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Investors keen on local market

Released at: 13:31, 22/09/2018 Vietnam - Japan Relations

Investors keen on local market

Mr. Hironobu Kitagawa (Photo: VET Magazine)

Mr. Hironobu Kitagawa, Chief Representative of the Japan External Trade Organization (JETRO), Hanoi Representative Office, tells VET about Japanese investment in Vietnam.

How has Japanese investment to Vietnam been in recent times?

Japanese investment in Vietnam continues to increase. The total number of newly-registered and expanded projects is 601 with total investment capital of $8.7 billion. Japan became the largest investor in Vietnam in 2017, in terms of both project numbers and capital.

The total number of newly-registered and expanded projects in the beginning of 2018 was 293, a 4.6 per cent increase year-on-year. Total registered capital was $6.1 billion, up 25.9 per cent year-on-year, due to a large amount of capital for a smart city development project in Hanoi.

What sectors do Japanese investors invest in the most in Vietnam? 

Vietnam has been attracting Japanese enterprises in recent years because it is not only a strong manufacturing location, with stable infrastructure and competitive labor costs compared to neighboring countries, but also because it is a market that has significant potential. It is expected that domestic demand will grow due to increases in market size, stable economic growth, and higher incomes. 

Japanese enterprises are attracted by human resources and domestic demand in Vietnam, both of which are issues they must address in Japan. In the manufacturing and processing sector, investment opportunities in fields with low-cost labor and land areas will continue to increase.

What are the advantages and obstacles for Japanese enterprises when investing in Vietnam?

According to JETRO’s “Survey of Japanese Businesses in Asia and Oceania” released last year, the favorable conditions in Vietnam’s investment environment include market size and a stable political and social situation. Labor costs are also cheap. The risks, however, include rising labor costs, the incomplete legal framework, a lack of transparency in legal application, complex tax mechanisms and procedures, and burdensome administrative procedures.

How do you view the potential for economic cooperation between Vietnam and Japan in the future? 

The importance of Vietnam is undoubtedly increasing for Japanese enterprises. Japan and Vietnam have had discussions on improving the investment environment, as part of an initiative to bolster investment. I think the abovementioned administrative issues can be improved to some extent. Creating transparent and fair rules based on international norms is a way to further bolster FDI in Vietnam.

In the JETRO survey of Japanese companies mentioned above, about 70 per cent of respondents said that they would like to expand their projects in Vietnam, which is a higher percentage than in other ASEAN countries. The percentage of companies considering Vietnam as a country where they would open branches or expand scale has increased for three years in succession.

In May, JETRO worked with the Ministry of Planning and Investment to hold the “Vietnam Investment Promotion Conference” during the State visit to Japan by State President Tran Dai Quang. While Japan and Vietnam celebrate the 45th anniversary of diplomatic relations, through the promotion of bilateral investment and deepening strategic partnerships, the goal is to further expand the business relationship between the two countries and enhance Vietnam’s new and emerging position. Investment licenses for three new projects in Vietnam were issued at the conference, and memoranda of cooperation on 13 investment projects were exchanged, as was one for an air navigation project. Vietnam and Japan expect to be able to promote further economic cooperation in the future.

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