“Vietnam’s inexpensive sources of labour and the future growth potential of the local market are major reasons behind their considering Vietnam a promising overseas investment destination”
Many Japanese firms are already among some of the top blue-chip investors in Vietnam
Many Japanese investors and enterprises are looking to invest in Vietnam after the March 11 earthquake and tsunami.
“Japanese investors and enterprises are looking for bigger markets in Asia like China, Vietnam, Thailand and Indonesia. Many of them consider Vietnam as good destination for investment,” said Vietnam-based Japan External Trade Organization chief representative Hirokazu Yamaoka, who was speaking at a conference last week on “Japan’s recovery scenario of foreign investment trends” jointly held by Nikkei Business Publications, Inc. (Nikkei BP), Vietnam’s Ministry of Planning and Investment (MPI) and the Japanese embassy to Vietnam.
During a visit to Vietnam to attend the conference last week, Yutaka Morimoto, chairman of Japanese-backed investment consultancy firm Accord Biz, said he was introducing more Japanese firms into Vietnam.
“Many Japanese firms are implementing a strategy of Vietnam+1, in which Vietnam will become their large scale production hub in Southeast Asia, from which they can export goods to other ASEAN countries and then develop production and investment in those ASEAN countries,” Morimoto said.
He said Japanese firms currently tended to focus on high technology with products having big added value in Vietnam. “They consider Vietnam a large consumption market with large potential in service sectors and industries, thanks to the country’s young population and diligent workforce.”
A recent survey of 346 respondents conducted by Nikkei Business Online, Japan’s leading economic and business online newspaper, found Vietnam ranked third in Asia as a consumption market, after India and Indonesia, but ranked first as a production base.
“Many Japanese enterprises are also carrying out their China+1 investment strategy, meaning that they are seeing more risks when doing business in China. To disperse the risks, they want to expand their production in Vietnam where the risks are far lower,” said Nikkei BP president and chief executive officer Kohei Osada.
According to Japan Bank for International Cooperation’s (JBIC) “JBIC FY 2010 survey: Outlook for Japanese foreign direct investment”, Vietnam ranked third [after China and India] as the most promising country for Japanese overseas business over the next three years, especially in the industries of chemicals (conducted with 256 companies) and electrical equipment and electronics (conducted with 265 companies).
Also, Vietnam ranked as the fourth most promising country [after China, India and Brazil] for Japanese overseas business over the next ten years, among ten economies including Russia, the US, Brazil and seven countries in Asia. This ranking came as a result of surveys conducted with 438 companies.
“Some 165 companies said Vietnam’s inexpensive sources of labour and the future growth potential of the local market are major reasons behind their considering Vietnam a promising overseas investment destination,” said Hideo Naito, head of power and water finance department under JBIC’s infrastructure finance group.
Vietnam’s qualified human resources being good for risk diversification to other countries and its position as base for export to third countries would also help Vietnam lure more Japanese companies, Naito said.
In addition, a recent Nikkei BP survey of 130 corporate managers of Japanese major firms including Toshiba and Honda revealed that 40 per cent would invest overseas within the next three years. This was especially true for Asia and Vietnam, a country which firms saw as having a stable political climate and an attractive investment environment as well as possessing the advantage of being near Japan geographically.
But the Japanese Ambassador to Vietnam Yasuaki Tanizaki sounded a note of warning at last week’s conference.
“Given many countries’ competition for Japanese investment, time cannot wait. Vietnam needs to take more actions,” Tanizaki told the 300 plus attendees at last week’s conference. These included Vietnamese ministries’ leaders, ambassadors, leaders of Vietnam-based international organisations and the government, local and Japanese and other foreign investors and enterprises.
By late July 2011, Vietnam was home to 1,560 valid Japanese projects with total registered capital of $21.6 billion. The north Asian country ranked fourth among 92 nations and territories investing into Vietnam. In the year’s first seven months, meanwhile, Vietnam lured 94 Japanese projects with total registered capital of $720 million to this country.