Let's wash our hands. Rub, rub, rub, let's rub them! ”Whether these words, formulated by the Vietnamese Health Institute, sung by national pop stars, accompanied by an animated music video and the choreography of a Vietnamese dancer, which were decisive in making Vietnam come through the corona crisis so well, cannot be proven. In any case, the video was clicked a million times and the key message of the song - "We have to increase our vigilance so that the virus does not spread" - has definitely worked.
In short: Vietnam is a Corona model boy. The country with a population of 97 million had only recorded around 1 infections and 1.300 deaths by December 35 - Austria has 200 times as many infections, with less than a tenth of the population. But the Vietnamese success is no coincidence: As early as 2003, the country was the first Asian country to successfully contain the SARS epidemic - and it has learned further from the experiences at that time. "Among the 30 most populous countries in the world, Vietnam is the one with the fewest coronavirus infections, and the country is in comparatively good economic position," says Dietmar Schwank, WKÖ economic delegate in Ho Chi Minh City (see interview).
The economy in Vietnam is practically in normal mode
Despite tourism failures, global collapse in demand and interruptions in supply chains, Vietnam will not slide into a recession this year. Growth of two to three percent is forecast for 2020 and a strong upswing for 2021. According to Schwank, one of the main reasons for the comparatively low economic damage is that even during a three-week lockdown in March and April, companies were able to produce under special safety precautions and construction activity was not suspended. The Vietnamese economy is now in more or less normal mode, and consumer sentiment is optimistic.
The still very restrictive entry regulations make it anything but easy for the 400 or so Austrian companies that are active in Vietnam. “It is currently almost impossible for our teams to enter Vietnam and continue working on our facilities under construction. On-site customer contacts are not possible at all ”, says Julia Schwärzler, company spokeswoman for the Vorarlberg cable car manufacturer Doppelmayr. And Karin Palmetshofer-Hörschinger, sales manager for the Asia-Pacific region at the Upper Austrian fire-fighting equipment manufacturer Rosenbauer, builds on following the company's projects virtually, but admits that it is difficult “to convey everything down to the last detail to partners and customers from a distance”.
Interview with Dietmar Schwank, economic delegate in Vietnam
Bilateral trade between Austria and Vietnam set new records in the previous year: Goods worth 250 million euros were exported to Vietnam and imported to the value of one billion euros. Although Austrian exports of goods to Vietnam collapse by a fifth this year, the outlook for the coming year is promising and both Doppelmayr and Rosenbauer are optimistic. "Vietnam is an absolutely important and emerging market for us," says Palmetshofer-Hörschinger.
Rosenbauer has been delivering to the country for 30 years, and more than 200 fire engines are already in use there. And for Doppelmayr, Vietnam is one of the most important export markets of all, with around 25 cable cars the company has contributed to the revitalization of Vietnamese tourism. “These include, for example, the world's longest tricable cable car, which connects the islands of Hon Thom and Phu Quoc. The most recently completed project is a cable car that leads to the holiday island of Cat Ba in northern Vietnam. With a 215 meter high cable car pillar, it also has a world record, ”reports Schwärzler.
Vietnam is aiming high not only because of the successful corona management and the solid macroeconomic framework. The country will also benefit from the increased awareness of the need for diversified supply chains as a result of the current crisis. In addition, the trade conflict between the USA and China is causing more and more companies to build up additional pillars in the region. In a recent survey of 260 leading global companies from various industries and regions, the consulting firm Gartner found that 33 percent have already relocated their operations from China or plan to do so within the next three years.
Stefan Engleder, CEO of the Upper Austrian plastics machine manufacturer, also confirms this trend Engel, who has been supplying injection molding solutions for the electronics sector in particular for many years and is represented with its own sales and service branch in Ho Chi Minh City: “Many companies are withdrawing from China and investing in Vietnam. As a result, Vietnam is playing an increasingly important role in the supply chain for the whole of Asia, ”says Engleder.
Vietnam's fairytale economic rise
The fact that Vietnam is in this position today is impressive in view of the devastation of the war that ended in 1975. Between 1990 and 2015, GDP per person tripled, and the proportion of the population living below the absolute poverty line (now $ 1,90 per day) has fallen from more than 60 percent in the 1980s to less than five percent. The former Asian poor house is now one of the middle-income countries. The current crisis will not change that.
That is also optimistic for future Vietnam business Free trade agreement between Vietnam and the European Union, which came into force on August 1st and which removes 99 percent of all tariffs - some immediately, some gradually. The agreement is considered to be the most ambitious that the EU has ever concluded with an emerging country. It is intended to significantly improve market entry opportunities for European companies and strategically integrate Vietnam into global value chains. In addition, many trade barriers, for example with regard to the protection of intellectual property, will be removed by the new regulations and climate and occupational safety standards will be taken into account.
Suppliers of machines and vehicles as well as agricultural goods expect special opportunities from the agreement. After all, Vietnam is still strongly characterized by agriculture - the country is the second largest coffee and fifth largest rice producer in the world. But while agriculture and fishing still employ 60 percent of the Vietnamese population, the largest share of added value is generated in the construction and industrial sectors (38 percent) and services (46 percent). Textile and shoe production as well as electronics production are particularly well developed, with multinational corporations playing the main role here.
So far, Austrian companies have mainly supplied systems, machines and components for Vietnam's industry. Currently, the health industry in Vietnam is becoming more and more important - also apart from Corona. This year significantly more pharmaceuticals and medical devices such as computer tomographs will be delivered to Vietnam than in previous years. All in all, it's not just the big players who are betting on Vietnam: “In addition to companies like Andritz, AVL List or Vamed there are a number of Austrian SMEs and start-ups that are successfully operating in Vietnam, ”says Schwank, who himself regularly commutes between Ho Chi Minh City and Hanoi.
DATA & FACTS
State with two centers
While Ho Chi Minh City in the south is Vietnam's commercial hub, government affairs come together in Hanoi, more than a thousand kilometers away, in North Vietnam. From there the Communist Party rules the country with a hard hand, there are hardly any political freedoms. Anyone who criticizes the regime on Facebook, for example, risks imprisonment. In economic terms, however, the government is taking a pragmatic course with an open trade policy. This sometimes leads to absurdities, for example when in the five-year plan the Manifesto of Marxism-Leninism is followed by an economic policy section co-authored by the World Bank, which emphasizes the advantages of the market economy.
Austrian companies that want to do business in Vietnam have to come to terms with such contradictions, especially if they are active in the infrastructure or health and safety sectors, in which the Vietnamese state is in control. However, Vietnam is keen to partially privatize some of the often inefficient state-owned enterprises that generate around a third of GDP. It is now also possible for foreign investors to acquire majority stakes in companies.
Rosenbauer shows that government business can open up private business opportunities. "We can see that the government projects are actually creating further demand for high-quality fire fighting vehicles, and we hope to soon be able to implement larger projects in Vietnam using commercial channels," says Palmetshofer-Hörschinger. Above all, the security equipment of the Vietnamese airports is firmly targeted.
Vietnam's economy is getting greener
Despite all these positive developments, there are still many construction sites in Vietnam in a figurative sense - a big one is the issue of environmental protection. Waste management is completely overwhelmed and in many places the water quality is suffering from advancing industrialization. The positive news: In Vietnam, too, green technologies are becoming more important every day. At an online event of the Foreign Trade Centers At the beginning of December, Austrian companies from the water and waste technology sector met with lively Vietnamese interest.
This is also strongly promoted by European development cooperation - the focus here is on environmental issues. The German development agency GIZ is working with its Vietnamese partners to remove obstacles for investors in the field of renewable energy. Austrian companies, especially with a view to hydropower as an important energy source in Vietnam, are likely to listen carefully.
And if the focus is already there, take a look at Vietnam's neighbors. Laos and Cambodia have also had growth rates of between six and eight percent for years. And the first Austrian companies are expanding their business field there: This is how the Tyrolean engineering office ILF Consulting Engineers together with the Austrian Development Bank OeEB - and based on an ADA business partnership - the project development company Rendcor was founded. In cooperation with local partners small hydropower projects are now being implemented in Laos in accordance with the highest environmental and social standards - and thus resist the Chinese competition.
Vietnam as a bridge to the region
In the future, Vietnam could well be a bridge for Austrian companies to other countries in the region, also because the ASEAN economic area, which includes ten Southeast Asian countries from Myanmar to Indonesia, is increasingly developing towards a common internal market.
A long-standing initiative by the ASEAN countries recently led to a spectacular contract. 15 countries from the Asia-Pacific region, from Australia to Japan and South Korea to China and even Vietnam have that in mid-November Free trade agreement RCEP signed. More than two billion people live in the new trading bloc, and a third of the world's economic output is produced there. European exporters who do not produce in Asia themselves now fear that this will make it difficult for them to access the Asian growth markets. With regard to the dismantling of trade barriers, the agreement does not go nearly as far as the one that the EU has concluded with Vietnam or with Japan. In addition, according to Dietmar Schwank, RCEP, in addition to increasing local production and quality standards, means that Austrian companies in the region can now export from Vietnam or China to the other RCEP member states at better conditions.
In any case, exports to Vietnam will increase significantly again after the crisis year. And Engel-CEO Engleder, on behalf of many Austrian companies, says: “We want to continue growing in Vietnam!” His goal is to “win more and more local companies as customers in addition to international companies with locations in Vietnam”. Incidentally, the corona awareness video described at the beginning also ends well: the two protagonists, who previously warned urgently about the dangers of the virus, kiss each other - with face masks of course.