Vietnam - Germany Relationship - Achievements in Trading, Investment and Potential Development
Vietnam and Germany officially established diplomatic relations at an ambassadorial level on September 23, 1975. In 1990, Germany began to provide development assistance to Vietnam. Since Vietnam has raised its impetus for “doi moi†(innovation), investment and trading between Germany and Vietnam has grown.
Germany has 56 projects licensed to invest in Vietnam with total registered investment capital of nearly US$252 million, according to statistics as at August 25, 2004.
After the former Soviet Union broke up, Eastern European countries fell into crisis, leading to a situation where exported goods from Vietnam lost most of their traditional markets in the Common Economic Committee (COMECOM). Germany quickly became the largest partner of Vietnam among EU countries and Europe as a whole. Currently, trade turnover between Vietnam and Germany accounts for 28 per cent of total trade turnover between Vietnam and the EU. Many Vietnamese enterprises have regularly participated in exhibitions or trade fairs held in Germany such as Anuga Colonge, Tundence, Koblenz, Rexale Frankfurt and EXPO Hannover. Through these exhibitions and trade fairs, many Vietnamese enterprises have found partners and signed contracts with importers from Germany and other countries. Topping the list of Vietnamese goods exported to Germany is footwear (over US$275 million in 2003), followed by garment products (over US$162 million), coffee (US$67 million), handicrafts (over US$35 million), seafood (US$18 million), computers and spare parts (US$10 million). At the same time Germany is a supplier of advanced machinery, equipment and technology to serve Vietnam’s cause of modernisation and industrialisation. In 2003 alone, Vietnam imported from Germany machinery, equipment and spare parts valued at approximately US$300 million, car components valued at nearly US$24 million, medicines worth US$2 million, raw plastic valued at nearly US$10 million as well as other inputs for production. Though imports from Germany are increasing rapidly, Vietnam has repeatedly recorded an export surplus to Germany, as a result of relatively high export achievements. The average export surplus value over the last 3 years is US$240 million per year.
In trading with Germany, Vietnamese enterprises enjoy many advantages. Germany is a large stable market, and the purchasing power of German consumers is strong and diversified. Some Vietnamese products like footwear and computer parts, have successfully penetrated and cemented their standing in Germany, while contributing to developing the prestige image of goods “made in Vietnamâ€. German companies have a serious, solid business practice where strategy and long-term plans are key. Germany has state-of-the-art technology and the ability to supply goods in great quantity at a high quality. Many Vietnamese enterprises have formed long-term and stable partnerships with German companies. Some Vietnamese products are enjoying the GSP tax applied in the EU. Vietnam has teams of engineers and experts who speak fluent German and a large number of Vietnamese living and doing business in Germany. In addition, a network of 240 representative offices and branches from 9 out of 16 states of Germany is very active in Vietnam. The well-developed political relationship between Vietnam and Germany is now contributing to the promotion of bilateral trade relations.
Despite the above-mentioned advantages, Vietnamese enterprises are still facing some difficulties working in the German market. Firstly, German trading policies are rigid because they must follow the EU mutual trading policy. These policies pose import limitations on garment products, high taxes, low quotas for rice and strict standards on quality and hygiene for seafood. Secondly, competition in Germany in particular and the EU in general is increasingly fierce and leading to some unfavourable trends for Vietnamese exported goods, especially after China joined the WTO and another 10 Eastern European countries joined the EU. The situation may deteriorate if WTO members carry out their commitments to open their doors strictly within their trading block rather than deal with outsiders. Thirdly, many Vietnamese enterprises are still weak in competitiveness and lack professional skills in international trade.
However, while trade turnover with Vietnam still forms a small share of its total trade turnover, Germany still considers Vietnam as an emerging market and an important trade partner in the near future. With an import demand of nearly US$500 billion each year, the German market still holds great potential for Vietnamese exported goods to explore if Vietnamese enterprises can take advantage of favourable conditions and overcome the challenges outlined above.
Vietnamese exports which are estimated to have large potential for development include garments, footwear, coffee, computers, handicrafts, raw tobacco, seafood, rubber, ceramics and crystal products, small equipment such as pumps, machine tools, toys and bicycles. Imported goods from Germany like machinery, equipment, material, synthetic fibres, steel and iron, chemicals, electronics, computers components, precise mechanical and optical products, medicines, stationery and rubber products continue to show higher and higher turnover. With the recovery of the German economy and the development impetus of Vietnam’s economy, the Vietnam–Germany trading relationship will continue to develop well into the future. Bilateral trade turnover in 2004 may reach US$1,539.67 million. Exports have increased so far by 15 per cent to US$937.71 million and imports have increased by five per cent to US$613.5 million.
Having a GDP per capita of over US$2,000 and advanced technology in industries of steel, coal, cement, chemicals, machinery, cars, machine tools, electronics and ship building and as the largest import market of Vietnamese goods, Germany continues to play an important role in the development of Vietnam’s economy.
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