Vietnam remains attractive destination, Jetro surveys

CA - "Vietnam is still attractive investment direction even more than China" said Koichi Hori, Dream Incubator Vietnam's chair of director board.

A recent survey made by the Japan External Trade Organisation (Jetro) showed that 58 percent of Japanese enterprises investing in Vietnam are expected to expand their business scope, higher than the Asean average level.

This figure is indeed an encouraging sign in the context of the world economy, including Japan, which has not really overcome the crisis yet.

Koichi Hori also pointed out a series of successful big companies such as Ajinomoto, Escock and Napkin.

Survey results also showed that the stability of political - society still continues to be the greatest advantage (with 64.5 percent) and then the scale and development prospects of the Vietnam market 47.8 percent), and cheap labour costs (37.7 percent).

In addition, biggest limitation being raised is the complexity of administrative procedures (67.2 percent), followed by uncompleted infrastructure (66.4 percent). The last group (49.6 percent) expressed concerns about the unclear policy management of Vietnam.

Jetro's survey report was released at the seminar on Vietnam's economy, held in Tokyo in the end of February by Jetro. This conference has attracted special attention of Japanese businesspeople and investors who plan to invest in Vietnam in coming time.

The Japanese economic specialists and business people investing in this Southeast Asian country, has focused on analysing the advantages and disadvantages of the internal economy of Vietnam.
While, the speakers almost did not find the new comparative advantages, the disadvantages, through their eyes, are remarkable results for Vietnam's policy makers and enterprises to reflect or reference.

Akira Hirano, Acecook's director of overseas investment, has pointed out five fundamental weaknesses of Vietnam including weak quality management system; uncompleted distribution system, unscientific working manner, the efficiency and transparency of the dealers and retailers, method of sales, monotonous promotion and marketing.

The final disadvantage relating to low quality of instant food (bread, noodle, seasoning powder), Akira Hirano said that this will be a good opportunity for Japan-based enterprises.
Meanwhile Hirota Nakanishi, overseas investment consultant of Jetro in HCM City, focused his analysis of Vietnam as a distribution and production market. He pointed out three main disadvantages.

Firstly, there is almost a vacuum of supporting industries, making the process of localisation of necessary accessories for production and assembly, become difficult. "This led to high price and, more importantly, the dependence on supply from abroad," Nakanishi emphasized.

Secondly, the consecutive increasing fluctuation of prices is also considered a disadvantage for foreign investors.
Thirdly, too far distance between the two economic centres of Hanoi and HCM City, especially in terms of shortcomings transport infrastructure, was the cause making weakness in necessary link to create overall economic power.

Specifically, Nakanishi mentioned subtle aspects of the "soft costs" in the field of real estate, and assumed that, with tight binding law of Japan, these "soft costs "were considered bribery or corruption.

"Thus, the advantage will tilt on the enterprises of the countries with softer regulations such as Taiwan or Korea." commented Nakanishi.

Nakanishi has also given some recommendations for Japanese enterprises. First, they should focus on the customer segment and specific consumption region.

Second, they have to study tastes of Vietnamese consumers. Finally, they should be careful in choosing native partners.