What is your assessment of Vietnam’s business environment over recent years? Which sectors are attracting Japanese investors the most?
Hironobu Kitagawa chief representative of Japanese External Trade Organisation JETRO
In recent years, Vietnam has been attracting investors because of a strong manufacturing location with stable infrastructure and competitive labor cost in comparison with neighboring countries. Moreover, the Vietnamese market is expected to expand due to stable economic growth and improved income. In particular, Japanese companies are attracted by potentiality of Vietnam including workforce issue. The shortage of labor is also one of the challenges that Japan is facing.
The Business Climate Index (BCI) released by EuroCham this year shows that many EU enterprises are quite optimistic about the business environment and Vietnam's inflation is proved not to be a major concern for them. What about Japanese enterprises? What’s JETRO’s plan to support Japanese enterprises in investing in Vietnam?
Most of Japanese enterprises shared that the problems related to unperfected infrastructure are risks in the Vietnam’s investment environment. At the same time, concerns about "not finding the source of raw materials/components" remain unchanged.
To solve this issue, on the JETRO side, we intend to gather information from Vietnamese companies which can supply high quality components based on Japanese requests. After that, we will publish these materials. In addition, we will continue to support and create more business opportunities for Japanese businesses who have desires to invest in Vietnam. We provide consultant information for the enterprises from intentions to actions.
What suggestions would you make to the Vietnamese government on supporting foreign enterprises, especially Japanese enterprises?
According to the JETRO survey on the performance of Japanese enterprises in Asia and Oceania, the favorable factors of Vietnam’s investment environment are "Market size and growth potentiality"," stable social / political situations"," cheap labor cost". However, risks in the investment environment such as "the rise in labor costs", "the incomplete legal system, and the lack of transparency in law enforcement" as well as "complicated mechanism and procedures of tax and troubling administrative procedures of license" are still mentioned.
In particular, I think the administrative implications may be improved if there is an effort from the Vietnamese government. Creating transparent and fair rules based on international principles and motivating businesses to take rules are effective ways to promote more investment.
According to statistics from the Foreign Investment Agency, Japan remains the leading investor in Vietnam with US$6.47billion year to date. Beside electronics, manufacturing and processing, in recent years, many Japanese enterprises have been increasing their investment in Vietnamese sectors of agriculture, real estate, food. What’s your comment over this trend?
Vietnam is an important destination for Japanese investors. The JETRO survey found that about 70% of companies claim their desire to expand projects in Vietnam. This number is relatively high in comparison with other ASEAN countries. According to a survey in Japan, the number of companies that mentioned Vietnam as a base to expand the size of business has increased in recent three years.
When we analyzed the demand trends of Japanese firms at the JETRO office, we realized that the non-manufacturing sector accounted for about 70%. As Vietnam has a large market with more than 90 million people and the majority of population is young, the focus on the domestic demand such as education, agriculture, hotel/atering is expected to grow in the future.
Thank you very much!