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In better shape

Released at: 12:00, 19/03/2017

In better shape

Mr. Atsusuke Kawada, Chief Representative of the Japan External Trade Organization (JETRO) in Hanoi. Photo: Magazine

Mr. Atsusuke Kawada, Chief Representative of the Japan External Trade Organization (JETRO) in Hanoi, tells VET’s Quynh Nguyen about Vietnam’s business climate in 2016 and his expectations for the years ahead.

by Quynh Nguyen

What are your thoughts on Vietnam’s investment climate last year?

In recent years it has improved more significantly compared to previous years and more clearly compared to other countries in the region. Issues relating to administrative procedures and the legal system, which are of concern for many foreign enterprises, have seen positive changes. But many risks remain in the country’s investment environment. Prime Minister Nguyen Xuan Phuc emphasized that Vietnam will strive to be ranked in the Top 4 leading countries in ASEAN with the fastest processing times for administrative procedures. Despite significant improvements, 40 per cent of Japanese enterprises indicate that administrative procedures remain complicated and the “unofficial cost” of doing business is greatly increasing. These are the risks that Vietnam needs to address. 

What do you think about the fact that more than 60 per cent of Japanese enterprises in Vietnam plan to expand their business and continue to view the country as an important investment destination? 

According to a JETRO survey, two out of every three Japanese enterprises plan to expand their business in Vietnam. This is quite high compared to other countries in the region. The main reasons for business expansion is that enterprises want to increase revenue. For non-manufacturing businesses, the main driving force is high growth potential. The rate of business expansion fell for three years but in 2016 increased 60 per cent. This shows that Japanese enterprises are optimistic about Vietnam’s investment environment. 

Vietnam now has more than 2,000 Japanese enterprises, mainly of small and medium scale. As our survey found, investment flows tend to move to the non-manufacturing sector. The reason is that support mechanisms for businesses in the sector have improved significantly. Large Japanese enterprises, meanwhile, tend to focus on the Vietnamese market rather than exports. I think the domestic market will be the focus of many Japanese enterprises in the future, because Vietnam’s middle class is rising and this makes the domestic market more attractive.  

How do Japanese enterprises view the tax and customs reform in Vietnam over recent years? 

Tax policy and customs procedures are obstacles in effectively applying free trade agreements in Vietnam. However, appreciation of tax policy and customs procedure reform increased more than 15 percentage points in this survey compared to the previous year. Japanese enterprises recognize the efforts made by the Vietnamese Government in business climate reform. In order to help Vietnam improve its customs procedures, the Japanese Government has supported its electronic customs clearance system, called VNACCS/VCIS. The system aims to simplify procedures and help transactions become transparent and public, reducing fraudulent unofficial costs.

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