Historic support enters new phase for Japan and Vietnam

August 01, 2023 | 09:36
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Japan’s investment in Vietnam’s new sectors will expand thanks to a new scheme currently under discussion, expected to help increase bilateral trade.
Historic support enters new phase for Japan and Vietnam
Strategic investors are being encouraged to boost funding into areas from distribution and processing to renewables and agriculture, photo Le Toan

Over the next few weeks, Vietnam’s Ministry of Planning and Investment (MPI) and Ministry of Industry (MoIT) are set to work with Japanese peers about increasing funding into high-tech industry, energy transformation, and improvement of production capacity and competitiveness, in order for Vietnam to participate deeper in Japanese supply chains and global supply chains.

The Japanese government will also encourage strategic investors to boost investment in clean energy and renewable energy, while supporting Vietnam in improving its agricultural value chains through technology and improvement in capacity in distribution and processing.

Both sides are also to work on completing procedures for Vietnamese pomelo to enter the Japanese market and for Japanese grapes to be marketed here.

Such a significant plan is expected to be confirmed by the two governments at the end of this year, with the Vietnamese prime minister set to pay an official visit to Japan in December to attend the ASEAN-Japan Commemorative Summit.

“The Vietnam-Japan relationship is witnessing its heyday as it has been created by the two countries’ big mutual confidence,” said Vietnamese Ambassador to Japan Pham Quang Hieu. “Japan is now the largest provider of official development assistance, the second-largest labour cooperation partner, the third-largest foreign investor, the third-largest tourism partner, and the fourth-largest trade partner of Vietnam.”

“Japanese investment has made an important contribution to developing Vietnam’s key infrastructure projects, boosting the country’s socioeconomic development in a sustainable manner, supporting the transfer of advanced technology to Vietnam, and also training high-quality human resources for Vietnam,” Hieu said.

According to the MPI, Vietnamese investors have funded around 105 projects in Japan, with total registered capital of $19.5 million.

Meanwhile, cumulatively as of June 20, Vietnam attracted over 5,100 Japanese projects registered at $69.9 billion, ranking third out of over 140 foreign countries and territories investing in Vietnam.

Takeo Nakajima, chief representative of the Japan External Trade Organization (JETRO) in Hanoi, said that Vietnam has become an indispensable and essential country for the global expansion of Japanese companies.

He cited a JETRO survey of more than 3,000 Japanese companies conducted at the end of 2022 stating that Vietnam was ranked second worldwide as a country in which to expand business in the future. The US and China ranked first and third, respectively.

In the survey, the most attractive investment environment for Vietnam was “market growth potential” (74 per cent) and “market size” (46 per cent).

“Vietnam expects to receive a large amount of foreign investment, and the domestic business-to-business market and infrastructure development will grow,” Nakajima said.

According to JETRO, the introduction of the Law on Investment and the Law on Enterprises has made the Vietnamese legal system more predictable and created an environment where companies can invest confidently. The laws reduced the number of prohibited and restricted investment areas, and investment in the service sector, which has been of great interest to businesses, was further promoted. Merger and acquisition procedures have also become simplified.

In an example, two months ago, Japan’s TotalEnergies ENEOS inked a long-term agreement with Golden Victory Vietnam Co., Ltd., one of the biggest shoes and footwear manufacturers and a key supplier for globally renowned sportswear brands, to develop a 4.6MWp solar photovoltaic system at its facility in the northern province of Nam Dinh. This new phase takes their total solarisation system size to 7.5MWp.

With over 7,900 of modules installed, the system is expected to produce about 5,200MWh of renewable electricity annually. Under the agreement, TotalEnergies ENEOS will fully fund, install, and operate the solar system while Golden Victory will pay only for the electricity generated for 20 years, avoiding any upfront costs.

There are also some big Japanese projects in Vietnam. For example, the $1.33 billion O Mon II thermal power plant in the Mekong Delta city of Can Tho is now underway.

In 2021, the joint venture between Vietnam Trading Engineering Construction JSC and Japan’s Marubeni Corporation received an investment registration certificate for the 1,050MW O Mon II plant.

The Japan-Vietnam Joint Initiative will complete its eighth phase this year. The MPI and Keidanren/Japanese Chamber of Commerce and Industry in Vietnam have formed 11 working teams to hold specific discussions on improving the investment environment in Vietnam. They are also discussing improvements to the investment and enterprise laws.

An increase in Japanese investment in Vietnam has resulted in a rise in bilateral trade, which has almost doubled over the past decade. In the first six months of 2023, two-way trade reached $20.8 billion – including $11 billion worth of Vietnamese exports, down 3.3 per cent on-year and imports of $9.8 billion, down 18.7 per cent on-year, according to the MoIT.

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