Investment Waves from Japan Continue to Rise

  It has been observed that Vietnam continues to receive foreign investment switched from from China, Thailand into Vietnam to acquire shares or set up business in Vietnam in real estate, manufacturing, and other services, especially from Japan investors.

On July 31^st, 2015 Forval Group has partnered with Tin Nghia Corporation and Dong Nai Container Port JSC to announce the establishment of Japanese Small and Medium Enterprises Development JSC (JSC) with an investment capital of 772 billion VND.

Accordingly, the JSC will build the infrastructure of workshops dedicated to the small and medium Japanese enterprises in Nhon Trach 3 Industrial Zone on 18,2ha area.

The community of Japanese SMEs tends to invest abroad but there is no need to rent vacant land but to rent factory space to shorten the time of initial investment. Therefore, the construction of the factory infrastructure to attract Japanese SMEs is efficient model.

Earlier, on July 26^th, 2015, Creed Group Investment Funds (under the Creed Group - Japan) signed a 200 million USD investment project in An Gia Investment and Property Development JSC. Besides, Creed Group also provides loans for An Gia to buy project, building high quality Japan housing projects in HCMC. In addition to financial investment, Creed Group has also transfer the real estate development technology for An Gia. But this is only the first step in the strategic partnership between the two sides. Creed Group will continue to increase investment if real estate market developed well.

Another Japanese corporation that is Kyocera Mita in May has also invested in building a factory in Hai Phong with capital of 200 million USD. The project was built in Vietnam – Singapore Urban, Industrial and Services Area (VSIP Haiphong) with an area of 20ha, specializes in manufacturing all types of printers, copiers for export to 140 countries around the world.

According to data from the Foreign Investment Department (Ministry of Planning and Investment), by the end of Quarter II/2015, Vietnam has attracted 2,551 projects with a total investment capital of up to 37.7 billion USD. Particularly in HCMC, there are 787 Japanese companies are operating in many sectors from retail, real estate, manufacturing, science and technology...

Early of June 2015, the delegation led by Mr. Iwasaki Yasuo, Vice Governor of Saitama City is visiting HCMC to exchange the cooperation opportunities. Continued with the investment trend, during the connection day between Japan and Vietnam companies in the field of agricultural, food, held in HCMC on July 31^st 2015, 25 Japanese companies have also met with 100 Vietnam companies to explore business opportunities. Since last year there have been over 6,000 Japanese businessmen came to find out information about Vietnam market with the desire to invest and expand their business here.

In particular, 60% of enterprises are interested in service fields such as restaurants, hotels, wholesalers, retailers, the remaining opportunities are in the field of manufacturing and processing.

With the advantages of labor and investment environment have increasingly been improved, some Japanese companies that are investing in Thailand and China have decided to choose Vietnam as next destination. Jetro's survey showed that as many as 25% of enterprises operating in China said they would move to Vietnam in the coming years.

Because of labor costs are increasing but limited workforce, many Japanese companies have tended to move abroad and Vietnam is the preferred destination. The wave of investment into Vietnam will continue to increase in the future, including commissioned production form.

The wave of companies shifting from China to 3^rd country has occurred for some years, however, at the present, this trend is growing fast. The reason is that labor costs in China rising, and many other obstacles. While Vietnam has favorable conditions for investment and development through young labor force and low labor costs. With over 90 million people, Vietnam is the 3^rd largest market of South East Asian region and this market is continuing to open when the ASEAN Economic Community was established by the end of this year. In addition, the investment environment in Vietnam is increasingly improved and the performance of businesses has developed.

The survey conducted by JETRO in 2014 showed that there are 66% of Japanese companies in Vietnam want to expand operations in the next few years because of good business performance. Up to 84.4% of Japanese companies participating in the survey said that they have higher revenue in 2014 than in 2013, with production sector, up to 70% enterprises see high potential in Vietnam market. Besides the favorable conditions to attract investment, the support from the Bank of Japan also help Japanese companies expand business strongly. One of the "synergy" of Japan investors is Tokyo Mitsubishi UFJ, the country's largest bank with market capitalization of up to 170 billion USD.

Mr. Nobuyuki Hirano, President of Tokyo Mitsubishi UFJ Bank in the meeting with Prime Minister Nguyen Tan Dung in April 2015 said they would continue to support capital for the Japanese businesses to invest in Vietnam, as well as support Vietnam in the development of supporting industry, high technology industry, infrastructure and agricultural development.

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FDI flows into Vietnam from China?

 In the longer term, FDI flows may decrease in China and move out of the country. Vietnam has the opportunity to attract investment capital when many investors wish to set up business to enter Vietnam market.

Earlier, according to the survey of FDI Market in the Asia - Pacific region, Vietnam is the 2^nd largest country that attracts FDI after China. However, rising labor costs in China in recent years has created opportunities for the emerging markets in Asia including Vietnam to enhance their competitiveness in the manufacturing sector.

Specifically, the cost to open one factory to produce chemical equipment or pharmaceutical technology in Vietnam is cheaper than in China by 50%. Similarly, the cost to build an auto manufacturing plant in Vietnam is 40% cheaper than in China.  Foreign investors have sent signals to switch manufacturing into Vietnam.

Looking at the medium term, the picture of foreign investment in Vietnam is bright. The domestic market continued to recover with the forecasting GDP growth for 2015 is 6.1% and increase to 6.2% in 2016.

Therefore, if Vietnam can make good use of opportunities, maximize cost benefits; enhance the skills of workers and improve production technology, Vietnam will benefit in the upcoming shift.

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The UK Entreprises Encouraged to Explore the Potential Market in Vietnam

   In addition to improvement of the business environment in Vietnam, Deputy Foreign Minister Hugo Swire also affirmed that Vietnam and UK will plan to raise awareness for the UK investors about potential business market in Vietnam.

Talking to the press after the Vietnam - UK 4th annual strategic dialogue in Hanoi today (February 27^th), Mr. Hugo Swire said, one of the highlights of the conference is how to strengthen bilateral trade relations.  According to him, a number of the businesses of the UK have succeeded in Vietnam but the UK wants more and more enterprises to be successful in Vietnam in the future.  To do this, the improvement in business environment is one of the problems the UK stressed many times before. Mr. Hugo Swire said that transparency and openness of Vietnam are still big challenges affecting the decision for UK enterprises to invest in Vietnam.  Besides, another fact acknowledged by Mr Hugo Swire is that many businesses in the UK have not understood the potential markets in Vietnam.

Therefore, during the dialogue taken place today, he said, Vietnam and the UK have discussed a program to raise awareness of UK businesses in London to Vietnam market.  According to Mr Hugo Swire, the completion of free trade agreement between Vietnam and the EU will open up many prospects to attract British investors to Set-up company in Vietnam.

"These problems, if be solved, they will bring to resonance as well as open new horizons for UK businesses to enter into Vietnam," said Deputy Foreign Minister.

Reviewing more specific about the Vietnam market, he also said, high-end consumer goods is one of the prioritized potentials for businesses of both countries.

According to him, many designers in the UK now want to introduce products to Vietnam and this may be a priority in the coming time. According to him, four other areas in which the Uk interested are education, energy, especially nuclear energy, health, transportation and infrastructure.

According to Mr Hugo Swire, a detailed plan to strengthen relations and cooperation between the two countries on these issues will be discussed in more detail at the annual meeting of the Joint Committee on Economic Cooperation in the future.

Also on bilateral cooperation, Deputy Foreign Minister said the capital of official development assistance (ODA) will end in 2016 but the UK is committed to continue the support for Vietnam by other methods.

One of the forms of assistance is Newton fund currently being deployed in Vietnam to invest in the fields of science and technology, particularly creative ideas, innovation.

According to Hugo Swire, the UK and Vietnam are still under discussion for formal cooperation framework to help the Newton fund operating efficiently. However, representatives from the UK said, one of the activities of the program is the exchange of scientists between the two countries , thus supporting the implementation of the research to develop economics and society.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

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