New wave of Japanese SMEs to Vietnam

They follow the path set by big Japanese corporations that have been in the countries for decades, said Nakajima Kazuo of Japanese consultancy firm Brain Works Group at “Vietnamese market from the perspective of Japanese businesses” conference.

There are around 1.787 million firms in Japan, of which 1.775 ones, or 99.3 per cent, are SMEs. But regarding operation and business scope, Japanese SMEs may be considered as big companies in Vietnam, said Nakajima at the event co-organized by Tuoi Tre newspaper and its Japanese partner, Manichi newspaper, in Ho Chi Minh City.

There are two main reasons for the movement.

After peaking in late 1980s and early 1990s, the Japanese economy is still in the stage of deflation, so local firms have been on the mood of moving outside the country for investment and growth.

The double impact of the earthquake/tsunami and nuclear crisis in March 2011, again, made Japanese firms rethink their development plans and strategies. As a result, spreading to other nations is a priority to diversify the risk of being trapped in future disasters in their homeland like it happened in 2011.

Japan and Vietnam are pretty similar in geography but Japan has a 130 million strong population, while that of Vietnam is around 90 million.

But the former is a matured economy, and the Japanese population is aging, while the latter is still an immature one, and has a young population.

As a result, the potential for growth in Vietnam is much greater than in Japan.

Most Japanese SMEs will continue to consider Vietnam as a good destination for outsourcing. There are also rooms to improve the service sector of Vietnam which is still in a primitive stage.

Some 225 Japanese firms were reported by Japanese newspaper to have entered Vietnam by the end of 2012, bringing the total number of Japanese firms in the country to 1,500-1,600.

Hurdles remain

If Japanese firms want to be successful in Vietnam, they must pair with experienced Japanese companies having a network in Vietnam, said Nakajima Kazuo.

Vietnamese firms, on the other hand, must have a long-term view if they want to partner with Japanese enterprises. They must raise competitive edge and the capacity in capital mobilization to enjoy Vietnam’s current advantage in cheap labor, said Nguyen Hieu Nhan, representative of Saigon Trading Group (SATRA) in Japan.

Regarding administrative procedures, Japanese firms need to know more about the licensing procedures, especially in the catering services.

Though Vietnam is calling for more foreign investments, there a lot of hurdles foreign investors may face when coming to Vietnam, including the complexity of the Vietnamese laws and ambiguous administrative procedures, said Suetake Jun of Kanematsu Corp.

So Japanese firms need professional local consultancy firms for those problems, he added.

In addition, Japanese firms which are ready to penetrate into the Vietnamese market need information about existing Japanese firms which are faring well there.

Although there are a lot of cooperation and investment potentials, companies of the two nations are still in a very early stage of knowing each other, so they need to be more proactive in learning about the context and culture of one another.

The role of intermediaries, corporate matchmakers, of the two nations is also a very important element to boost up progress, said experts.