Japan’s foreign direct investment in Vietnam grew dramatically this year proving the ASEAN country’s value to the regional heavyweight.
Low production costs are still a big turn-on for Japanese businesses
Ministry of Planning and Investment (MPI) figures show that Japanese firms registered $1.6 billion in 102 projects in the first 10 months of the year in Vietnam, comprising 12.5 per cent of foreign direct investment (FDI) registered in the country during the period.
The figure this year was four times greater than Japanese firms’ registered investment in Vietnam during 2009, which stood at $372.7 million.
The MPI reported that newly registered capital reached $1.48 billion during January-October, while existing Japanese projects in Vietnam registered an additional $115 million to extend their operation scale.
Japan’s ambassador to Vietnam Yasuaki Tanizaki last week confirmed that Vietnam was now the first choice of Japanese firms, particularly when the Japanese yen’s appreciation made their investment within Japan more expensive.
“Vietnam has a very attractive investment environment for potential Japanese investment,” the ambassador said.
Tanizaki said labour costs remained competitive in Vietnam compared to other Asian countries like China and Thailand.
“Labour costs have been rising in Thailand and China’s coastal area, where many Japanese manufacturing companies are located. They have therefore lost their attractiveness,” Tanizaki said.
A recent survey carried out by the Japan External Trade Organization (Jetro) also found that 56 per cent of the questioned Japanese firms picked Vietnam due to low production costs, besides other reasons including Vietnam’s high growth rate and a bright economic development future.
There are currently more than 1,500 Japanese enterprises doing business in Vietnam, with the biggest number located in northern Haiphong city and then southern Binh Duong province, Ho Chi Minh City and Hanoi.
Japanese firms are focusing in Vietnam in the manufacturing of transportation vehicles’ components, electronic components and plastic production.
Many other big Japanese enterprises also have strategies to expand their investment in infrastructure, transportation and energy development, which see high demand in Vietnam.
On October 22, 2010, the International Nuclear Energy Development of Japan Co., Ltd. (JINED) was founded in Tokyo by a total of 13 Japanese companies, consisting of nine electric utilities, three manufacturers and the Innovation Network Corporation of Japan. JINED’s mission is to present proposals to countries that are going to build their first nuclear power stations.
For the time being, the company intends to concentrate on winning contracts for construction of nuclear power stations planned by the Vietnamese government in southern Ninh Thuan province.
Japanese firms’ investment in infrastructure projects is also expected to increase, particularly after the Japanese government decided in August, 2010 to pick five infrastructure projects in Vietnam to promote its infrastructure export plan under a public-private partnership (PPP) initiative.
The projects include an international airport, a coal-fired power plant, an industrial park, water supply system and urban development in Vietnam. Under this initiative, the Japanese government will provide trade guarantee and other assistance to its businesses to keep up with the projects in Vietnam.