Vietnam and Germany Boost Multi-faceted Co-operative Ties

Germany and Vietnam established their diplomatic ties in 1975. A new development step has been seen in the two countries’ friendship and co-operative ties since Vietnam began its renovation process. As Germany was unified, Vietnam declared to be ready for further co-operation with unified Germany.

 

Their ties were marked with important visits of leaders. In 1993, former Vietnamese Prime Minister Vo Van Kiet paid a working visit to Germany. In 1995, former German Chancellor Helmut Kohl paid a visit to Vietnam. In 2001, Vietnamese Prime Minister Phan Van Khai visited Germany and in 2003 and 2004, German Chancellor Gehard Schroeder paid visits to Vietnam.

 

Vietnam is now still a focal country within Germany’s development co-operation programme. After establishing development co-operation relations with Vietnam in 1990, the Germany Federal Ministry for Economic Co-operation and Development (BMZ) provided Vietnam EUR 500 million, according to a source from the German embassy in Vietnam.

 

Germany is the third country behind Japan and France among Vietnam’s bilateral donors. Two major organisations of Germany, including the Germany Reconstruction Bank (KfW) and GTZ (Deutsche Gesellschaft fur Technische Zusannebarbeit – or German Technical Co-operation Agency) have implemented projects on financial and technical co-operation, respectively. To improve the effectiveness of the two countries’ co-operation since 2000 the two countries have agreed to concentrate on three major fields, including reform policy assistance alongside a boost of the development of the private sector and vocational training; environmental protection and long-term use of natural resources with water supply and treatment, and waste treatment; health care and family planning with HIV/AIDS prevention.

 

So far, around 240 representatives from enterprises and organisations in Germany have visited Vietnam, including 70 production enterprises. Germany’s total investment capital by February 22, 2005, had reached US$215.17 million, according to figures of the German Statistics Office. Germany ranks 23^rd among 67 countries and territories investing in Vietnam. In 2004 alone, five German enterprises were licensed to invest in Vietnam with a total of US$5.6 million, let alone many other German corporations and companies are expanding their activities in Vietnam. The Metro Corporation has built more establishments while Siemens is equipment supplier for the Phu My 2 and Phu My 3 electric power plants. By September 2004, there had been 70 business establishments set up and operating in Vietnam. However, value of the projects remains low as most of them have capital of less than US$10 million, with some even less than US$1 million.

 

What has attracted German investors most are Vietnam’s great potential as an 80-million-person market and a high economic growth rate. Also, the success of enterprises operating in Vietnam has attracted German investors. Furthermore, Vietnam has many students in Germany, let alone tens of thousands of cadres trained by the former Democratic Republic of Germany. These people have a good understanding about Germany and its culture. There is no other country in the region with such a convenient condition as German investors can use their mother language while doing business in Vietnam. Also, Germany and Vietnam have signed many bilateral agreements, including the Double Taxation Treaty Agreement and the Bilateral Investment Protection Agreement. Furthermore, Vietnam’s investment law has become increasingly open to foreign investors in general and German investors in particular. Positive results of Vietnam’s administrative reform are another factor attracting attention from German investors.

 

However, compared to the existing potential of Vietnam and Germany, especially to Germany’s economic strength, the country’s investment capital volume in Vietnam remains low. This has resulted from both subjective and objective factors. In terms of the objective factors, as the market economy has developed strongly in Eastern Europe with an investment environment similar to Vietnam, German investors prefer the region to Vietnam as they can save costs and control their business better. Regarding the subjective factors, despite a high economic growth rate, management and international business skills of many Vietnamese enterprises, in particular private enterprises, remain poor, hindering Vietnamese enterprises’ business co-operation and partnership with German and other foreign companies. According to German entrepreneurs, Vietnam should improve its framework conditions and promote its administrative reform.

 

Germany has implemented a policy on economic socialisation with 95 per cent of enterprises being privately-run. Vietnam has seen a strong development of the private sector. Alongside the two countries’ trade and political ties, and the success of operating enterprises in Vietnam, it is hoped that in the future, Vietnam will become an attractive destination for German investors.