The Japanese External Trade Organization (JETO) has recently rated Vietnam as Japanese firms’ favorite alternative investment destination to China among seven Asian nations, when branching out to lessen their over-dependence on the fast-growing economy.
JETO’s survey is based on 966 responses from 1,865 questioned Japanese-affiliated firms operating in India and six member countries of the Association of Southeast Asian Nations - Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
At 38.3 per cent, Vietnam had the highest percentage of firms that said they were taking measures to cope with risks resulting from doing business in and with China, followed by the Philippines at 26.1 per cent, Thailand at 21.6 per cent and Singapore at 20.2 per cent.
Vietnam also ranked first in both the number of companies planning to expand production and the number of respondents that will transfer part of their production to the country from China.
Particularly, Vietnam was the only country where the proportion of firms that said manufacturing costs are lower than in China topped 50 per cent, standing at 56.1 per cent.
Companies operating in Vietnam that said manufacturing costs are lower than in China by 10 per cent or less accounted for 22.8 per cent, while 26.3 per cent said manufacturing costs are over 10-20 per cent lower. In addition, 7 per cent said such costs are more than 20 per cent less.
Moreover, Vietnam also came second (cited by 199 firms) after Thailand (237) regarding the best location for establishing a production base over the next five to 10 years, exceeding India (110) and China (100).
The Philippines was favored most among Japanese companies planning to expand suppliers of raw materials and parts to countries other than China. India was placed first in terms of the number of companies that will diversify their export destinations outside of China.
Asked to compare the investment environment in China with that in other countries, companies operating in Singapore valued the country higher than China in all 11 categories, including political and social stability, and the taxation system.
Those in Thailand said the country is superior to China in 10 categories, while respondents in Malaysia valued the country higher than China in nine categories.
Many Japanese firms doing business in India and the Philippines said that though employees' communication abilities in the two countries are much higher than their counterparts in China, the countries are inferior to China in terms of the "development of supporting industries" and the "level of researchers and engineers."
Most Japanese firms operating in Indonesia view the country as inferior to China in all categories.
In China and India in particular, many firms expect their operating profits to grow this year thanks to higher sales on strong domestic demand.
Japan now ranks third among Vietnam’s largest investors with 621 projects totaling nearly US$6 billion. In the first three months of this year alone, the Southeast Asian nation welcomed 35 Japanese projects with combined registered capital of US$118.34 million.
Nikkei Weekly, Vietnam Panorama
Vietnamese
