VietNamNet Bridge - Some analysts, while believing that Japanese have been leaving Vietnam for other regional countries, attributes this to unreasonable policies being pursued by the government of Vietnam.



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2013 was considered the golden age for Japanese FDI in Vietnam with $5.87 billion worth of investment projects registered. 

The encouraging results gave Vietnam and Japanese institutions one more reason to predict that the Japanese FDI would continue to increase in 2014.

However, contrary to all predictions, Japanese FDI unexpectedly dropped by 61 percent in 2014. Most of the Japanese registered investment projects were small with 85 percent of projects capitalized at below $5 million and 61 percent below $1 million.

Yasuzumi Hirotaka, managing director of JETRO HCM City Branch, noted that Japanese have scaled down their investments in manufacturing projects in Vietnam because of complicated procedures.

He noted that the majority of Japanese enterprises in supporting industries are small scale and they try to minimize risks by making investments overseas. 

Some of them want to relocate their factories to Vietnam. However, they failed to implement the plan because of Vietnam’s laws on prohibiting old machine imports.

Meanwhile, large Japanese multinational enterprises, expect investment incentives from the government of Vietnam, and they would like to be able to source material supplies in Vietnam to optimize their profits.

However, they cannot find the materials they want. The localization ratio of products in Vietnam is only 14.4 percent, much lower than China (38.2 percent) and Thailand (23.2 percent).

According to Manfred Otto, a lawyer from the Duane Morris law firm, about 100 Japanese small and medium enterprises, mostly metal and plastics manufacturers, visited Vietnam in 2014 to seek Vietnamese partners.

The Japanese enterprises looked for companies that follow strict discipline during production and can provide component products with stable quality (at least 60 percent).

This is a high requirement for Vietnamese enterprises as Vietnam’s supporting industries remain weak.

Though it has made heavy investment in the retail sector in the country, Masaaki, chair of Bridgestone Group, complained that most Japanese businesses still cannot enjoy preferential policies for small and medium enterprises.

Kyocera is the only Japanese enterprise which can take full advantage of preferential policies related to supporting industry development.

Otto pointed out that current laws still do not cover all business activities. Japanese enterprises are cautious about Vietnam’s accountancy system, because one Vietnamese business may have more than one set of books.

Besides, the lawyer said, Japanese businessmen also complain they cannot find qualified workers for technology transfer.

Nguyen Minh Phong, a renowned economist, noted that in order to retain Japanese investors, Vietnam must improve the investment environment and create a transparent legal framework to help minimize investment costs.

Kim Chi