Japanese Investment in Vietnam to Rise in 2005

3:26:31 PM | 7/8/2005

In 2004, there were 57 Japanese FDI investment projects in Vietnam with registered capital of US$222 million, ranking third after Taiwan and the Republic of Korea. The total Japanese FDI has increased to 486 projects and nearly US$5.4 billion. In 2005, Vietnam will accelerate the implementation of Vietnam-Japan Joint Initiative with a more attractive investment environment.

Experiences of foregoers

According to some Vietnamese businesses, Japanese businesses pay first attention to the working style and business knowledge of Vietnamese managers such as workplace safety, product categories, office arrangement, etc. affecting business activities. To Japanese, everything is negotiable. It is in contrast with business conduct of Europe and America basing on fixed contracts and quality criteria, returning all disqualified products and looking for other partners. The Japanese try to find the causes of disqualified products and recommend remedy. Unlike American and Europe markets maintaining the same products for a long time, the Japanese require differences in styles and processing methods, stimulating the consumption.

Mr Ho Quoc Luc, Director of Fimex Vietnam, a seafood company with 20 years of business experience with Japan, advised that in dealing with Japan, Vietnamese businesses must have good knowledge in management, production, quality as well as in season, volume and categories of shrimp. The development must be from low to higher levels, from semi-processed to refined products. It is the stable roadmap to develop long-term business activities in Japanese market.

Japanese businesses are prudent in their investment. They often contact IZs and EPZs invested by Japanese companies or through reliable Japanese businesses to make their investments. According to Mr Nguyen Bach Khoa, Chairman of Than Ho Management Board, Japanese companies prefer long-term business partnership and it often takes long time to develop it. To attain Japanese partnership, Vietnamese businesses must be patient in their pursuit without doing by halves or turning to others half way. The knowledge of Japanese culture and language are of great advantages in dealing with Japanese businesses, Mr Khoa added.

Advantages in trade and investment

From 2005, Vietnam-Japan joint ventures will be allowed to participate in trade and distribution except on some products, and from 2011 they can have 100 per cent in foreign investment capital. Vietnam will also allow Japanese invested companies participate in the distribution of products of manufacturing companies and in such sectors as credit, insurance, telecommunication and advertisement. In addition, Vietnam will amend the trade law, reducing restriction on business activities, imported products and quota. The domestic and foreign investment laws will be merged and investors (including wholly foreign owned enterprises) will be free to choose the form of investment except in some areas. In certain cases, enterprises can reduce the investment capital. Foreign investors will have more freedom to import equipment without prior registration.

However, Prof. Kenichi Ohno, Director of Vietnam Development Forum, believed that beside conferences and seminars, Vietnam should have additional policies on marketing, advertisement and legal framework. The preferential treatment must be also applied to all major partners such as US, EU, ROK and Taiwan. In particular, Vietnam should hire companies in the region to attract investment from the same region.

The “Vietnam-Japan Joint Initiative” promoted by Prime Minister Phan Van Khai and Prime Minister Junichiro Koizumi at their meeting of April 2003 will be implemented to increase competitiveness and foreign investment in Vietnam. The two countries have developed a plan of action of 44 sections and 125 items with two parts: implementing a strategy of foreign investment and specific measures to improve the investment environment. The plan has been officially implemented since December 2003. The committee of the two countries will meet every six months to review the improvement of the investment environment and recommend new measures.

So far, progress has been made by the Vietnamese side: 20 items have been completed (including the Competition law and a new policy on land) and 65 items are on schedule (including personal income tax, fees regarding foreigners, preferential treatment on foreign business income tax, common investment law).

According to the Ministry of Planning and Investment, when the plan is implemented, the investment environment in Vietnam will be more liberal and attractive to foreign investors. In particular, it will be a great opportunity for Japanese investors as the preferential treatment will be reinforced by the implementation of the Investment Protection Agreement between the two countries.