Japanese Investor Concerns

There are about 300 Japanese joint ventures running businesses in the area of “greater” HCM city, covering not only HCM city but also adjacent areas of Dong Nai, Vung Tau and Binh Duong provinces, where large industrial zones and EPZS are heavily concentrated. Many foreign investors face problems, difficulties or obstacles with the tax office, customs office or other local government offices. That is not unique to foreign investors; local Vietnamese investors face the same difficulties. However, the big difference is that the local investors know well how to get by the problems, while most Japanese, European and US investors must also abide by their homeland laws.

If you want to know more about the difficulties, just take a look at the report prepared by “Japan – Vietnam Joint initiative to improve business environment with a view to strengthen Vietnam’s Competitiveness”. Take tax issues for example, the tax office changes its policies without prior notice and they become effective retroactively in many cases. That causes much confusion on the part of most foreign investors doing business in Vietnam. Tax policy has to be clear and transparent, and any changes in policy must be known to business people well in advance, because it has a detrimental impact on production cost which every manufacturer is making desperate efforts to reduce as much as possible.

Do you think that Japanese investors will continue to invest in Binh Duong in the coming time?

There is no rush of investment, Japanese investors are very careful. They will continue to investigate and review the investment policy of Vietnam. Most investors start with small projects, and then expand production to finally create big projects. Remember that Japanese business people never want to intervene in labour disputes.

 

That’s right. Many in Japanese management have started worrying about a wild strike. A wildcat strike is a strike initiated by workers without any involvement of labour unions of the factory. It is illegal under Vietnamese law, yet most labour strikes in the past were in fact wildcat strikes. The Vietnamese labour laws clearly stipulate the necessary steps to be taken and procedures to be followed when a labour union wants to go on strike. Without taking such steps and procedure any strike is illegal, and therefore, if anything results from talks between strikers and company management, it would not be legally binding. However, actual life is certainly different. Once a wildcat strike takes place and things get confused, local labour authorities begin to intervene in labour disputes in order to settle them. However, in most cases, mediations by local authorities tend to be much more favourable to illegal strikers rather than company management, arousing suspicions among foreign investors that local authorities are biased and unfair to foreigners, despite their ardent love calls for foreign investment.

 

One more thing I would like to note is that up to now, no organization seems to care what happened after a storm of strikes hit hard in the industrial parks of “greater” HCM city before and after the Tet 2005. As you know, in the present day manufacturing industry, finished goods are rarely manufactured or assembled entirely within the borders of one country. Vietnam is an example, parts and components manufactured in other countries are imported into Vietnam and assembled into a larger component or half finished products, which are again exported to overseas factories to be completed as finished products. Due to previous illegal strikes, many factories in Vietnam were forced to close and suspend production for a week or so, having a bad influence not only on production in Vietnam, but also on factories in other countries. Headquarters began to think of reducing production levels of troubled factories to a minimum, and if necessary they could be closed down permanently. Those critical decisions will be made, not by the management of local joint ventures, but by the CEOs of their headquarters, over which local joint venture management has no influence.

 

Local governments should immediately organize an active office including the Ministry of Labour, War Invalids and Social Affairs, and provincial Labour Unions. The office must declare telephone numbers and names of persons in charge. If a wildcat strike occurs, this office will intervene immediately.

 

What happened to Japanese investors in their headquarters after the storm of strikes had passed was that they began to review their investment policy toward Vietnam, but I strongly hope that there will be no negative impact on Japanese investment in Vietnam.