Vietnam welcomes expansion of Japanese business activity

Japanese investors see huge advantages in Vietnam, both in direct investments and through mergers and acquisitions Photo: Le Toan

Japan’s Ministry of Economy, Trade and Industry has announced a group of 87 Japanese companies that will receive subsidies to diversify their production bases. Among them, 15 companies will increase expansion in Vietnam as part of their efforts to improve supply chain agility.

According to Hirai Shinji, chief representative of the Japan Trade Promotion Organization in Ho Chi Minh City, the programme provides support for voluntary corporate initiatives for the purpose of diversification of their production base in order to strengthen supply chain resilience.

Shinji insisted that it is not designed to facilitate businesses to either relocate their production bases to other countries or reshore them back to Japan. The programme envisages a variety of corporate initiatives for strengthening the supply chain including support for the construction of additional manufacturing plants and enhancement of production/logistical efficiency, by utilising digital technologies and producing alternative intermediary goods.

Shinji noted that the 15 companies, which already have a presence in Vietnam, will get financial support to ramp up expansion in the country. They include Akiba Die Casting, Inoue Iron Works, Able Yamauchi, Showa, Techno Global, Hashimoto Cross, Fujikin, Plus, Pronics, Hoya, Matsuoka, Meiko, Yokoo, Shin-Etsu, and Kikkiso.

More than half of the companies specialise in critical industries for pandemic response such as pharmaceutical manufacturing equipment, medical gloves, masks, and medical clothing among others. The rest operate in electronic spare parts and accessories.

Shinji expected expansion will help drive Japan’s investment into Vietnam this year. In fact, Vietnam is emerging as a potential investment destination for Japanese investors on the back of market size and growth potential.

“Vietnam’s GDP per capita of $3,000 is expected to double in the next 10 years, thus Japanese backers are increasingly interested in Vietnam and the early chance to capitalise on market growth,” Shinji said.

For example, trading firm Toba Inc. has established a wholly-owned subsidiary in Vietnam in anticipation that more Japanese manufacturers will invest in its rapidly growing economy, as reported by NNA Business News. With capital of $500,000, subsidiary Toba Inc. (Vietnam) Co. was established in Hanoi on June 16.

Staffed by five employees, the unit will start work next month, the parent company said in a statement on last Monday. The subsidiary will sell control machinery and factory automation equipment such as industrial robots, and other industrial equipment, along with providing consultancy on efficient, cutting-edge production.

In addition, Japan will assist apparel maker Matsuoka Corporation in producing protective clothing in Vietnam to diversify supply chains and lessen its dependence on China amid the coronavirus crisis.

Matsuoka plans to invest ¥3 billion ($28 million) in An Nam Matsuoka Garment Co., its Vietnamese manufacturing unit, to start production of protective wear and other items in the next few months.

Dai-ichi Life Holdings, meanwhile, has recently set up a representative office in Hanoi in light of the country’s remarkable economic growth and its expanding life insurance market. The capital office will not only conduct research and surveys on the insurance market and regulatory trends but also work on building relationships with relevant local authorities and Japanese companies in this country.

Besides making direct investment, Japanese companies have actively conducted mergers and acquisitions with Vietnamese counterparts. For instance, NYK Line has recently acquired 15 per cent shares of Thoresen Vinama Tug (TVT) and entered the tugboat business. TVT has two tugboats providing services at Phu My and Cai Mep ports near Ho Chi Minh City, the largest ports in the nation in terms of cargo throughput.

“NYK made this decision after considering the tugboat business in Vietnam, a country that has achieved remarkable economic growth in recent years, and recognising that the tugboat sector is primed for future growth,” NYK said in a press release.

Meanwhile, Mitsubishi UFJ Lease and Finance Co. will acquire a 49 per cent stake in a leasing arm of major state-backed commercial lender VietinBank as part of its efforts to expand in Southeast Asia. The deal is subject to approval from the State Bank of Vietnam.

After the share purchase, one of the four largest state-backed lenders will hold a 50 per cent stake in the local peer with registered capital of VND1 trillion ($43 million), while a local business will hold the remaining 1 per cent, spokesman Kenichiro Ota told NNA Business News.

Similarly, Japanese private equity firm Daiwa PI Partners has poured $8 million into Vietnamese cinema chain Beta Media in a deal that values the firm at VND1 trillion ($43 million), as per a company statement. Thus, Daiwa PI Partners’ investment aims to bet on the growth of the country’s movie industry, which is driven by an increasing number of middle-income class and interest in entertainment.

Japanese buyers have still managed to ink deals with Vietnamese companies despite the global health crisis. They are also keen to expand to overseas markets like Vietnam given the diminishment of its own market not only because of the coronavirus effect, but also from issues arising from a falling and ageing population that was already a pressing concern before the pandemic hit.