HANOI: Over 60 per cent of Japanese businesses operating in Viet Nam plan to expand their operations, regarding the Southeast Asian nation as a crucial investment destination, according to a JETRO survey released yesterday.
The finding, revealed at a seminar in Ha Noi, was part of JETRO’s 2015 survey on the business operations of Japanese-affiliated firms in 20 countries and regions in Asia and Oceania. The survey, conducted between October and November of 2015, received valid responses from 4,635 Japanese companies, including 557 operating in Viet Nam.
Speaking at the seminar, Atsusuke Kawada, Chief Representative of the Japan External Trade Organisation (JETRO) in Viet Nam, said that the percentage of respondents in Viet Nam planning to expand operations was rather high compared with other countries in the region such as Indonesia, Thailand, the Philippines, China, and Malaysia, with percentages of 52, 49, 55, 38 and 45, respectively.
The survey said the main reason for business expansion was a rise in revenue with 85 per cent of respondents choosing it as the most encouraging factor. In 2015, nearly 60 per cent of Japanese companies operating in Viet Nam gained profits, down 3 percentage points year-on-year. However, in an absolute value, the number of firms reporting profits increased from 281 to 326.
Viet Nam currently ranks third out of 15 countries in ease of recruitment, with respondents praising “market scale and growth ability” and the “stable social-political situation” of the country, the survey said.
It added Viet Nam’s labour costs were relatively low in comparison to other countries. For example, labour costs in the manufacturing industry are less than a half of those costs in China, Thailand and Malaysia. However, roughly 80 per cent of Japanese firms in Viet Nam cited an “increase in employee wages,” the survey said.
In term of risks stemming from the investment environment, 60 per cent of the survey respondents said that administrative formalities, customs formalities, the tax system, laws and increasing wages in Viet Nam posed the greatest risk to investors in the country, the survey said.
Viet Nam’s localisation rate, or the percent of supplies that can be sourced locally, has reached 32 per cent, down 1 per cent year-on-year. This rate is higher than the Philippines (26 per cent) but much lower than China, Thailand, Indonesia and Malaysia, which have 65 per cent, 56 per cent, 41 per cent and 36 per cent, respectively, the survey said.
Kawada said in order to increase competitiveness in costs, Viet Nam should develop capacity for local parts suppliers helping Japanese firms increase the amount of locally-produced parts. According to the Ministry of Planning and Investment, as of June 2015, Japan is the second largest investor to Viet Nam, after South Korea, with nearly 2,700 in-effect investment projects with capital of US$37.7 billion.
The annual survey has been conducted since 1987 by JETRO to understand the business activities of Japan-affiliated companies in Asia and Oceania, including Viet Nam. The surveyed firms operate in a wide range of sectors, including automobiles, machinery, chemicals and pharmaceutical products, food, textiles, retail, transport, ICT and finance.
