VietNamNet Bridge – Vietnam now absolutely can replace Japan in making garments and software. However, it’s still unclear if Vietnam can grab the opportunities.

With 98.1 percent of information technology products and 90.8 percent of garment products in Japan sourced from Vietnam, Hirokazu Yamaoka, Chief Representative of Jetro (Japan External Trade Organization) commented that Vietnam now can absolutely replace Japan in making the products.

The figures show the higher proportions of Vietnamese products in the Japanese market in comparison with Chinese products, which have the proportions of 96.9 percent and 82 percent, respectively.

The conclusion has been made by the organization after conducting a survey on 3,819 Japanese businesses now operational in Asia and Oceania in October and November 2012. The report about the survey was publicly released in Vietnam for the first time some days ago after 26 years of implementation.

If considering the above said proportions together with the information that 70.5 percent of Japanese invested enterprises say they would increase the locally made content ratios and 65.9 percent of businesses would scale up their business in Vietnam, one would see that Mr Hirokazu Yamaoka’s predictions about Vietnam’s replacement in the two fields are within reach.

Japanese investors still put a high hope on their opportunities in Vietnam, even though 39.8 percent of businesses were reportedly unprofitable in 2012 in the global economic crisis and domestic recession.

Some business fields have been named as the most important fields Japanese would focus on when expanding their outward investments. These include information technology, transport, machines, food, distribution (retail and wholesale), chemicals and healthcare. Of the top five business fields targeted by Japanese, Vietnam only does not have big advantages in transport and machinery.

However, when many experts keep optimistic about the “good signs from Japan,” others keep more cautious about what will happen.

Bui Tat Thang, Head of the Development Strategy Institute, an arm of the Ministry of Planning and Investment, said on Dau tu that the low localization ratio in the products made in Vietnam can most clearly showed the big gap between the expectation and the reality.

A report by Jetro showed that the localization ratios of the products bearing Japanese names is just 27.9 percent, which is much lower than the 47.8 percent in the whole Asia and Oceania.

Especially, the ratios prove to “make nothing” if compared with the 60.8 percent in China, 52.9 percent in Thailand and 43.3 percent in Indonesia.

The chief representative of Jetro also said that in such a context, Japanese businesses in Vietnam may consider increasing the purchases of the materials from ASEAN countries (44 percent), China (16.9 percent) and Japan (13.3 percent).

He has also urged the government of Vietnam to take actions to speed up the investment plans by Japanese investors.

Thang believes that what Vietnam needs to do now is to attract high technology groups to Vietnam.

According to Thang, Japanese enterprises now in the need of transferring technologies to satisfy the increasingly high demand for their products. As such, the Japanese investment in the Vietnamese supporting industries would be made under the “symbiosis” principle.

If they still maintain the principle of holding technology copyrights, they would not be able to provide high quality products, once they have to seek input materials from more suppliers.

In related news, Kinh te & Do thi has reported that while highly appreciating the Vietnamese market potentials, Japanese pointed out that the labor cost in Vietnam accounts for 18.3 percent of the total production cost, which is higher than the average level of 16.8 percent in ASEAN, the 17.6 percent in China, and 17 percent in Thailand.

Compiled by Thu Uyen