Vietnam plan B for risk wary Japanese investors

Toyota could reconsider investing up to $609 million in Thailand, and could even cut production Photo: Duc Thanh

Yasuzumi Hirotaka, chief representative of Japan External Trade Organisation’s (JETRO) office in Ho Chi Minh City, said increasing numbers of Japanese companies in Thailand had adopted the strategy to avert the risk of concentrating their production in one country.

The strategy means Japanese companies will shift part of production from Thailand to other Southeast Asian nations to take the advantage of political stability and lower labour costs.

“This is a chance for Vietnam to lure investment from Thailand,” said Hirotaka.

“When seeking investment from Thailand, Vietnam should not only attract investment from Thai companies, but also from Japanese companies in Thailand,” he added.

In recent years, Thailand has been the most attractive place in Southeast Asia for Japanese companies. Japan’s multinational companies like Nissan, Toyota and Honda expanded investment in Thailand when they used the strategy of China plus one to avert risks of growing tension between China and Japan and rising wage costs in China.

But now, the new strategy reflects rising wage costs in Thailand. According to a recent JETRO survey of Japanese companies in 20 countries in Asia Pacific regions late last year, the average annual wage of a worker in the manufacturing sector in Thailand was 2.3 times higher than in Vietnam. And now, Japanese investors are becoming increasingly concerned over the current political crisis in this country, which began last October.

Kyoichi Tanada, president of Toyota Motor Corp in Thailand was quoted by Bloomberg as saying that long-term investors may consider countries including Indonesia and Vietnam because of the unrest. Last month, Toyota, the largest automobile manufacturer in Thailand, revealed it could reconsider investing up to $609 million in Thailand, and could even cut production, if political unrest dragged on.

Statistics from JETRO also showed that Japan’s direct investment inflows into Thailand declined in 2013, but the investment flows to Vietnam increased.

Hirotaka suggested Vietnam should hold more investment promotion activities in Thailand to attract Japanese companies. “We could form a supply chain between Thailand and Vietnam,” he noted.

JETRO has already started encouraging Japanese companies in Thailand to expand investment projects in Vietnam as part of their Thailand plus one strategy. This organisation published three articles in InfoBiz Thailand, a Japanese magazine for Japanese companies in Thailand, to promote investment expansion in Vietnam. Atsusuke Kawada, chief representative of JETRO’s Hanoi Representative Office, said last year the organisation held a trip for some 50 Japanese companies to explore investment opportunities in the north of the country. He added JETRO would continue to organise Vietnam tours for Japanese investors this year.