Nearly 47 percent of Japanese firms in Vietnam plan expansion

The Japanese-invested Foster Electric Co. Ltd in the Vietnam-Singapore Industrial Park in Bac Ninh province (Photo: VNA)

Despite a raft of difficulties plaguing 2020, nearly 47 percent of Japanese businesses investing in Vietnam said they will expand operations in the next one or two years, the Japan External Trade Organisation (JETRO) said on February 8.

Unveiling the results of a survey of Japanese enterprises investing abroad in financial year 2020, from April 2020 to March 2021, JETRO noted that among the more than 900 in Vietnam that took part in the survey, over 400 expressed an intention of expanding functions such as normal and high added-value goods production, logistics, and research.

In particular, the rate of Japanese businesses planning to boost sales and normal goods manufacturing in Vietnam is high compared to the level in other countries and regions.

About 16.4 percent of respondents also said they will step up investment in equipment and other new investments in the time ahead.

Japanese firms have not only paid recent attention to manufacturing and processing but also digital transformation, trade, and hi-tech agriculture, the survey found.

Hirai Shiji, Chief Representative of JETRO in HCM City, said their expansion plans are fuelled by the higher revenue possibilities and Vietnam’s rising economic growth potential in the years to come.

Japanese enterprises are also considering the re-establishment of certain supply chains affected by COVID-19, for example by changing purchasing units or production bases.

Up to 18.8 percent of respondents said that if they were to change suppliers, they would select those in Vietnam - the highest rate in the 20 Asian and Oceanic countries included in the survey. There were also 18.1 percent that said they would choose Vietnam if they changed production bases, putting the country in second position after Thailand (20 percent).

Japanese businesses said Vietnam is highly regarded thanks to its growth potential, political and social stability, and lower labour costs compared to other countries in the region.

Also pointing out the obstacles facing Japanese firms, the survey recommended that to attract new investors and encourage existing businesses to expand, Vietnam should develop supporting industries and improve its domestic supply capacity.

The JETRO report showed that in financial year 2020, due to COVID-19, 52.8 percent of Japanese enterprises in Vietnam posted falling profits against 2019, while 29.4 percent recorded stable profits and 17.8 percent posted an increase.

They expressed optimism about the prospects for Vietnam’s economic recovery this year thanks to its effective control of COVID-19./.