Focus on Bettering Business Climate in Vietnam and Japan

 

Mr Atsusuke Kawada, Chief Representative of JETRO Hanoi, said, among 557 Japanese companies surveyed in Vietnam, the number of profit-making companies dropped 3.5 per cent from the previous year to 58.8 per cent. The number of loss-making companies rose 1.3 per cent from the previous year to 26.2 per cent. Notably, 63.9 per cent of Japanese businesses here planned to expand their operations in 2016 to increase revenue.

 

In 2015, many Japanese companies failed to meet expectations but they still pinned high hopes for 2016 as Vietnam joined many free trade agreements (FTAs), especially the Trans-Pacific Partnership (TPP).

 

JETRO President Hiroyuki Ishige affirmed that TPP is providing a huge advantage for businesses in TPP member countries to boost their trade and investment in other member states. Currently, in the range of 70 - 80 per cent of Japanese companies are using JETRO services when they invest in Vietnam. Thus, JETRO’s responsibility of providing information and advice on the investment and business environment in Vietnam for investors is very important and serves as an important bridge for Japanese investment in Vietnam.

 

Sharing the common advantage of being TPP member countries, Vietnam and Japan will have more favourable conditions for increasing business and investment cooperation in the coming time. Furthermore, the efforts of the Government of Vietnam to offer solutions to companies to deal with difficulties and obstacles will also help enhance the investment environment in Vietnam.

 

Mentioning the advantage of investment climate, Mr Kawada said, among 15 countries surveyed, Vietnam ranked third in cheap labour costs, which are below half those in neighbouring countries like China, Thailand and Malaysia. Companies surveyed also rated high on political and social stability, market size and growth potential. The weakest point of Vietnam is language barrier. Vietnam bottomed the list in foreign language proficiency.

 

The biggest expectation of Japanese companies on investment in Vietnam is simplified customs procedures, with over 64 per cent of respondents showing their interests. The next expectation is the lifting of import and export duties the rule of origin. Up 80 per cent of surveyed companies complained about salary rise for local employees and 65 per cent faced difficulties in purchasing input materials and components in Vietnam. Therefore, Mr Atsusuke Kawada added that, to improve cost competitiveness, Vietnam should boost purchases from domestic companies; and have policies on development of supporting industries and support of small and medium enterprises (SMEs). Besides, the country needs to work harder to show its changes to Japanese firms.

 

According to JETRO’s a survey of 1,000 foreign companies operating in Japan, there are five difficulties they have faced, including complicated administrative and licensing procedures, personnel, and language. Expensive costs and capital sources are becoming the biggest obstacles in the Vietnam’s investment environment.

 

JETRO President Hiroyuki Ishige confirmed that Japan is building its success as it has an attractive investment environment. In 2014 and 2015, foreign investment in Vietnam thrived after a long time of stagnation. Data from Japan's Finance Ministry showed that direct investments into Japan totalled 22,900 billion yen as of September 2015.

 

Europe is still the biggest investor in Japan, accounting for 46.8 per cent, followed by second-placed North America with 29.4 per cent and third-placed Asia with 15.5 per cent. According to JETRO surveys, foreign companies appreciated advantages in Japan, including the potential of Japanese market, high-quality infrastructure, reliable partnership and high-quality research and development.

 

Surveys showed as high as 77 per cent of foreign companies planned to expand investment in Japan and 74 per cent thought to recruit more employees. JETRO said, to further improve the investment climate, the Government of Japan will continue to carry out investment promotion initiatives to become the easiest business destination in the world.