Mr. Marko Walde, chief representative of the German Industry and Commerce Vietnam (AHK Vietnam), shared his thoughts with BizLIVE about the local investment climate and proposed what the government should do to improve it.
What do you think about Vietnam’s business environment?
Basically, investment conditions for foreign and also German companies in Vietnam are quite good. If a German company looks for investment locations in ASEAN
, of course it compares different countries, for example Vietnam, Thailand and Indonesia. And Vietnam is already in a very good position.
At the end of the day, we have two challenges. The first is the supply chain. We don’t have a suitable and well-developed supply chain yet in Vietnam. And the second thing is the workforce.
If you want to implement production processes, you need not only equipment but also people who are able to operate the equipment. Therefore, you have to educate people, such as industrial mechanics and mechatronics.
How do German businesses view Vietnam?
Right now we see a lot of German companies that invested 10 or 15 years ago in China now are looking to ASEAN to enlarge their investments in the region and outside of China to diversify their engagement in Asia.
Basically German companies do invest in Vietnam. In some special cases, for example the automotive sector, if they need a developed supply chain, these companies go to Thailand. The same is seen in the hi-tech and medical segments. The companies often go to Singapore or Malaysia because those countries have a suitable environment for this.
In general, Vietnam is always a very attractive investment destination for such German companies.
What difficulties do German companies face when investing in Vietnam?
Setting up a company in Vietnam has become very easy and fast. But if you want to change anything, such as enlarging your business goal and selling products in Vietnam, you will have to obtain additional licenses.
Or when you need to educate people, in cooperation with other Asian or German companies, then you need another license for this. This makes all the processes sometimes very slow. There are actually no reasons anymore to have such red tape requirements in Vietnam.
Which sectors should Vietnamese companies focus when they want to penetrate Germany and the EU?
We have right now in Germany two big Vietnamese investments which are made by FPT
Corp and VietinBank with two branches. For the software, BPO and IT companies, Germany is a very attractive location.
Secondly, agriculture and agricultural produce sector offer great potential. Vietnam is the world’s second largest coffee exporter. Germany is the No. 1 importer of Vietnamese coffee while nobody in Germany knows that. Because they cannot recognize Vietnamese coffee in the stores and no “Made in Vietnam” [coffee] brands exist. And I think there is a lot of potential.
What do you think about Vietnamese business people?
Vietnamese people are very dynamic and busy. If you compare Vietnam with other regional country, Vietnamese people are very reliable. I am convinced that the German business culture and the Vietnamese business culture are not so different.
We learn that Vietnamese people are basically very reliable business partners and suitable to deal with.
What are your recommendations for the Vietnamese government to improve the business environment?
The Vietnamese government should care that foreign investments in Vietnam are really long term and sustainable. When they stay here for 10 or 30 years, they have to increase their Vietnam operations. If they have production of mobile phones here, and Vietnamese parts account for only 2%, it will be very easy for them to move out.
If the government can encourage and develop Vietnamese companies to be significant suppliers in such production, maybe to increase the localization rate from 2% today to 20%-30%, then it will not be easy for them to move to another country.
The government should help develop Vietnamese companies so that they are able to become suppliers of foreign investors. At least German companies, they want to do that. It’s not really a solution to import 100% of the raw materials. It’s easier to have business partners and suppliers here in Vietnam.
Secondly, to educate people, especially in industrial mechanics and mechatronics. It’s very easy to find in the region and the world cheaper business locations. But to find a location with educated workforce, it’s very difficult.
I think it’s a win-win approach, for the young people to receive good education, not only from the university. You cannot build a car with graduates from university only, but also professional mechanics. It’s good for the young people, for Vietnam and also for the foreign investors. Therefore, I think Vietnam needs a big reform of the vocational training program.