent of respondents. 

Date: September 25 – October 20, 2023 

Delegation of the German Industry and Commerce in Vietnam (AHK Vietnam)

www.vietnam.ahk.de

The German Industry and Commerce in Vietnam is the representative office of the German Federal Ministry of Economy and Climate Change BMWK, with the function of supporting and promoting bilateral economic relations between Germany and Vietnam. Together with the diplomatic missions of the Federal Republic of Germany abroad (the Embassy of Germany and the Consulate), we represent the voice and interest of German businesses to the government, institutions, and departments in Vietnam. Since 1994, the German Industry and Commerce in Vietnam has actively promoted bilateral trade and investment activities between Germany and Vietnam.