Realising Opportunities to Attract Japanese Investments

According to the data of the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment of Vietnam, Japan invested in 1,194 projects worth US$18 billion as of the end of the first quarter of 2010, ranking fourth among 89 countries and territories investing in Vietnam. Remarkably, 60.4 percent of projects and 86.8 percent of capital were registered for processing and manufacturing industries. The disbursement rate of committed FDI capital by Japanese investors is also higher than other foreign investors. A number of Japanese leading corporations like Canon, Sony, Sumitomo, Suzuki, Toyota, Honda and Mitsubishi have made early presence in Vietnam.

 

The investment for producing reliable, competitive products with high contents of technology to replace imports is considered one of the most outstanding characteristic of Japan's FDI projects.

 

According to experts, when global economies start to recover, Japanese investment will return to Vietnam. And, Kobe Steel Ltd is approved to invest in a US$1 billion steel ingot project in Hoang Mai Industrial Zone, Nghe An province, many other big investors from Japan will come to Vietnam.

According to Japanese investors, Vietnam is not only attractive for political stability but for its active market opening in accordance with WTO entry commitments, especially in service market. The population is expanding and per capita income as well as consumer market is increasing. If Japanese companies previously only invested in production, they will expand into many service, telecom, finance, banking and distribution areas in the coming time.

 

The Japan External Trade Organisation (JETRO) confirmed that quite a lot of Japanese companies are seeking information for investing in service sector in Vietnam at JETRO offices.

 

The presence of Japanese investors in the Vietnamese service sector will directly impact Vietnamese companies and will bring more opportunities to consumers.

There was a strong wave of investment flows channelled from Japan to Vietnam in 2004-2006, with many large projects. However, according to the Foreign Investment Agency, the Japan's FDI result in Vietnam is still incommensurate with the potentiality and desire of both sides as it accounts for a small proportion of Japanese investment in ASEAN.

 

In fact, many Japanese companies are comparing whether Vietnam is the best destination for their investment.

 

To strengthen the competitiveness, according to Japanese companies, Vietnam needs to resolve four existing issues which are interfering with their activities. Firstly, Vietnam is indeed short of skilled labour and skilled middle managers. According to Japanese experts, the mobility of farming labour to industrial sector is an inevitable trend.

 

So, Vietnam should have appropriate measures like building houses and offering good treatments to them. Middle management force also needs to have high training level, have good command of foreign languages and possess outstanding working skills.

 

Secondly, Vietnam lacks synchronous infrastructure. Power shortages in industrial zones have reduced but not put to an end. Vietnam is short of large seaports for shipping goods to big markets and container shipping charges are relatively high. Cost of living has substantially increased in the past three years in Vietnam.

Thirdly, the crude production (raw materials for domestic production) remained undeveloped; therefore, domestic sources can meet only approximately 30 percent of the demand. It is considered the best measure to call small and medium enterprises to invest in supporting industries.

 

Finally, sudden changes and unclear implementation of policies also distress investors.

 

The Vietnam Japan Economic Partnership Agreement (VJEPA), which came into effect in 2009, has created a new turning point for the two nations. Most recently, Vietnamese Minister of Planning and Investment, Vo Hong Phuc, paid a working visit to Japan and held meetings and dialogues with Japanese companies, aiming to draw new investment capital from Japan.

 

At the same time, Vietnam asserts that Japan remains an important partner. Clearly, Vietnam is ahead of many opportunities but it must act to take them.