According to the Ministry of Planning and Investment, there are 971 Japanese-invested projects in Vietnam, totaling $18.45 billion of registered capital, with a large number of projects in manufacturing and processing industries. At a recent meeting to promote investment from Japan into the southern province of Dong Nai, experts said that there is a new inflow of investment from Japan to this province.
Among newly-licensed investors in Dong Nai, there are big names from Japan--for example Brother, Tiger, Daitoh Industry and Onishi. If Onishi manufactures drilling drillers, Daitoh Industry is specialized in semi-conductor, LCD screens and solar batteries. These are hi-tech industries that Vietnam needs to activate its supporting industry. In a short period of time, five Japanese investors were licensed in Dong Nai. They are small businesses but they operate in the fields of mechanical engineering, electronic and hi-tech.
Hai Phong city also attracts many Japanese investors in the first half of 2011, with the largest project of Kyocera Mita, worth $187 million in registered capital. At the Vietnam-Singapore Industrial Zone, Japanese-invested projects account for 50 percent of the total new foreign-invested projects in this period.
At the investment promotion conference in Dong Nai, Japanese investors said that Vietnam now has a great opportunity to attract investment from Japan, which is similar to the first investment wave in the 1990s. However, Vietnam still has weak points that worry Japanese investors; particularly: shortage of power and poor infrastructure.
An investor from Osaka said that many Japanese investors do not have sufficient information about Vietnam.
Many industrial zones in Vietnam have worked out plans to welcome Japanese investment since many Japanese investors in China want to move their factories to Vietnam.
Toshio Kazama, General Director of the Long Binh Industrial Zone Development Company, a joint venture with Japan’s Sojitz Group, said that his company is working on the establishment of an industrial zone in Dong Nai to welcome new Japanese investors from now to the year end.
Toshio Kazama’s opinion must be bases on the fact that Japan’s investment in China has no longer favorable owing to diplomatic matters, which urges Japanese firms to disperse their assets to avoid risks.
In addition, value of the Chinese yuan and minimum wage increase, land is banned from being leased at low prices, the circulation of export tax reduces, which make production cost in China to increase. As a result, some sectors and production forms are no longer lucrative.
In that context, Japanese investors are performing a new investment policy, called “China plus one”: major investment in China and part in Vietnam, Indonesia, Thailand or Malaysia. Vietnam, as a neighbor of China, with politic stability and a similar business mechanism with China, has opportunity to become the destination of Japanese firms.
Over four years ago, Mizumo Masumi, director of a Japanese consulting firm in China, made a field trip to Vietnam. He compared the investment conditions in Vietnam and China and said that for some Japanese enterprises, it is urgent to seek a place to remove their factories. Vietnam is an important destination.
According to Mizumo Masumi, Vietnam is 20 years behind China in preparing its legal system, from 15-20 years in building infrastructure for production, and 10 years in building infrastructure for tourism.
Vietnam’s general policy is welcoming foreign investment into the fields that no longer enjoy investment incentives in China, so it is an attractive destination for investors in these fields. However, Vietnam is not a perfect investment environment. In the future, with the growth of the foreign-invested sector, Vietnam can change its policies, which can make similar difficulties and restrictions like China. This is a noteworthy aspect.
Mizumo Masumi’s theoretical point is briefed as follow:
Vietnam’s industrial zones which are invested by foreign investors have good infrastructure, which is not inferior to those in China. But they are smaller than China’s.
In comparison with China, Vietnam’s infrastructure is small and weak and this may hinder Vietnam from completely absorbing the inflow of foreign investment. If infrastructure construction continues to go slow, in the near future, Vietnam’s attraction of foreign investment may be hindered seriously.
The number of Vietnamese workers who can speak Japanese is less than China’s, while employees of Japanese small and medium firms are not very good at English. This may be a hindrance for them to invest in Vietnam.
Japanese enterprises often pay its workers higher than minimum wages, so wages in Vietnam are equivalent to 50 to 70 percent to wages in China. In China, most of workers work far from home, so their employers have to build hostels for them. In Vietnam, though workers live far from home, they often seek accommodations themselves.
Personal income taxes in Vietnam and China are similar, which are both high. In China, businesses have to pay value added tax (around 17 percent) and business tax (around 5%). In Vietnam, VAT is 10 percent on average. Foreign investors are exempted taxes for importing equipment for production and office equipment.
He concluded that Vietnam’s current situation is the same to that of China in 15 or 20 years ago. Vietnam is a country of great development potential.
DNSGCT
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