Optimistic Prospects for Attracting Investment from Japan

According to statistics of the Foreign Investment Agency (Ministry of Planning and Investment), from 1^st January 2012 to 15^th December 2012, Japan became the largest investor of Vietnam, accounting for 13.6 percent of the total registered capital, followed by Taiwan, Korea and Singapore. According to experts of various fields, Japanese investors are interested in cooperating with Vietnam in areas such as manufacturing, processing industry, construction, ports, and transportation infrastructure.

 

Mr Hideaki Ohmura, Governor of Aichi Prefecture (Japan), said that in recent years, the number of companies from Aichi Prefecture coming to Vietnam has been increasing. In 2000, there were 21 offices and 18 enterprises of Aichi prefecture in Vietnam. In 2010 those figures increased to 74 offices and 60 companies. Vietnam also ranked third among countries attracting investment of enterprises of Aichi Prefecture, after China and Thailand.

 

The export turnover between Vietnam and Aichi Prefecture nearly doubled from 2005 to 2010. Specifically, in 2005, the export and import turnover between Vietnam and Aichi was JPY 99.2 billion. In 2010, it increased to JPY 191.5 billion. This is the result of a cooperation agreement to promote investment signed by the Ministry of Planning and Investment and Aichi Prefecture in 2008, and the establishment of the Aichi Support Desk in 2009, aiming to assist Aichi’s investors and enterprises to invest in Vietnam.

In the coming time, to tighten the cooperation relations and promote investment from Aichi to Vietnam, Aichi Prefecture leaders expressed their desire to cooperate in a number of areas such as human resources and health. Moreover, Aichi also wishes to increase the number of direct flights from Aichi to Vietnam. Aichi Prefecture has signed a memorandum of cooperation with the Ministry of Health of Vietnam. Soon there will be a meeting to discuss in more detail with Vietnam Airlines about increasing the number of direct flights from Aichi to Vietnam.

 

Mr Hideaki Ohmura said that Aichi is a large province of Japan, strong in industry. 40 percent of Japan industries are located here, especially the auto industry. In the province, there are also many small and medium enterprises producing automobile spare parts. Recently, Aichi enterprises also developed the aviation industry. Accordingly, 35 percent of spare parts for Boeing 787 aircraft are produced in Aichi Prefecture.

 

In addition, according to Mr Hideaki Ohmura, the investment criteria of Vietnam’s government in the near future will be attracting projects which are in favour of modern technology, environment friendly, and effective using resources, minerals and land. Vietnam’s government will also facilitate and strengthen links with local businesses, focusing on attracting investment into the fields of supporting technology, agricultural service industry, services having advantages with high knowledge content, information technology, science and technology services, education and training, and infrastructure development. On the other hand, it will limit investment into projects in the manufacturing sector which create trade deficit, consume energy and exploit without producing. Provincial government leaders of Aichi will continue to call Aichi enterprises to invest in Vietnam under this investment portfolio.

 

Mr Okubo, President, Executive Director of Forval Group, Japan, Chairman of the Special Committee on Supporting the Globalization of Japanese SMEs of Japanese Business Association, and Chairman of the Commission on Promoting SMEs of Tokyo Business Association, reviewed that to attract Japanese investors, Vietnam should gain experience in the construction of industrial parks following the criteria "an industrial park is not only an industrial park, but also an urban area."

 

Mr Okubo said that at present in Vietnam, the building of many industrial parks only focuses on the development of the industrial areas alone, without paying attention to the surrounding urban areas. However, some enterprises making investment in industrial parks have started paying attention to this issue and had paid more attention to surrounding urban infrastructure. He said that this will be a firm trend in the future. He also said in the coming time, Forval will access industrial parks and assess whether the industry has enough potential to develop such urban areas. Criterion in terms of size and factory area is also one of the highlights of attracting Japanese investment. As suggested from Forval, industrial parks should focus on building factories for rent covering an approximated area of 300 square metres. This scale will be suitable and easy for Japanese small and medium enterprises to use.

 

Forval Corporation is a Japanese company and also the Chairman of the Committee on Supporting Small and Medium Enterprises in Japan, with 240,000 members in its network throughout Japan. Particularly, the group has a great reputation in promoting investment, consulting Japanese investors to make investment worldwide.

Mr Okubo added that small and medium enterprises in Japan only have demand for small workshops, while in Vietnam’s industrial parks, the smallest workshops have area of about 1,000 sq. metres. The cost of building small firms can be more expensive than building really big ones, but to attract large number of investors from Japanese business, investors should also take reducing the area of their workshops into account. Besides, Japanese businesses also favour IT support by having many producers and media companies handle response, simplify registration procedure types (one way service in Japanese), support the recruitment and training of personnel in parallel with the construction of professional training, partner supporting (organizing seminars and helping partners to generate relationship) or support environmental policies.

 

To apply those ideas, recently on 25^th October in Hanoi, the signing of a strategic partnership between N&G (N&G Corp) of Vietnam and Forval Corp of Japan to develop Hanoi Southern Supporting Industrial Park (HANSSIP) took place, contributing to promoting the Vietnamese supporting industry. Accordingly, HANSSHIP is planned and designed according to supporting industrial standards of Japan by design group Nikken Sekkei Civil (NSC). This will be a supporting industrial park as well as an urban area, with integrated services, logistics and commercial centres, banks, hospitals and schools so that workers, professionals and their families feel like living for a long time with the development of businesses tied to HANSSHIP, a criteria that Japanese investors want.

In general, Japanese firms highly rate the investment environment of Vietnam, especially for political stability and abundant human resources. In addition, Vietnam has the advantage of convenient geographical location for the development of logistics, ports, and road transport to China and ASEAN countries. In addition, the Vietnamese government is promoting the Cai Mep - Thi Vai Port project which will help reduce transport cost between countries in the Mekong region. This is a good condition for Japanese logistics enterprises to invest in Vietnam to develop logistics services to the surrounding area, especially to transport goods to neighbouring countries.

 

However, Japanese companies also expect the Vietnamese government to pay more attention to the development of appropriate policies to attract investors and train high-quality human resources to meet the requirements of the Japanese business. Besides, the Vietnamese government should continue to have measures to support businesses regarding tax, land, human resource training, revision of the Land Law, Investment Law and Enterprise Law, creating a legal basis favourable for investors.

 

That the economies of the world and Vietnam continue to be subject to the difficulties in 2013 certainly will impact the automobile market in Vietnam in general and Toyota in particular. Hence, in 2013 the consumption of Toyota cars in Vietnam will also be affected by this trend. Specifically, Toyota's sales may be reduced. This requires the company to take measures to stimulate the market to attract customers in the coming year. On the macro level, the Government of Vietnam also has heavy-handed measures for the sake of its economy, such as tight monetary policy, high exchange rate and interest rate, which have caused some difficulties for Vietnam's automobile market.

 

In addition, the increase in fees for registration and road maintenance adopted by major cities such as Hanoi and Ho Chi Minh City will increase costs for car owners. So it is possible that the needs of the market will decline. Toyota will certainly have to review production plans in the coming year.

 

According to some experts, the real need for cars is still relatively high, with a significant shift in the segment market with more private cars than commercial vehicles despite the difficulties of the market.

 

In terms of automotive industry development orientation, Vietnam can build a strategic vehicle line for this industry to sustainably develop on a larger scale. However, the Vietnamese government should have a reasonable investment, in particular the development of mechanical engineering, and supporting industry to help domestic auto manufacturers to be competitive with foreign automotive brands.

Currently, Honda is focusing on the development of car models with the motto to create "interaction between people and cars," Honda wants each of its products to be not only a means of transport, but a companion in life, bringing harmony to mount. Vietnamese consumers are familiar with the brand Honda Civic, they will now have another choice of the City vehicle, which is the first car to be brought out to introduce outside Japanese territory. Earlier, the car appeared only at the Tokyo Motorshow. Through this, Honda would like to remind that Vietnam is also a very important market in the development strategy of Honda.

 

With the launch of several new models, Honda hopes to improve market consumption in Vietnam as well as worldwide. In addition, foreign car makers also expect the Government of Vietnam to soon have a complete legal framework, consistent policies, tariffs and charges.