Japan sees more FDI ahead for Vietnam

Japan consistently leads in foreign direct investment (FDI) into Vietnam and in 2012 has extended its margin over other countries.  In the first 11 months of 2012, FDI from Japan into Vietnam reached $5.051 billion, accounting for 41.5 per cent  of the total registered FDI into Vietnam and leaving  Singapore, the second biggest foreign investor in the country with $1.554 billion, only accounting for 12.8 per cent of the total.

“The interest of Japanese corporations in Vietnam is increasingly vigorous,” said Yasuzumi  Hirotaka, managing director of Japan External Trade Organization  (Jetro) in Ho Chi Minh City.
According to Daiwa Capital Markets, after a rapid increase in Chinese wages in the recent years, labour costs are now much lower in the Association of South East Asian Nations (Asean). As a result, the baton is now passing from China to what economists described as the Asean-7 – Thailand, the Philippines, Vietnam, Indonesia, Laos, Cambodia and Myanmar.

Daiwa Capital Markets cited Nike as typical case in point. According to the statistics, in 2000, 40 per cent of its shoes sold globally were made in China compared to 13 per cent in Vietnam. But today, 41 per cent of Nike shoes are manufactured in Vietnam, compared to 32 per cent in China.
Vietnam’s export growth in the labour-intensive industries of textiles and clothing has been higher than that of China for most of the past decade, while Cambodia’s export growth rate of the sector has also exceeded China’s in the last two years, economists said.

According to Hasu Vietnam, a Vietnam-based consulting firm, Vietnam is highly appreciated as the most suitable destination especially for Japanese investors in manufacturing sector. Because China has no longer been the best destination for Japanese investors, Vietnam can catch the larger share of outbound Japanese investments if Vietnam improves its administrative procedures.

However, the firm said Vietnam has directly competed with Indonesia and India to lure Japanese investors. In spite of some inconvenient administrative procedures, Vietnam still achieves a little higher point compared to Indonesia and India. Japanese prefers Vietnam’s cultural characteristics to Islam characteristics in Indonesia because Vietnam’s culture is more similar to Japan’s. Meanwhile, alhough India’s labour force has advantage of fluent English, Japanese  investors use little English, said Vo Thuan, director of Hasu Vietnam.

Vietnam’s labour force is known for its good quality, hand dexterity, good eyesight, diligence and high literacy rate. Moreover, Vietnam has a small number of national holidays and affordable labour costs, said Omi Kenji, director of Jetro’s research division.