Japanese firms want long-term operations in Vietnam

09:10 | 05/07/2019 Economy

(VEN) - In a talk with Vietnam Economic News’ Quynh Thoa regarding the development of support industries, Hironobu Kitagawa, Chief Representative of the Japan External Trade Relations Organization (JETRO) in Hanoi, said further policy improvements would enable Vietnam to create a more attractive investment environment and become a long-term investment destination for Japanese companies.

japanese firms want long term operations in vietnam
Hironobu Kitagawa, Chief Representative of the Japan External Trade Relations Organization (JETRO) in Hanoi

Vietnam has achieved significant initial results in developing support industries. What do you think of the localization rate in this sector?

The localization rate in Vietnamese support industries keeps increasing. Japanese buyers highly appreciate Vietnamese suppliers. However, while the localization rate at Japanese companies in Vietnam is 36.3 percent, that at Japanese companies in China and Thailand is 66 percent and 57 percent, respectively. Japanese manufacturers in Vietnam have to import components from other countries. This increases their manufacturing costs and makes it difficult for them to maintain medium and long-term operations in Vietnam.

Therefore, the Vietnamese government should increase support for domestic manufacturers and identify specific sectors for which support industries need to be prioritized. Vietnamese companies are becoming stronger in terms of skills and technology. Suitable government policies can help bring this business advantage into play.

What should Vietnamese manufacturers do to meet the strict requirements of Japanese companies?

When they invest in Vietnam, Japanese companies pay attention primarily to human resources. Therefore, in my opinion, Vietnamese companies should be aware of the strengths and weaknesses of their human resources so as to provide them with additional training on a timely basis. Vietnamese companies should cooperate with reliable Japanese partners to learn from their technologies.

The number of industrial manufacturing facilities moving away from China keeps increasing. What should Vietnam do to attract more Japanese investors in this context?

Japanese investors choose Vietnam because they believe Vietnam is a potential market where they can find a favorable investment environment and ease of doing business. They decide to move their manufacturing facilities from China to Vietnam not because China has no advantages nor due to the impact of the US-China trade war, but because they want to find a place to maintain long-term operations.

Japanese companies like the investment environment in Vietnam. Therefore, I think Vietnam should further improve its investment environment to attract more Japanese companies to invest in manufacturing sectors. I believe Vietnam’s high-tech manufacturing capability will be recognized worldwide if it pursues this goal and makes suitable adjustments to its investment policies.

Quynh Thoa