Vietnam urged to particularise advantages to woo Japan's investment capital

CA - Japan, the largest bilateral donor in infrastructure development in Vietnam, is one of the top investors in Vietnam. But specialists say that these results are not commensurate with the potential and desire of both countries.

Statistics of Ministry of Planning and Investment's Foreign Investment Agency (FIA) shows that till Q1 of 2010, Japan had total 1,194 operational projects with total registered capital of over $18 billion in Vietnam, ranking fourth among 89 foreign countries and territories investing in Vietnam.

Noticeably, among these 1,194 projects of Japan in Vietnam, up to 60.4 percent and 86.8 percent is invested in the processing and manufacturing industry. Japan's FDI disbursement rate is pretty high compared with investment commitments of other countries. A series of top corporations of Japan such as Canon, Sony, Sumitomo, Suzuki, Toyota, Honda, and Mitsubishi made their entry early in Vietnam.

The investment to produce reliable and competitive products with high levels of technology to replace imports is considered one of the most outstanding characteristic of Japan's FDI projects.
Specialists said that when the global economy started to recover, the investment from Japan could return to Vietnam. And if the steel billet projects worth $ 1 billion of Kobe Steel Co Ltd in Hoang Mai Industrial Zone, Nghe An province is licensed, then many other big Japan investors will enter Vietnam in coming time.

According to the analysis of Japanese investors, Vietnam is very attractive because of not only political stability but also its activeness in opening the market under WTO commitments, especially in the service market. Population size is growing larger while the per capita income as well as consumer market is increasing also. Japanese enterprises previously only invested strongly in production and they will expand to many areas of services, telecommunications, finance - banking, and distribution.

A source from the Trade Promotion Organisation of Japan (JETRO) in Vietnam confirmed, quite a lot of Japanese companies came to the JETRO office to find out and seek consultancy on the investment in Vietnam's services sector.

The participation of Japan's experienced businesses in Vietnam's services is expected to affect directly the local firms and also bring more chances for consumers.

The country has witnessed a wave of investment flow from Japan into Vietnam in 2004-2006 with many big projects. However, according to the Foreign Investment Department, Japan's FDI capital in Vietnam only accounts for a small ratio of Japan's investment into Asean. In fact, some Japanese businesses wondered whether Vietnam could be the highest priority to draw up investment projects or not.

To particularise the competitive advantages, Japanese enterprises proposed that Vietnam needs to absolutely deal with four problems that are preventing their operations.

Firstly, Vietnam lacks qualified manpower and good managers. The labour move from rural to industrial sectors remains weak, Japanese experts assessed.

Secondly, Vietnam is short on the synchronic infrastructure system. Power shortages in industrial zones have been improved but still not completely tackled. Vietnam still lacks big seaports to transport goods to large markets while the cost of goods carrying by containers is relatively high. The living cost in Vietnam has increased rapidly as compared with three years ago.

Thirdly, the crude production (raw materials for production) has not developed so the in-place material supply ratio reached only approximately 30 percent. Call for small and medium enterprises to invest in this area is the best solution.

Lastly, due to the sudden changes and unclear applying of policies, many companies are not secured to do business.

In 2009, the effect of Vietnam-Japan Economic Partnership Agreement (VJEPA) created a new millstone for the bilateral trade of both countries. Most recently minister of Planning and Investment Vo Hong Phuc visited and worked in Japan through a series of meetings and dialogues with Japanese enterprises in order to woo the new investment flow from Japan.