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Continued promise

Released at: 07:47, 16/09/2015

Continued promise

Mr. Atsusuke Kawada, Chief Representative of the Japan External Trade Organization (JETRO) in Hanoi, tells VET's Hoang Thu about trade, investment and economic cooperation between Japan and Vietnam.

by Hoang Thu

What are your thoughts on trade, investment and economic cooperation between Japan and Vietnam over recent years?

It can be said that the economic relationship between Japan and Vietnam is now in its best phase. 

In terms of trade, Japan ranked fourth among Vietnam’s largest partners regarding total turnover in 2014 and was Vietnam’s third-largest market in both exports and imports. 

In terms of investment, as at June this year Japan had a total of 2,661 licensed projects in Vietnam with capital of $37.7 billion. It is also ranked second among foreign direct investment (FDI) in Vietnam, following South Korea. Small and medium-scale projects, of less than $5 million, from Japanese enterprises in Vietnam currently account for the majority.
According to a JETRO survey in 2014 on the business situation of Japanese enterprises operating overseas, including in Vietnam, nearly 70 per cent of those in Vietnam plan to expand. Do you think this figure will increase in the years to come? 

According to the survey, nearly 70 per cent of respondent Japanese enterprises operating in Vietnam said they want to continue to expand their businesses activities in the country. Eighty per cent said this was to increase their revenue and more than 40 per cent said they consider Vietnam to be an investment destination of great potential with a population of over 90 million. 
Specifically, in the non-manufacturing sector, 67.5 per cent of respondents indicated high growth and potential in terms of their business performance in Vietnam.

Vietnam’s economy in recent years has maintained sustainable growth in the context of rising incomes. Vietnam will continue to be viewed as an attractive investment destination by Japanese enterprises in the time to come.

What sectors in Vietnam have attracted interest from Japanese investors?

The manufacturing industry has accounted for 30-40 per cent of Japanese investment in all industries and sectors recently. The proportion of the non-manufacturing sector is also increasing gradually. 

According to figures from the Foreign Investment Agency (FIA) under of the Ministry of Planning and Investment (MPI), there were 176 new projects belonging to Japanese investors licensed in Vietnam in the first seven months of 2015. Of these, 74 projects are in manufacturing and 102 projects are in non-manufacturing sectors, including consultancy, retail, and IT, among others. 

In a recent meeting between JETRO and Japanese enterprises regarding Japanese investment, held at the JETRO Hanoi office, we not only discussed manufacturing industries but also service sectors such as consultancy, personnel dispatching, and logistics, etc., to provide different services to Japanese enterprises operating in Vietnam. Moreover, we have recently received many questions on extensive consultations involving agriculture and food. 

What are the major challenges facing Japanese enterprises operating in Vietnam?

According to the JETRO survey, regarding the risks in Vietnam’s investment environment, more than half of respondent enterprises indicated problems including “the legal system is not perfect and does not operate transparently”, “rising labor costs”, and “the complexity of the investment mechanism and legal tax procedures”.

Compared with other countries where Japanese enterprises are operating, there is a higher rate of Japanese enterprises operating in Vietnam raising the problem that “the legal system is not perfect and does not operate transparently”.

We hope that Vietnam’s business environment will be improved in the time to come. This will help to limit the challenges facing Japanese enterprises’ business performance and also promote new investment from Japan. 

What recommendations would you make to Vietnam’s policymakers in regard to attracting more investment from Japanese investors? 

To attract more Japanese businesses, Vietnam’s policymakers should quickly issue policies in a consistent and stable manner.

Specifically, for the automotive industry, Vietnam has announced an auto industry development master plan with a medium- and long-term vision, in July 2014. So far, however, there has not been any action plan introduced to implement this vision.

For Japanese investors, if the market of any industry is not correctly forecasted they cannot expand their investment and support for other new Japanese investors to invest in Vietnam. Therefore, we look forward to specific action plans, including tax incentives, being issued by Vietnam’s policymakers. 

JETRO has recently signed a cooperative agreement with MPI that includes support for Japanese enterprises to conduct agricultural projects in Vietnam. Can you tell us more about this?

JETRO is attempting to strengthen business relations between Japanese enterprises and Vietnam in the field of agriculture. During the visit to Japan by Prime Minister Nguyen Tan Dung in July, Mr. Hiroyuki Ishige, Chairman of JETRO, and Minister of Planning and Investment Bui Quang Vinh signed a cooperative agreement between the two sides, including cooperation in agriculture.

Regarding the specific content of cooperation in the agricultural sector, JETRO has organized Business Matching sessions in Hanoi and Ho Chi Minh City to promote the export of agricultural products and seafood from Japan to Vietnam. We also have plans to send a business mission of enterprises in the agricultural sector from Japan to Vietnam.

To support enterprises between two countries becoming business partners in the agricultural sector, JETRO, with its role as a bridge between the two countries, will now attempt to create win-win cooperation for enterprises from both countries.

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