JETRO report underlines bright spots

“There remain major factors adversely affecting Vietnam’s investment environment,” the report said, identifying the fact that supporting industries in Vietnam have a lower capacity than other countries in the region.
“Additionally, Vietnam’s infrastructure is not only 74.6 per cent worse than China’s but is almost in the worst condition [in the region], just slightly better than India,” it stated.
The survey, conducted from January to February 2006, received responses from 966 Japanese-affiliated manufacturers currently operating in Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam and India.
A majority of respondents were operating in the transportation equipment parts (15.4 per cent), electric/electronic parts (14.8 per cent), metal products (7.8 per cent), chemicals (7.7 per cent), and electric/electronic equipment (7.5 per cent) industries.
Of the six ASEAN countries surveyed, Thailand, with 83 transferred manufacturers, was the most popular destination for Japanese enterprises relocating their investments, followed by Indonesia (82), Malaysia (80), the Philippines (79), Vietnam (66) and Singapore (6).
However, the report said that Vietnam was the first choice of Japanese investors considering relocating their Chinese investments.
“Vietnam is particularly advantageous with her political and social stability, low production costs, labour management and exchange rate volatility.
“However, it is noted that the advantage of labour management has been, to some extent, worsened by recent strikes,” the survey stated.
“With regards to investment attraction by industries, in the mid- to long-term, Thailand and Vietnam are seen as optimal production bases in the region.”
The survey also said that under these circumstances, Vietnam’s position as the first choice for Japanese investors’ seeking to offset risks associated with intensive business in or with China, could provide great opportunities for the nation.
The report said Vietnam was the most popular choice for Japanese manufacturers considering to expand their Chinese-based production to a third country, with 20.5 per cent of investors considering Vietnam as a investment destination, more than 2.8 times the number considering the next-most-popular destination, Thailand.
“Similarly, the ratio of Japanese manufacturers planning to transfer their production from China to Vietnam is 6.8 per cent, more than double the ratio for the following country (Malaysia, 3.1 per cent),” the report said.
“The main reason for the ‘Vietnam choice’ is lower production costs, which are identified [as a leading factor in attracting them to Vietnam] by more than half (56 per cent) of Japanese investors,” the report said.
The report also said most businesses based their expectations in Vietnam in 2006 on increasing domestic sales (56.5 per cent), while exports were the dominant factor in attracting investors to the other countries surveyed.
However, the survey also emphasised the need for Vietnam to consider increasing competition from neighbouring countries, especially the Philippines, Malaysia and Thailand, in transportation, equipment parts, and electrical and electronic parts.




No. 765/June 12-18, 2006