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Welcoming carpet laid out for powerhouse foreign SMEs
Vietnam is in a great position to lure investment from Japanese enterprises and build up its fledgling supporting industry.
However, experts warn it won’t be all plain sailing. According to Japan’s Small and Medium Enterprise Agency, there were 220,000 companies operating in the Japanese manufacturing industry. Of which, merely two per cent have invested in foreign countries. This means there is great scope for Vietnam to lure Japanese investors into its supporting industry.
“While Vietnam is focusing on developing its supporting industry, many Japanese small- and medium-sized enterprises (SMEs) seeking ways to expand their production abroad to diversify risks owning to natural disasters and the high value of the yen. This makes the conditions favourable for Vietnam to attract these businesses,” said Japanese ambassador to Vietnam Tanizaki Yashuki.
Makoto Ryouke, assistant director of Manufacturing Support Division in Osaka, said Japanese SMEs faced many difficulties inside the country so they were looking for investment opportunities abroad, with Vietnam and Thailand being top choices.
“I come from Osaka – the city has selected Vietnam as its leading partner and top priority for SMEs [interested] in investing in South East Asian nations. In Vietnam, Japanese investors find cheaper labour costs and lower infrastructure fees,” Ryouke said. Up to 75 per cent of Osaka’s SMEs are targeting Vietnam as their South East Asian production base.
Meanwhile, Vietnam’s Deputy Minister of Planning and Investment Nguyen Van Trung said: “The character of Japanese SMEs is very suitable with Vietnam’s investment attraction orientations. We will now try to create more favourable conditions in terms of infrastructure, legal framework and incentives for Japanese SMEs.”
Kenichi Ohno, leader of GRIPS-NEU Research Project, a collaborative project involving Japan’s National Graduate Institute for Policy Studies (GRIPS) and Vietnam’s National Economics University (NEU), said despite improvements over recent years, Vietnam’s investment environment lagged behind that of its neighbours such as Thailand and Malaysia.
“When investing in Vietnam, Japanese SMEs still encounter several difficulties. Industrial park infrastructure in Vietnam has failed to meet Japanese investors’ requirements. Electricity shortages and blackouts remain a big barrier to Japanese businesses operating here,” Ohno said, adding that “improving infrastructure and the workforce’s skills are urgent tasks.”
Atsushi Uehara, president of Long Duc Investment – a Vietnam-Japan joint venture developing $100 million Long Duc Industrial Park in southern Dong Nai province, said that to accelerate Japanese investment into supporting industries, the Vietnamese government should immediately issue new regulations on tax incentives for foreign invested projects. Construction of Long Duc Industrial Park, which prioritises attracting Japanese supporting industry investors, was kicked-off on March 19.
According to the Ministry of Planning and Investment’s Foreign Investment Agency, by February 20, 2012, Japan had 1,692 investment projects in Vietnam with the total registered capital of more than $24.7 billion, outstripping Singapore to become the biggest foreign investor in the country.
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