Local suppliers grab Japanese interest

Hirokazu Yamaoka, chief representative of Japan External Trade Organization in Hanoi (Jetro)

What can you tell us about Japanese investors' feelings  towards Vietnam’s business climate?

Vietnam-based manufacturing units have recently faced power shortages and frequent blackouts, causing many difficulties for business operations. In addition, illegal strikes have occurred in several industrial parks due to the impact of inflation on workers. These issues are sometimes exacerbated by the media, somewhat creating a perception among investors that Vietnam’s investment environment is deteriorating.

However, we can say that not all Japanese investors have the same perception. The fact that around 500 Japanese companies contacted us in the last fiscal year ending March 2011, underscores the interest in investing in Vietnam. This is really an encouraging news considering the aftermath of the global financial crisis.

You have not mentioned the weak supporting industry in Vietnam, which was often cited by Japanese investors in Jetro surveys as a great concern regarding the investment environment. Does this mean the situation has improved?

Actually power shortages and frequent blackouts are critical issues for Japanese investors that need to be addressed sooner than others, such as the weakness of the supporting industry. Indeed, when investing in Vietnam, Japanese enterprises already know that Vietnam’s supporting industries remain feeble. Thus, they are prepared and ready to deal with this problem in the long-run.

Do you see any improvement in Vietnam's supporting industries?

Last year, Jetro surveyed over 3,500 enterprises throughout Asia, including 150 in Vietnam, asking them what percentage of their spare parts were imported from Japan, China and Vietnam. The results showed only 22 per cent of the surveyed enterprises in Vietnam said they could purchase the spare parts domestically, while the ratio was over 60 per cent in China and Thailand. Still, this ratio has shown that Vietnam’s supporting industries are improving, though further efforts are required.

Jetro and Vietnam Trade Promotion Agency (Vietrade) are to host the fourth ‘Vietnam-Japan Exhibition on Supporting Industries’ exhibition in Hanoi in September 15-17, 2011. Have you seen notable progress in Vietnamese suppliers through their participation in the last three exhibitions?

Our coming exhibition, under the framework of Japan-Vietnam Economic Partnership Agreement (JVEPA),  will be noteworthy as it will be co-located with two other significant events, the ‘Industrial Components & Subcontracting Vietnam 2011’ held by Hanoi Trade Promotion Centre and ‘Vietnam Manufacturing Expo’ organised by Reed Tradex, Thailand. Due to this combination, the total scale will be 200 booths with exhibitors from 20 countries.

After organising such an exhibition, we always carry out surveys among participants and the last three showed very encouraging results. Many Japanese businesses which participate in our exhibitions more than once told us the capacity and qualification of Vietnamese suppliers have improved dramatically. We are so glad to hear that.