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Japanese investment in Vietnam on the rise in 2019

Japanese investment in Vietnam is expected to grow this year, given Japan’s recent initiative to shift investment to Vietnam and other Mekong River nations, as well as free trade agreements (FTA), experts said.

According to Hironobu Kitagawa, chief representative of the Japanese External Trade Organization (JETRO) in Hanoi, the Vietnamese market will remain attractive to Japanese investors in 2019. Japan was the largest investor in Vietnam last year with registered capital of nearly 8 billion USD.

Japanese investment, Vietnam, on the rise, Mekong River nations, free trade agreements,  investment inflow

Japanese investment in Vietnam is expected to grow this year, given Japan’s recent initiative to shift investment to Vietnam and other Mekong River nations as well as free trade agreements.

Kitagawa said a JETRO recent survey on investment trends among Japanese firms operating in Vietnam in the 2018 fiscal year showed nearly 70 percent of Japanese businesses want to expand operations in Vietnam after gaining good business performance last year. A total of 65.3 percent of the 723 Japanese companies recorded high profits in Vietnam in 2018, according to the survey.

The majority of these companies said the market scale and growth are the greatest advantages of Vietnam’s investment environment. Other positive factors include low labour cost and political stability.

Besides, experts forecast the Japanese investment inflow to Vietnam would benefit from a Japan Chamber of Commerce and Industry initiative to shift Japanese investment to Vietnam and other Mekong River nations with an aim to enhance economic partnerships between the two sides.

However, instead of just focusing on manufacturing, Kitagawa forecast Japanese investment inflow to Vietnam’s non-manufacturing industries would keep rising in 2019 and in the next few years.

Non-manufacturing industry accounted for about 70 percent of Japan’s total investment capital in Vietnam in recent years. Especially, the growth rate of the industry was higher than that of manufacturing.

According to experts, the shift of this investment capital flow is aimed to catch up with huge opportunities from the CPTPP and the Regional Comprehensive Economic Partnership (RCEP).

Vietnam, which is considered one of the attractive consumption markets in the region with a population of some 100 million people, is luring foreign investors, including Japanese. Like China 10 years ago, incomes of Vietnamese consumers are getting higher and they are also spending more on consumption.

According to Kitagawa, Vietnam's business environment is relatively good compared to other countries in the ASEAN region.

However, to further attract Japanese investors to Vietnam, he noted the JETRO's survey showed it was important for Vietnam to streamline the country’s legal system as it remained inadequate and less transparent.

According to the survey, local authorities still lack prior research on legal content and delay in issuing documents to guide the implementation of laws, which cause adverse impacts on investors’ works and inconsistency in the laws and execution.

In addition, Vietnam’s tax regime, such as personal income tax, transfer pricing and value-added tax (VAT) invoice, remains complicated and inconsistent.

Besides, Kitagawa suggested the Vietnamese Government should further promote existing plans, such as the Japan-Vietnam Joint Initiative and the Vietnam Business Forum, which would enable it to continuously listen to the opinions of Japanese businesses with an aim to improve the country’s business environment.

 

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Source: VNS/VNA

Japanese investment, Vietnam, on the rise, Mekong River nations, free trade agreements, investment inflow
 
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