Japanese companies stay upbeat on business expansion in Vietnam

Vietnam ranks fourth in Asia and Oceania as the most attractive destination for Japanese business expansion in the next one and two years, a survey by Japan External Trade Organization (JETRO) has found. 

Bangladesh tops the list as the most favoured country, where 73.2 per cent of Japanese companies want to expand business, followed by India (72.8 per cent) and Myanmar (72.1 per cent). 

Among ASEAN nations excluding Brunei, Vietnam ranks second and its proportion of companies having expansion schemes is much higher than that of other countries such as Malaysia (54 per cent), Thailand (52.2 per cent), Singapore (50.4 per cent) or Indonesia (49.2 per cent).

Up to 67.1 per cent of Japanese firms established before 2010 plan business expansion, showing that Vietnam continues to be an important investment destination.

Higher profit is the main reason why many Japanese enterprises decided to expand their business in Vietnam, followed by the potential and high growth of the Vietnamese market, according to JETRO. 

About 65.3 per cent of Japanese companies in Vietnam gained profits in 2018, 0.2 percentage points more than the previous year.

The JETRO’s report shows that the biggest advantage of Vietnam is market size and growth potential, combined with cheap labor cost.

However, Japanese companies are facing the risks of the investment environment in Vietnam, namely increased wages, difficulty in local procurement of raw materials and parts and difficulty in quality control.

According to statistics from the Foreign Investment Agency under the Ministry of Planning and Investment, among 112 countries and territories investing in Vietnam, Japan takes the lead with a registered investment capital of $8.59 billion last year, equivalent to 24 per cent.

Japan investors have recently shown increasing interest inVietnam real estate and retail sectors.

Mikazuki, which is operating over 1,000 hotel rooms in Japan, has just been granted the investment licence to develop Xuan Thieu tourism complex in Danang. The Japanese hotel company plans to start construction on the $100-million resort on an area of 13 hectares in March.

Construction contractor Kajima Corporation has set up a joint venture with Indochina Capital to develop a hotel chain across Vietnam.

In retail sector, Japan’s household goods and apparel chain Muji plans to establish a Vietnam branch in August 2019 and open its first store in Ho Chi Minh City next spring. Its move follows fashion giant Uniqlo that will open first store in the southern commercial hub at the end of next year.