Asia Business Channel

Japanese companies plan to expand in Vietnam

The Japan External Trade Organization (JETRO) has just released its “2017 Survey on Business Conditions of Japanese Companies in Asia and Oceania” and reports that Vietnam continues to be an important investment destination for Japanese businesses and that two-thirds of Japanese firms currently operating in Vietnam have plans to expand their operations.

The survey was conducted from Oct.10 ~ Nov.10, 2017 in 20 countries and JETRO asked 12,000 Japanese enterprises to provide feedback. In Vietnam, 1,345 Japanese businesses were asked to participate and answers to the survey were provided by 650 companies.

According to the survey, 69.5% of Japanese firms have mulled expansion plans in Vietnam and Vietnam is seem favorably given the country’s expanding market size, social and political stability, and low labor cost, factors that have allowed companies to expand their revenues in the country.

The report also states that this is the third consecutive year that Vietnam has become the country where Japanese firms want to expand their operations the most. The rate was 63.9% in 2015 and 66.6% in 2016. This year’s expansion rate of 69.5% is the highest rate among the 20 countries that were surveyed.

Takimoto Koji, head of JETRO’s representative office in Ho Chi Minh City said that 65.1% of Japanese firms in Vietnam were profitable last year, up 2.3% points compared to 2016. However, Koji also said that Japanese enterprises are unsatisfied with Vietnam’s incomplete legal system, and complicated taxation and administrative procedures. Japanese companies also have concerns over increased labor costs and Koji suggested the Government should have more incentives for supporting industries.

Japan was the largest investor in Vietnam during 2017 and accounted for 35% of total foreign direct investment into the country. During 2017 there were 367 Japanese-invested projects approved with total registered capital of $7.75 billion USD. This represents a 700% increase in investment when compared to 2016.

The dramatic increase in Japanese investment is related to three large-scale projects: the Van Phong 1 thermal power project in Khanh Hoa Province, which is projected to cost $2.6 billion USD; the Nghi Son 2 thermal power project in Thanh Hoa Province which is projected at $2.9 billion USD and the Block B-O Mon gas project in Kien Giang Province with a value of $1.3 billion USD.

Overall, the manufacturing industry took the lead in attracting Japanese investment, and accounted for 40% of the total. Other key industries were real estate with 23% of the investment total along with food & beverage, hospitality, logistics, transportation and retail.

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