It has been nearly three years since Vietnam and the European Union signed the EVFTA. In this article, we highlight the developments the EVFTA has bought to Europe and Germany in particular – and vice versa. 

Overview

Considering geopolitical uncertainty, increasingly over the past couple of years, the Western world has been actively complementing or even replacing its Asian manufacturing in countries such as China or Taiwan. Vietnam has been a beneficiary of this trend; it is one of Southeast Asia’s fastest-growing economies, with a powerful manufacturing edge, favorable corporate taxation, numerous treaties, and special economic zones (SEZs). It is also driven by Vietnam’s energy transition efforts.

This brief analysis sets out developments over the past two years in both strategy development as well as specific cross-border investments between several EU countries and Vietnam. It is not designed to be comprehensive, but rather to highlight these shifting flows, key investments, and the direction taken over the past two years by EU countries.

Since the EU-Vietnam Free Trade Agreement (EVFTA) came into effect in August 2020, trade and investment from Europe has boomed. EU trade with Vietnam surged by 14.8 percent in 2021 to US$63.6 billion led by investments in renewable energy by several EU countries, in addition to other strategic areas of the growing economy in Vietnam.

Germany

At year-end 2022, Germany was Vietnam’s largest market in Europe and Vietnam’s seventh-largest export market in the world, serving as an important gateway for Vietnamese goods to enter other markets in Europe. Meanwhile, Vietnam is Germany’s largest trading partner in Southeast Asia(1).

Since 2011, Germany and Vietnam have had a strategic partnership involving cooperation at all levels and in numerous policy fields. Germany is Vietnam’s largest trading partner among EU states, slightly ahead of the Netherlands. An EU free trade agreement with Vietnam came into force in 2020(2).

The first German investments in Vietnam started shortly following Vietnam’s opening up. In 1992, Bültel (producing fashion for brands such as Camel Active) settled down in Binh Duong. In the same year, Tatonka (an outdoor brand) opened a backpack production line in Ho Chi Minh City (HCMC). German investments accelerated when Vietnam joined the WTO (2007) and again following the 2015 amendment of the enterprise and investment law(3).

By year-end 2022, 450 companies from Germany had invested circa US$2.8 billion in Vietnam creating some 47,000 jobs(4). The largest German investor has been Bosch. Since its entrance into Vietnam in 2007, Bosch Vietnam has invested over US$450 million. With over 5,000 staff, it currently manages one high-tech factory and three R&D facilities, in sectors including mobile technology, industrial technology, electrical appliances, high-rise construction, and energy technology. Bosch operates a major manufacturing complex in Dong Nai while also operating an R&D center in HCMC.

Adidas entered Vietnam in 1993, but only in 2009 did it officially set up Adidas Vietnam. Adidas has been manufacturing apparel and footwear in Vietnam for over a decade. In October 2022, its CEO stated that Adidas wanted to make Vietnam one of its main manufacturing hubs.

Other German companies operating in Vietnam include Stada – Pymepharco, medical equipment, via the acquisition of a controlling stake in 2018, and Messer Gases, chemicals, via a major investment in 2017.

While manufacturing growth continues, recent investments (since 2021) have been focused on renewable energy/energy transition and digital as shown below:

• In February 2021, Siemens Gamesa won its largest nearshore project to date in Vietnam – the 100 MW Tra Vinh Dong Hai 1 wind farm. Located in Tra Vinh province, the project will feature 25 SG 5.0-145 turbines with a flexible power rating. It is the first nearshore project by Trungnam Group as the Vietnamese energy and infrastructure developer expands to the nearshore sector to complement its existing renewables portfolios for solar and onshore wind projects.
• In November 2021, BCG Energy and Siemens Gamesa signed a cooperation agreement on a US$400 million wind power development in Vietnam. Under the terms of the agreement, Siemens Gamesa will be the supplier of equipment and technical solutions for BCG Energy to implement more than 500 MW of wind power projects in Vietnam. BCG Energy currently owns 577.1 MW of capacity in Vietnam and aims to reach 1.5 GW of generating capacity by 2023.
• In September 2022, several companies collaborated with Siemens on another major wind deal. EKF Denmark’s Export Credit Agency (EKF) and Siemens Gamesa, have been strategic business partners for years. The wind project is backed by a buyer credit guarantee from EKF; The guarantor behind it is the Vietnamese bank MB Bank; the buyer credit guarantee for the financing of the project was arranged by another good business partner of EKF, German Landesbank Baden-Württemberg (LBBW).
• In September 2022, Bosch announced its plans for Vietnam expansion in software, and high-tech agriculture. About 6,000 software engineers for research and development as well as hi-tech agriculture will be part of the task force developed by Bosch, a German engineering and technology giant, under its Vietnam expansion plans until 2025(5).

2023 – Future Growth

In November 2022, German Chancellor Olaf Scholz spent 2 days of his 4-day Asian tour in Vietnam. He was the first European leader to visit Vietnam since the start of the COVID-19 pandemic. During his visit, Scholz said Germany wants to considerably boost trade and investment while helping Vietnam become a beneficiary as Western firms look to diversify away from China. Cooperation deals on energy and vocational training were signed during Scholz’s visit to Hanoi(6).

In April 2023, Vietnam’s Minister of Industry and Trade Nguyen Hong Dien received a German business delegation led by former Vice Chancellor of Germany Philipp Rösler focused on investment opportunities and business cooperation in the fields of e-commerce and new materials(7).

The Vietnamese government has issued many preferential and supportive policies for supporting industry enterprises in Vietnam, many of which are aligned with German strengths such as electronics, automobile manufacturing, assembly, and mechanical engineering. Minister Dien suggested that German enterprises expand production and investment into Vietnam to take full advantage of those incentives.

In Q1 2023, B. Braun Group announced that its Vietnamese operation will be hiring an additional 1,600 employees, including 200 in its 3rd factory southwest of Hanoi(8).

These future efforts are building from any already strong 2022 base where the total two-way trade turnover reached US$12.6 billion, up 12.1 percent compared to 2021, of which exports reached US$8.9 billion up 23.1 percent, and imports at US$3.6 billion, down 8.2 percent7 (5). The key export items were machinery and equipment, telephones, footwear, textiles, coffee, and seafood, while imports included machinery, equipment, pharmaceuticals, chemicals, auto parts, and components.

(According Vietnam Briefing Written by Asia Investment Research on July 12, 2023)