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Japanese firms eye retail market
Vietnam and Japan’s free trade agreement, which comes into force next month, is paving the way for Japanese firms to shift their investment model from a manufacturing base to retail.
Under the agreement signed late last year, the two countries will cut tariffs on some 92 percent of goods and services over the next decade.
The pact has encouraged Japanese investors to take a hard look at the 85 million strong market after being hit by a recession back home in the world’s second-largest economy.
The shift has been pronounced. From the cheap-labor driven manufacturing investments of the early 00s to the opening of trading companies today, Japanese firms are looking to cash in on Vietnam’s surging per capita income.
“Japanese investors have changed the way they approach (the) Vietnamese market,” Hirota Nakanishi, an investment consultant for Japan External Trade Organization in Ho Chi Minh City, said.
“Only 50 percent of Japanese investors to Vietnam are active in (the) manufacturing sector compared to 80 percent before.”
Highlighting the trend was Sharp Electronics decision to establish a wholly-owned company in Vietnam last month. Sharp Electronics (Vietnam) Company Ltd or Sharp Vietnam will import, distribute, retail and do after-sale services of Sharp products.
“I expect the average annual income of Vietnamese in major cities such as Hanoi and Ho Chi Minh City to reach US$2,500 - $4,000 this year,” Masashi Kubo, Sharp Vietnam general director told Tuoi Tre newspaper.
“This is one of the reasons that Japanese firms like Sharp have their eyes on Vietnam.”
Cao Binh, head of the Hachi Hachi Shop in HCMC which sells Japanese imports, said merchandise had doubled to 4,000 varieties compared to two years ago.
“Before I had to place big orders to catch the attention of Japanese producers,” Binh said. “But now they even accept an order for about 500 items.”
A report from HCMC Department of Industry and Trade showed that Japanese businesses have opened some 64 representative offices in the city during the past two years, most of which are import and export businesses.
Professor Tran Van Tho of Waseda University in Tokyo said the shift from manufacturing to trade is an expected move for companies looking at their bottom lines.
Vietnam-Japan trade turnover reached more than US$15.5 billion last year, with Vietnam’s exports to Japan reaching $8 billion and Vietnam importing $7.5 billion of goods and services from Japan.
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