(VEN) - Japan currently is the biggest foreign investor among the 101 countries and territories investing in Vietnam, and there still exist great opportunities for the country to attract Japanese direct investment capital.

The number-one investor

Statistics from the Ministry of Planning and Investment's Foreign Investment Department showed that Vietnam had attracted 16,910 foreign direct investment (FDI) projects with total registered capital of US$243.038 billion by the end of this August. Of this, Japan took first place with 2,381 projects and total registered capital of US$36.201 billion accounting for 14.08 percent of total projects and 14.9 percent of total FDI registered capital in Vietnam.

The Ministry of Planning and Investment also said that when compared with investors from other countries, most Japanese investment projects in Vietnam have a large amount of capital and focus on the processing and manufacturing sector and high technology which have greatly influenced the Vietnamese economy. Japanese businesses in the country have also closely observed Vietnamese investment policies and laws.

Foreign Investment Department Director Do Nhat Hoang said that many Japanese big-name groups, which are among the world's top 500 companies, have invested in Vietnam such as Toyota, Honda and Canon showing that Japan is the number-one investor both in terms of quantity and quality of its investment projects.

Although total Japanese investment capital hit only US$1.27 billion accounting for 12.5 percent of total FDI capital in the first eight months of this year, compared with US$4.35 billion in the same time last year, experts said that there still exist great opportunities for Vietnam to attract Japanese investment capital.

Great opportunities exist

According to the latest survey by the Japan External Trade Organization (JETRO), 70 percent of Japanese businesses in Vietnam said that they intended to expand their production and trade this year compared with 66.4 percent in Indonesia, 66.2 percent in Thailand and 51.6 percent in Malaysia.

Recently, many Japanese business delegations have visited Vietnam to learn about the investment environment. A group of 10 businesses from Kanagawa in Japan paid a visit to the country at the end of this July. They are in the areas of processing, manufacturing, finance, education and training, petroleum production and trading, and construction materials.

Vietnamese Ambassador to Japan Doan Xuan Hung said that apart from businesses from Kanagawa Province, a large number of businesses from other provinces in Japan are about to fly to Vietnam to learn about the investment environment. Specifically, a group of 70 Japanese businesses will visit Vietnam this coming October.

Kanagawa Governor Yuji Kuroiwa said that with a strong, young and well-trained labor force and stable politics Vietnam is an attractive investment location for many Japanese companies.

Overseas Investment Business Association Chairman, Professor Doctor of Science Nguyen Mai said that China used to be an attractive investment location but it has recently become less attractive since Chinese employees require higher wages, and Chinese businesses are growing strongly and are competing fiercely with foreign rivals. In this situation, a large number of Japanese businesses will leave China for other countries including Vietnam.

JETRO Chief Representative in Hanoi Atsusuke Kawada said that Vietnam and Japan established relations on September 21, 1973 and a strategic partnership in 2009. Japan currently is not only the largest foreign investor but is also the largest official development assistance (ODA) provider in Vietnam with more than US$24 billion so far.

Vietnam and Japan have concluded many important agreements such as a Vietnam-Japan Partnership Agreement, an Investment Encouragement and Protection Agreement and a Dual Taxation Avoidance Agreement. Particularly, the two countries took part in negotiations on a Trans Pacific Strategic Economic Partnership (TPP) Agreement providing an important basis for Japanese investors to continue their interest in the Vietnamese investment environment.

Developing support industries

Japanese businesses spoke highly of the investment environment in Vietnam. However, this does not mean they are ready to pour their capital into the country without any condition, particularly now that the investment environment in Vietnam has not really satisfied them.

Specifically, JETRO said that Vietnamese support industries currently meet only 32.2 percent of the needs of Japanese investors in Vietnam, much less than 64 percent in China, 53 percent in Thailand, 42 percent in Malaysia and 41 percent in Indonesia causing Japanese investors to spend more in Vietnam than in other countries in the region.

Many Japanese medium to small-sized businesses are looking to invest in Vietnamese support industries. However, Japan Business Association in Vietnam Chairman Yoshihisa Maruta said that the investment environment in Vietnam is still facing many barriers which are associated with rapidly increasing labor costs, complicated administrative procedures, state non-transparent policies and troublesome tax paperwork.

To attract Japanese direct investment capital, Yoshihisa Maruta recommended that the Vietnamese government build a favorable business environment and provide support to encourage small and medium-sized businesses to invest in support industries./.

By Nguyen Hoa - ven.vn

The post Vietnam still luring Japanese investors appeared first on Asean Investment | Marc Djandji Blog.