JETRO: 70 percent of Japanese firms want to expand operation in Vietnam

Survey conducted by the Japan External Trade Organization (JETRO) showed that 65.3 percent of 787 Japanese companies operating in Vietnam achieved high profits in 2018.
JETRO: 70 percent of Japanese firms want to expand operation in Vietnam

Of which, firms which were established before 2010 got a more stable profit margin, accounting for 80 percent as they have passed the period of capital recovery and are yielding. Meanwhile, firms which were founded from 2011 to now saw lower stable profit margin as they are in capital recovery period.

In terms of investment trend this year, up to 70 percent of Japanese firms in Vietnam will expand operation in the fields of industrial manufacturing, trade, services and retail network. Most Japanese firms said that market scale, high growth, low labor costs and political-social stability remain the largest advantages of the country’s investment environment.

More importantly, the issues of employee turnover, cost competition among firms, customs clearance procedures and administrative procedures have been improved.

In comparison with countries in the ASEAN, Southwest Asia and Oceania, Vietnam ranked fourth in terms of socio-political stability and low labor costs, ranked sixth in terms of market scale and growth, and ranked 12th in term of language barrier.

In addition, Japanese firms have been taking advantage of the free trade agreements that Vietnam has signed. Depending on each free trade agreement, Japanese firms will benefit 30-70 percent of tariffs.

However, along with advantages, there are still investment risks which come from incomplete legal system, lack of transparency in law enforcement and difficulties in buying local materials. The localization ratio of materials has improved from 23.7 percent in 2008 to 36.3 percent in 2018, surpassing that of Malaysia but is still much lower than that of China, Thailand and Indonesia. Firms which purely produce for export have started to reduce export ratio and increase local consumption ratio.

According to Mr. Takimoto Koji, head of JETRO Representative Office in Ho Chi Minh City, in 2018, Japan is the country with the highest licensed investment capital in Vietnam, with nearly US$7.99 billion for 630 projects. Japanese enterprises’ investment area is currently shifting to the surrounding areas, instead of concentrating in Ho Chi Minh City and Hanoi.