10:20 | 25/07/2015 Economy
(VEN) - Japanese direct investment in Vietnam has declined in the last two years for many reasons including the underdevelopment of support industries.
Canon Vietnam has spent US$40 million annually on import of foreign molds for production in Vietnam
Japan, no longer number-one investor
Japan was Vietnam’s top investor during 2012-2013, with US$5.23 billion worth of direct investment capital accounting for 39.5 percent of total foreign direct investment (FDI) capital in 2012 and US$5.7 billion and 26.6 percent in 2013. However, the figures dropped to US$2.05 billion and 10.1 percent in 2014, leaving Japan in fourth place among the 60 countries and territories investing in Vietnam, trailing the Republic of Korea, Hong Kong-China and Singapore.
According to the Ministry of Planning and Investment’s Foreign Investment Agency, Vietnam attracted US$5.49 billion in FDI from 48 countries and territories in the first half of this year. Of these, Japan took fifth place with US$496 million accounting for nine percent of all FDI capital, compared with the Republic of Korea which surged into the lead with US$1.52 billion and 27.6 percent.
Support industries remain a bottleneck
According to the Japan External Trade Organization (JETRO), reasons for the sharp decline in Japanese investment capital vary including the low local content of made-in-Vietnam products. The localization rate for products reached only 33.2 percent in Vietnam compared with 66 percent in China.
At a recent meeting with the Vietnamese Ministry of Industry and Trade, Canon Vietnam General Director Soma Katsuyohi said that Canon Vietnam has spent US$40 million annually on import of foreign molds for production in Vietnam, which has cost a lot of time and money. Canon Vietnam wants Vietnam to strongly develop support industries to make it possible for Canon to increase the localization rate.
JETRO’s surveys carried out in 2013-2014 showed that 65 percent of Japanese investors in Vietnam intended to expand their operations. The rate was much higher than several other countries in the region and provided hopes for Vietnam to attract Japanese direct investment capital.
Many Japanese businesses said that the investment environment in Vietnam is improving, the macro economy is becoming stable, and power and transport infrastructure is being upgraded. Vietnam has also strived to improve the investment environment in a transparent and more open manner. Many Japanese investors want to become strategic investors in Vietnam to contribute to creating new values and developing the economy. However, at the Mid-term Vietnam Business Forum which was held in June 2015, Japan Business Association in Vietnam Chairman Shimon Tokuyama said that to make support industries no longer a bottleneck in attracting foreign investment, Vietnam needs to give them a boost. Once support industries grow, they would help improve the investment environment, reduce trade deficit, increase tax revenues and improve the current financial status, Shimon Tokuyama said.
According to the Ministry of Planning and Investment, Japanese businesses had invested in Vietnam via 2,661 projects with total registered capital of US$33.7 billion, ranking second among the 103 countries and territories investing in Vietnam.