Japanese businesses optimistic about Vietnam

According to JETRO Hanoi Chief Representative Atsusuke Kawada, the survey revealed that 58.8 percent of respondents said they made profits, and 63.9 percent intended to expand their operations in Vietnam. Despite a slight decrease compared with 2014, the percentage of Japanese businesses wanting to expand operations in Vietnam was higher than in other countries such as China (38.1 percent), Malaysia (44.6 percent), and Thailand (49 percent). Notably, two out of every three non-manufacturing businesses believed Vietnam had very high potential.

Regarding favorable conditions for investment, 57.7 percent of respondents said labor costs in Vietnam were low, while 54.9 percent said the political and social situation in Vietnam was stable. Three quarters of Japanese people working in Vietnam said they felt satisfied with living here.

Regarding investment barriers, 63.3 percent of respondents said the legal system in Vietnam remained inadequate and lacked transparency; 61.1 percent complained about complicated administrative procedures; 54.6 percent said labor costs were increasing; and 53.9 percent felt unsatisfied with complicated tax mechanisms.

In the manufacturing sector, the survey revealed firms benefited from a 32.1 percent localization rate for materials and components, compared to 26.2 percent in the Philippines, 65 percent in China, 56 percent in Thailand, and 41 percent in Indonesia. Kawada said that over the past five years Vietnam had made greater efforts to increase the localization rate from 22.4 percent to 32.1 percent, while Thailand, the Philippines, Malaysia, and Indonesia had actually stepped backwards.

The supply of materials and components from Vietnamese companies for Japanese businesses slightly decreased from 43.5 percent in 2014 to 41.2 percent in 2015. Kawada said Japanese businesses wanted Vietnamese companies to supply them with more materials and components so that they could minimize manufacturing costs.

These results also showed that 32.7 percent of Japanese businesses in Vietnam exported 100 percent of their products in 2015, with 62.5 percent exporting to Japan, up 4.2 percent compared with 2014, while the percentage of businesses exporting to ASEAN countries slightly fell, from 19.7 percent in 2014 to 18.3 percent in 2015.

Vietnam’s deepening integration into the global economy has brought new hopes to Japanese businesses investing in the country. Sixty-four percent of respondents expected the ASEAN Economic Community would help simplify customs procedures, while 31.7 percent hoped Cambodia, Laos, Myanmar, and Vietnam would eliminate import taxes.

Nearly 70 percent of respondents expressed high expectations thanks to trade facilitation and tariff changes; 34.5 percent expected opportunities to access commodity markets, and 27.5 percent showed expectations that rules of origin would improve the situation.

In his recent meeting with Vietnamese Deputy Minister of Industry and Trade Do Thang Hai, Kawada said the Vietnamese government needed to make greater reform efforts in the time to come to improve the investment and business environment. Notably, Vietnam needs to promote support industries and apply suitable policies that offer support for small and medium-sized companies that supply materials and components for Japanese businesses.

Nguyen Phuong