Japanese investors to switch strategy in Vietnam

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Yoshida Sakae, director of the Ho Chi Minh City branch of the Japan External Trade Organization (JETRO), said in an exclusive interview that though the current trend was to build large factories to manufacture for exports, the new trend would emerge in the next few years.

It would involve setting up retail sales networks especially after the ASEAN Trade In Goods Agreement (ATIGA), a regional tax exemption regulation, took effect in 2015.

Some big plants could be shut down so that their owners could switch to import and retail sales of Japanese products manufactured in other ASEAN markets, he said.

Sakae gave the example of the Family Mart supermarket chain which currently has eight outlets in HCMC and plans to open 200 in Vietnam.

Another retailer, Aeon Group, well-known for its Jusco supermarket chain, has opened outlets in Vietnam and plans to fully tap the market by 2013.

Some Japanese companies with small factories in Vietnam would stop production to focus on distribution or building larger factories in Vietnam or neighboring countries to exploit the ASEAN market.

One example was Sony which had closed its TV factories in Vietnam to concentrate on importing and selling Malaysian-made products in Vietnam.

Many Japanese businesses in Vietnam could follow the Sony model to save costs and focus investment on major production bases for intra-regional export.

Where they would be set up would depend on the investment environment and the size of each country.

However, the number of businesses registering to be members of the Japanese Business Association of HCMC (JBAH) in the last four months had risen rapidly, signaling more firms had chosen Vietnam as a production base.

Besides, with the Japanese yen appreciating against the US dollar, more large Japanese corporations are buying companies or stakes in Vietnam and other Asian countries.

Recently Unicharm Group shelled out $128 million to acquire 95 per cent of sanitary care and toiletry products maker Vietnam Diana Joint Stock Co to gain a foothold in Vietnam and expand its regional market share.

Though many Japanese firms considered Vietnam a promising market, its economic instability cause by rising inflation was their biggest concern.

The government should take measures to stabilise the economy to attract more foreign investors.

Regarding the quality of labour, he said the quality of labour in Vietnam had improved faster than in neighboring countries in recent years.

Though the Vietnamese government had decided to increase the minimum wage by VND2 million, it did not affect Japanese investors much due to the yen’s appreciation.

But wage increases could shake investors’ confidence.

Japanese investors wanted to be better informed and consulted about changes in laws governing both foreign and domestic firms so that they could prepare better.