Southern hub prepares for FDI wave from Japan

Also, the chronic flooding problems of Thailand and the devastating tsunami that struck Japan are other reasons that Japanese companies are looking towards Vietnam as a good place to set up factories and do business.

Yasuzumi Hirotaka, managing director of Japan External Trade Organization (Jetro), told VIR that Vietnam should anticipate another big wave of investments from Japan. Already, Japan is ranked top in foreign direct investment (FDI) to Vietnam in the first half of 2012, and the interest of Japanese corporations to Vietnam has been increasingly vigorous.

Murakami Daiken, chairman of Japan Business Association in Vietnam, agreed that Vietnam might see expanded investment flows from Japan.

"We are concerned about current situation between Japan and China. It is a fact that Japanese companies operating in Vietnam depend on parts supply or products from China,” said Daiken.

However, this investment movement would take time and Vietnam needed to improve its competitive edge to take advantage from this situation, Hirotaka said.

"The Japanese companies do not have ideas to remove quickly their facilities from China to Vietnam. They watch the situation and also repeat the assessment of their own country risks,” he said.

"After that there would be some companies that will try to spread their risks and as a result, decide to newly invest or to expand their facilities in Vietnam. This would also be the case of Thailand. This movement would be very slow, not quick,” Hirotaka stressed.

In order to attract more Japanese firms, he said, Vietnam needed to create a better investment environment by developing supporting industries while also enhancing administrative reforms and focusing on "after care” of existing Japanese investors.

According to Jetro, Vietnam’s to-do list should include higher efficiency and transparency of state-owned enterprises, improved infrastructure, deregulation to foreign-invested companies, and a better financial environment for supporting industries. Moreover, Vietnam would need a realistic national industrial strategy, they said, instead of overly ambitious or distant goals.

"We are facing the 2015 unification of markets of Asean. I wonder if Vietnam can gain in this big event. The key word is speed,” said Hirotaka.

In order to effectively support and attract foreign investors, Vietnam should improve supporting industries to provide materials, chemicals and other additives to foreign firms, said Yamashita Takanori, general director of Japan’s Fujitsu Vietnam, developer of a $199 million printed circuit board manufacturing plant in Dong Nai.

Vietnam should pay attention on "after care” with existing Japanese investors to convey a positive image of investment destination and progress in terms of administration, taxes and customs, said Tao Takeda, general manager of NSK Vietnam, Japan-backed garment and textile supporting industry company in southern Long An province.

In this context, southern hub provinces tout several initiatives to lure investment from Japan.

Ho Chi Minh City Department of Planning and Investment said it was urgently working on plans to develop a Vietnam – Japan industrial park (IP) specialised to attract Japanese investments into supporting industries.

Moreover, new IPs such as Le Minh Xuan 2,3, Vinh Loc 3, Xuan Thoi Thuong, Hiep Phuoc phase 3, Hoa Phu, Phuoc Hiep in the city will be developed to accommodate Japanese-invested projects, according to the department.

Dong Nai is also boosting infrastructure investment. Based on the success of Long Duc IP – the first IP specialised for Japanese investment in the province, Dong Nai plans to call for Japanese developers to jointly invest in other IPs to lure more investments from Japan, according Nguyen Phuong Lan, vice director of Dong Nai Industrial Zones Management Authority.

Dong Nai had long defined Japanese investors as a key target and has established a well-supported Japanese business circle in the province, said Bo Ngoc Thu, director of Dong Nai Provincial Department of Planning and Investmen.

In Long An, the construction of Duc Hoa 3 – Silico IP has been 90 per cent complete, including basic infrastructure such as water treatment, electricity supply and internal roads. A final push could help attract Japanese investments, said Yoshio Yamamoto, representative of the Duc Hoa 3 – Silico developer.