A survey on business conditions of Japanese companies in Asia and Oceania released by the Japan External Trade Organisation (JETRO) in Hanoi showed optimistic signals that 63.9 % of Japanese enterprises in Vietnam are planning to expand their business in the coming years. In case of business relocation, Vietnam is the first choice of Japanese enterprises (accounting for 42.3% of enterprises).
Thus, this is the third consecutive year, Vietnam has become an attractive destination to Japanese investors and these enterprises continue to place high expectations on the potential and growth possibility of the Vietnamese economy.
During the 30-year period of attracting foreign direct investment (FDI), capital inflow from Japan has always occupied an important position, which has been increasingly diverse and pouring into areas that Vietnam is paying much attention to.
|The production of semiconductor devices at MTEX Vietnam, a subsidiary of Japanese MTEX MATSUMURA Corporation. (Photo: SGGP)
Japanese enterprises are evaluated to operate effectively and seriously while complying well with the laws of Vietnam, contributing to promoting economic growth and creating jobs for locals.
Working style and skills of Japanese enterprises are always appreciated while Japanese investment projects in Vietnam run effectively with good technologies. Japanese investment is considered a high-quality capital flow and has become a model for the cooperation relationship between Vietnamese enterprises and FDI enterprises.
In particular, Japan has maintained a high and stable rate of investment in Vietnam and has always been one of the two leading FDI countries in Vietnam for many years.
But in 2019, investment capital from Japan decreased to the fourth position in the list of countries and territories investing in Vietnam, the lowest position in the past five years. Notably, this decline occurred in the context that Japan has continued to increase investment in Asian countries.
On a global scale, Japan has replaced the US to become the world’s largest country investing abroad as it has maintained an investment scale of more than US$100 billion over the past eight years.
While many companies have been moving out of China, Vietnam is still not in the choice of large enterprises because Vietnam remains at the middle level of the regional and global production chains. This fact requires more effort from Vietnam to attract Japanese investment as expected.
For many years, recommendations of Japanese enterprises have focused on improving the investment and business environment, developing supporting industries and improving the quality of labour training.
Investors believe that the biggest risk they may face is the unilateral withdraw of incentives when policies change, complicated and overlapped administrative procedures, limited supply of electricity, and delays in investment and payment for infrastructure projects.
56% of enterprises also said that they still encountered difficulties in purchasing components, accessories and materials from the Vietnamese market even though they wish to expand purchasing from the domestic market and this rate hasn’t changed compared to previous years.
In order to take full advantage of and absorb the ‘wave’ of Japanese investment as well as attracting new-generation FDI capital, the Government needs to improve the institution and remove difficulties and obstacles that enterprises have recommended.
In particular, special attention should be paid to comprehensive solutions regarding enhancing the business environment, improving labour quality and developing supporting industries.