Vietnam prepares to welcome investment wave from Japan

The earthquake in March 2011 in Japan and the current serious floods in Thailand have forced Japanese manufacturers to reconsider their investment strategies. Especially, they are planning to relocate production factories to Vietnam.

More and more Japanese businessmen have arrived in Vietnam in recent days to consider the possibility of setting up their manufacturing factories in industrial zones in the country.

“A lot of Japanese businessmen have come to Vietnam following the introduction of the Japan External Trade Organization JETRO or consultancy firms. The question they always pose to us is whether Vietnam suffers from floods,” said Than Thanh Vu, Chair of Sao Khue investment consultancy firm.

A lot of Japanese investors in Thailand, including Honda, Canon, Nissan, Hitachi and Toshiba, have to halt production due to the 70-year historic flood in the country, according to Bloomberg newswire.

At present, Japan remains the biggest foreign investor in Thailand. Some Japanese companies have sent words that they may have to relocate the production factories to other countries, if the infrastructure in Thailand cannot be improved.

In fact, relocating the production factories to Vietnam had been considered by Japanese companies before the historical flood took place when drawing up long term development strategy. The labor cost in China has increased, while in Japan, the manufacturers are facing the yen appreciation, the high labor cost and the natural calamities. Therefore, Vietnam and Indonesia have become favorite places for Japanese manufacturers to set up production bases.

According to Vu, Japanese investors like to make investment in Vietnam not only because of the low cost, but also because of the cultural similarities.

In fact, Japanese real estate developers have anticipated that the number of Japanese investors who come to Vietnam to set up production bases would increase. Therefore, they have flocked to Vietnam to develop industrial zones to welcome the investors from Japan. Sojitz, Daiwa House and Kobelco Eco-Solutions have invested 100 million dollars in the Long Duc industrial zone in Dong Nai province, hoping to attract 100-150 Japanese enterprises.

Jesco, an infrastructure investor, last week announced that it would contribute capital to develop Long Hau 4 Industrial Zone in Long An and cooperate to develop the Japanese market. Itochu has chosen Ba Ria-Vung Tau province as the place to set up an industrial zone for Japanese enterprises.

The Japan International Cooperation Agency JICA now has the fund which helps the industrial zones in Vietnam upgrade infrastructure to attract Japanese enterprises, especially the ones in supporting industries.

Phan Van Chinh, a senior executive of IDICO, which specializes in developing industrial zones, has also noted that the interests of Japanese enterprises in Vietnam have increased.

Consultancy firms all say that though the interests by Japanese enterprises in Vietnam have increased, this does not mean that Vietnam can be sure of successfully attracting them to Vietnam, and that Vietnam needs to “tidy up their houses in order to welcome guests.”

Dr Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management CIEM, said that Vietnam plans to reserve 4-5 industrial zones for Japanese companies.

Japanese enterprise hope to concentrate in industrial zones specifically reserved for them, including the zones for small and medium enterprises. The market changes have brought more and more Japanese enterprises to Vietnam, but the heightening of the Vietnam-Japan partner relationship would be an important commitment that helps attract the foreign direct investment from Japan in the time to come.

Nguyen Thi Xuan Thuy, a researcher from the Vietnam Development Forum, also said that Japanese enterprises which make outward investment tend to apply the “symbiosis” principle to take full advantage of their strength.