Vietnamese and Japanese businesses are moving in the same direction.

For six consecutive years, Vietnam has held the second position as the country where Japanese enterprises want to expand their business and production.

Chief Representative of Japan External Trade Organization, Representative Office in Hanoi Nakajima Takeo. (Source: VGP)

Mr. Nakajima Takeo, Chief Representative of Japan External Trade Organization, Representative Office in Hanoi (JETRO Hanoi) commented so to TG&VN in a recent conversation.

Up to now, Japan has more than 5,000 projects with a total investment capital of nearly 70 billion USD, accounting for 15.7% of total registered foreign direct investment (FDI) in Vietnam. The Land of the Rising Sun is currently the third largest foreign investor out of 143 countries and territories investing in Vietnam. How do you evaluate this result?

By September 2023, cumulative foreign investment in Vietnam (calculated by total newly registered and expanded investment capital, excluding investment and share purchase) ranked by country: South Korea ranked first, Singapore ranked second, Japan ranked third. The top three countries are the main investment drivers in Vietnam. Japan ranked third in terms of investment volume and second in terms of number of projects. This shows that the Land of the Rising Sun is an active investor in Vietnam.

Japan's share of total FDI capital was 15% 10 years ago and is now at 15.7%. The level of investment in the S-shaped country has increased steadily, and the number of projects has also increased significantly. Japanese investors have brought new investments to Vietnam, on a large scale such as power plants and infrastructure projects or investments by small and medium enterprises (SMEs).

The Japan Chamber of Commerce and Industry in Vietnam has the largest membership in ASEAN, with 2,000 companies. There are about 560,000 people in Vietnam working for Japanese companies who receive social insurance. It is clear that Japan contributes significantly to the welfare of the people and the stability of Vietnamese society.

According to many international organizations and economic experts, Vietnam is currently an attractive destination for Japanese investors. What is your assessment of Vietnam's business investment environment?

JETRO’s survey shows that for six consecutive years, Vietnam is the second country where Japanese companies want to expand their business and production. In my opinion, there are three reasons why the S-shaped country is an attractive destination for Japanese investors.

First, its attractiveness as an export base. Vietnam has signed 15 Free Trade Agreements (FTAs) worldwide and imports and exports benefit from low or no tariffs. The volume of trade through the ports of Hai Phong and Ho Chi Minh City is huge.

In the list of the world's top 30 container ports by throughput in 2022, Ho Chi Minh City seaport holds the 21st position. Besides, the industrial parks have competitive costs and excellent workforce.

Second, the attractiveness of the market. According to our survey, 74% of respondents said that the most significant advantage of investing in Vietnam is the potential for market growth.

The S-shaped country has very high expectations for the consumer market, the B2B market (a form of business, direct transactions between businesses and businesses), government infrastructure projects and solving social problems.

Third, attractiveness as a cooperation partner. Typically in the digital field, Japanese and Vietnamese enterprises are increasingly cooperating and doing business regardless of country or location. Digital cooperation in finance, healthcare, logistics and e-commerce is developing strongly.

Vietnam is an attractive destination for Japanese investors. (Source: AEONMALL)

Are there any restrictions for Japanese investors operating in Vietnam, sir?

Vietnam still has certain limitations. For example, core inflation remains high at nearly 4% and wages of FDI enterprises are increasing by about 6% per year. 75% of Japanese companies in Vietnam consider salary increases a challenge. Office rents, energy prices and logistics costs are also increasing.

At the same time, recruiting and retaining top talent is becoming increasingly difficult. We hear companies say they can’t hire good people unless they pay above-average salaries.

Various administrative procedures are also an obstacle for businesses. 66% of Japanese businesses find that ineffective administrative procedures are a problem in Vietnam. With economic growth and FDI inflows, the country must expand its contact points, but the number of administrative staff remains low.

In addition, the issue of electricity security, especially in the Northern region, is a risk to production activities. If the electricity suddenly stops or the voltage fluctuates, it can lead to significant losses for the business.

Attracting high-quality investment has always been the goal that Vietnam wants to aim for. In your opinion, what should Vietnam do in the coming time to welcome high-quality investment capital from Japan?

To cope with rising costs in Vietnam, Japanese companies are increasing productivity and producing high value-added products through human resource development, labor savings, automation and digitalization. In this sense, businesses from both countries are moving in the same direction.

However, the transition to high value-added production is difficult, even in developed countries. The transition to high value-added production has not really been realized.

However, Vietnam has a competitive advantage and attractiveness thanks to low production costs.

Many FDI enterprises are reviewing and strengthening their supply chains due to the uncertain global situation. Global companies regularly and strictly check greenhouse gas emissions and environmental impacts at each stage of the supply chain. Meanwhile, production networks also need smart logistics networks. In developed countries, many logistics facilities are built along highways and railways.

JETRO is the Secretariat for the Japanese Government's Supply Chain Diversification Fund. JETRO sees Vietnam as an essential hub in the production network of Japanese companies.

Therefore, in the future, we believe that the S-shaped country needs to focus on developing the green energy/power grid and logistics. To accelerate this trend, Vietnam needs more green energy supply and stable electricity sources.

Thank you!

Source: https://baoquocte.vn/doanh-nghiep-viet-nam-va-nhat-ban-dang-di-cung-huong-248431.html