The finding is contained in the 2021 World Business Outlook report released recently by the German Chambers of Commerce Abroad (AHK).

The survey analysed feedback from more than 4,500 German companies, branches and subsidiaries worldwide, including Vietnam. Over half the respondents were in the service sector, and the rest in the construction and industry sector and retail trading sector.

It found that German business leaders in Vietnam look forward to a recovery in 2021 and 2022, with one-third of the respondents saying that the nation’s economy will recover in the first half of this year, while another 30 percent expects the recovery to happen next year.

The AHK report attributes the positive outlook to simultaneous implementation of the EU-Vietnam Free Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) Agreement.

It cites a World Bank report as saying the agreements will help Vietnam's GDP increase by another 3.2 percent in the 2021-2030 decade compared to the country’s expected growth without the two agreements.

It also says that Vietnam will become a strategic investment destination for international corporations as the global and regional supply chain gets restructured.

Around 55 percent of the respondents said their business situation has improved this year compared to 36 percent last year, while only 10 percent saw their business worsen, down 12 percentage points from last year.

Up to 47 percent of German companies in Vietnam said they intend to expand their activities in the country by diversifying their supply chain by finding additional suppliers and increasing their inventory. The rate of German companies wanting to expand marked an increase of 25 percentage points over last year and was much higher than the Southeast Asian average of 28 percent.

The business optimism was also reflected in the fact that 50 percent of the respondents planned to hire more people in 2021 and 2022.

But there were also issues of concern. Around 42 percent of the respondents said Vietnam’s lack of qualified workers was the greatest factor of uncertainty for their business this year. This marked an increase of 24 percentage points since last year.

Travel restrictions, less consumer demand for products and services, the cancellation of trade fairs and events amid the Covid-19 pandemic have hurt the German companies in Vietnam, the AHK report says.

German is the 18th largest investor in Vietnam with over 361 FDI projects in various fields including mechanics, manufacturing, logistics, chemicals, renewable energy, according to the Ministry of Planning and Investment.

The total investment capital by German firms in Vietnam is over $2 billion. Germany is Vietnam’s biggest trade partner in the EU. Bilateral trade value between German and Vietnam was nearly $10 billion last year, up 52 percent year-on-year, according to the General Department of Vietnam Customs.