In 2000, Vietnam ranked eighth in Japan’s overseas investment list but jumped to fourth place in 2005 after China, India and Thailand. It also ranked second on the overseas investment choice list of Japanese small and medium enterprises.
Over US$6.2 billion into Vietnam
From 1988 to 2005, Japan injected US$6.2 billion into Vietnam, of which US$4.5 billion investment (or 74 per cent) has been realised. The investment capital disbursement rate was the highest among countries pledging to invest in Vietnam.
In 2005, Japan invested in 97 projects with an aggregate capital of US$400 million, ranking third after South Korea and Hong Kong. In fact, Japan ranked first because many Hong Kong investors were based on Japanese capital.
The political stability and the increasing GDP growth from 5.8 per cent in 1998 to 7.5-8.5 per cent in the 2000s have left a good impression on Japanese investors and are also factors to encourage Japanese enterprises to expand business scales in Vietnam when this country enters the World Trade Organisation (WTO) and improves bilateral trade relations with the United States.
Furthermore, Japanese investors want to avoid risks and redistribute investment from China. Relations between China and developed nations have unresolved conflicts, such as a critical reminbi-USD exchange rate policy.
Fewer too cautious surveys
According to the survey conducted by the Japan External Trade Organization (JETRO) in early 2006, Vietnam is now the first choice for Japanese investors to move to from China.
The core factors for industrial production like electricity, scarcer water and increasing labour costs, lead to quicker investment movement from China to Vietnam. Japanese industrialists have regarded Vietnam as a new base to supply the Japanese market and other countries.
The investment redirection choice from China into Vietnam also means a more rational rearrangement for Japanese overseas investment, which brings more benefits to Japanese investors.
The Asian Development Bank (ADB) firmly forecast that the GDP growth of Vietnam will remain between 7.8-8 per cent in 2006 and many following years. This statistic will persuade Japanese enterprises to move more quickly without the previous hesitation.
The encouraging voices from the international community during the Consultative Group (CG) mid-term meeting in Nha Trang City showed that although Vietnam encountered fairly serious corruption, international organisations and nations still provided support and continued providing official development assistance (ODA) capital and long and medium-termed loans for Vietnam after its government pledged to resolve this issue.
Hope pinned on new investment wave
The survey of the JETRO in 2006 showed that Vietnam now has the advantage over India and Thailand. However, Vietnam still needs customs procedure simplification and intellectual property observance to improve the investment environment.
Hence, listening to constructive ideas from investors to further improve its good business investment, including administrative formality reform and unnecessary procedure removal, is a lever to not only lure more Japanese investors but also form a new investment wave when Vietnam is officially admitted to the WTO by the end of this year and is the host of the APEC 2006 Summit in November.
Six favourable conditions for Vietnam to attract Japanese investment
1) A market of 85 million people with increasing purchasing power, especially for light industrial products, consumer goods and electrical home appliances.
2) Vietnam is suitable for labour-intensive processing and assembling industries, which need medium-scaled investment (US$50-150 million); for example: Canon, Honda, Nippon Steel Glass, Suzuki and Sumitomo Electric Industries.
3) An investment reception policy with perfected legal system enables Japanese investors to save time and money.
4) Infrastructure systems like transport, port, communication and electricity systems have been significantly improved in the past 10 years. In particular, the development of the construction sector helps reduce construction costs for production factories, lowering overall initial investment.
5) The taxation system has been further rationalised, with clear priorities for foreign investors, especially for enterprises in export processing zones.
6) Sufficient supplies from Vietnam help reduce production costs as well as reliance on mother companies abroad.
Vietnamese
