Majority of Japanese investors plan future expansion in Vietnam

Hironobu Kitagawa announced the result of the survey on Japanese business performance 2017

Japan External Trade Organization’s Hanoi Office on February 6 announced the results of its latest survey on the performance of Japanese businesses in Asia and Oceania, including Vietnam, in 2017. Among the 652 interviewed businesses, 65.1 per cent said that they made a profit, up 2.3 per cent from 2016.

Among the profit-making Japanese firms, 67.5 per cent are operating in processing for export in the manufacturing and processing industry.

According to the survey, only 19.4 per cent of Japanese enterprises said that they incurred a loss last year, down 5.7 per cent from a year earlier.

With better business performance, 70 per cent of Japanese enterprises said that they will expand operations in Vietnam in the future.

Compared with other regional countries, Japanese enterprises seem more optimistic, as only 63.4 per cent of companies in the Philippines, 51.4 per cent from Indonesia, 48.3 per cent from Malaysia, 47.2 per cent from China, and 47.2 per cent from Thailand expressed ambitions to expand business activities in Vietnam.

According to Hironobu Kitagawa, head of JETRO’s Hanoi Office, around 88 per cent attributed the reason for business expansions in Vietnam to increasing revenues, while 58 per cent in the non-manufacturing sector said that high growth potential was the reason behind their expansion.

Talking about investment trends among Japanese firms in 2017, Kitagawa said that new Japanese projects licensed in the manufacturing sector in 2017 continued to fall, while other economic sectors were on the rise.

Last year, new Japanese investment in infrastructure and mining with the number of big projects worth over $1 billion accounted for 90 per cent of total Japanese investment in Vietnam.

Continuing the upward trend from previous years, projects of investment value of less than $5 million accounted for 90 per cent of the total number of Japanese projects.

Japanese investment in Central Vietnam saw a strong rise in capital thanks to two power projects, while investment in Northern and Southern Vietnam expanded both in the number of projects and their value against 2016.

Besides strong interest in Vietnam, Japanese investors still complain about risks in doing businesses in the country.

Rising labour costs remained their top concern, with 61.6 per cent of Japanese firms complaining about this, up 3.1 per cent on-year. The runners-up were the imperfect legal system and the inconsistent performance of legal documents, cumbersome tax procedures, complicated administrative procedures, and underdeveloped infrastructure.

According to statistics from the Ministry of Planning and Investment's Foreign Investment Agency, last year, Japan topped Vietnam's list of foreign investors with total pledged capital of $9.11 billion, followed by South Korea with $8.49 billion and Singapore with $5.3 billion.