Japanese firms plan Viertnam expansion: report

JETRO’s survey of the 2016 business conditions of Japanese companies in Asia and Oceania published yesterday in Hanoi was carried out from October to November 2016, and it received responses from over 4,600 companies. In Vietnam, it received valid responses from 639 firms.

The survey found that the major cited reasons for business expansion were sales increase and high growth potential.

Automobile and motorbike components manufactured at the Hanoi-based Stanley Vietnam Co, a Vietnam-Japan joint venture.

The operating profits of Japanese firms in Vietnam were also found to have improved. More than 62% of respondents expected operating profits at least 4 percentage points higher than 2015 survey. This ratio was higher than Thailand and Indonesia but lower than the Philippines and China.

The raw materials and parts procurement rate increased to 34.2% from the 32% of the previous year but still lower than China’s 68% of Thailand’s 57%, according to Jetro, adding that Vietnam should continue to improve the local procurement rate to reduce production costs.

Stable political and social situation is regarded as an advantage in Vietnam’s investment climate, while wage increase is a significant risk. Other risks also include incomplete infrastructure and a complicated administrative and tax system.

According to Atsusuke Kawada, Chief Representative of JETRO in Hanoi, the Government of Vietnam is striving to improve the business climate and investment climate. However, the finding that nearly half of surveyed firms were worried about the incomplete legal framework of Vietnam recommended that greater efforts were needed, he said.

He said Japanese firms tended to invest in non-manufacturing industries in Vietnam, and agriculture would be a focus for Japanese investments in the future.

There are more than 1,200 Japanese firms operating in Vietnam.

In a business forum held during Prime Minister Shinzo Abe’s two-day visit to Vietnam in January, Prime Minister Nguyen Xuan Phuc expressed hope that Japan will become the top investor in the Southeast Asian country.

Latest statistics from the Vietnam Foreign Investment Agency revealed that as of the end of November, Japan ranked second among 114 countries and territories with investments in Vietnam, with 3,242 projects worth a total of US$42 billion.