Japanese businesses to expand operations in Vietnam
OVER 60 percent of Japanese businesses operating in Vietnam plan to expand their operations, regarding the Southeast Asian nation as a crucial investment destination, according to a Japan External Trade Organization (Jetro) survey.
The finding, revealed at a seminar in Hanoi, was part of Jetro’s 2015 survey on the business operations of Japanese-affiliated firms in 20 countries and regions in Asia and Oceania. The survey, conducted between October and November 2015, received valid responses from 4,635 Japanese companies, including 557 operating in Vietnam.
Speaking at the seminar, Atsusuke Kawada, Jetro chief representative in Vietnam, said the percentage of respondents in Vietnam planning to expand operations was rather high compared with other countries in the region such as Indonesia, Thailand, the Philippines, China and Malaysia, with percentages of 52, 49, 55, 38 and 45, respectively.
The survey said the main reason for business expansion was a rise in revenue with 85 percent of respondents choosing it as the most encouraging factor.
In 2015 nearly 60 percent of Japanese companies operating in Vietnam gained profits, down 3 percentage points yearon-year. However, in an absolute value, the number of firms reporting profits increased from 281 to 326.
Vietnam currently ranks third out of 15 countries in ease of recruitment, with respondents praising “market scale and growth ability” and the “stable socialpolitical situation” of the country, the survey said. It added Vietnam’s labor costs were relatively low in comparison to other countries. For example, labor costs in the manufacturing industry are less than a half of those costs in China, Thailand and Malaysia.
However, roughly 80 percent of Japanese firms in Vietnam cited an “increase in employee wages,” the survey said.
In term of risks stemming from the investment environment, 60 percent of the survey respondents said that administrative formalities, customs formalities, the tax system, laws and increasing wages in Vietnam posed the greatest risk to investors in the country, the survey said.
Vietnam’s localization rate, or the percent of supplies that can be sourced locally, has reached 32 percent, down 1 percent year-on-year. This rate is higher than the Philippines (26 percent) but much lower than China, Thailand, Indonesia and Malaysia, which have 65 percent, 56 percent, 41 percent and 36 percent, respectively, the survey said.
Kawada said in order to increase competitiveness in costs, Vietnam should develop capacity for local parts suppliers helping Japanese firms increase the amount of locally produced parts.
According to the Ministry of Planning and Investment, as of June 2015, Japan is the second-largest investor in Vietnam, after South Korea, with nearly 2,700 in-effect investment projects with capital of $37.7 billion.
The annual survey has been conducted since 1987 by Jetro to understand the business activities of Japan-affiliated companies in Asia and Oceania, including Vietnam.
The surveyed firms operate in a wide range of sectors, including automobiles, machinery, chemicals and pharmaceutical products, food, textiles, retail, transport, information and communications technology and finance.
Japanese firms to invest more
JAPANESE enterprises wish to expand their investment cooperation with Vietnam as the country continues to enjoy strong growth, especially after the recent signing of a number of trade deals.
This statement was made by Kishimoto Yoshio, director general of Japan’s Kyushu region’s Bureau of Economy, Trade and Industry, who led a delegation of 30 Japanese businesses to visit Hiep Phuoc Industrial Park in HCM City on Monday.
At the reception for the delegation, head of the HCM City Export Processing and Industrial Zones Authority, Vu Van Hoa, said 17 industrial parks in the city have so far attracted about 1,300 projects with total investment capital of $9 billion.
Of the figure, 559 projects worth $5.4 billion are foreign investments.
Japan is the largest investor in the city’s industrial parks with 119 projects capitalized at $1.3 billion.