While many local firms have scaled down or even closed amid the tough economic times, several Japanese firms have expanded investment in Vietnam, demonstrating their faith in the market.
Japan's Tokyu Corporation has recently cooperated with Vietnamese industrial investment and development firm Becamex IDC to develop a US$1.2- billion project called Tokyu Binh Duong Garden City in the southern province of Binh Duong.
In June, Nidec Seimitsu Vietnam Corporation, a subsidiary of the Japan-based Nidec Corporation, received a license to establish a manufacturing company with an investment of $40 million in Ho Chi Minh City. The new subsidiary company plans to construct its first factory by the end of 2012 to produce and trade micro-motors used in cell phones.
Nidec Group, since its establishment of Nidec Tosok (Vietnam) Co., Ltd. in 1997, has been expanding its operations in Vietnam and currently manages nine companies in HCMC and one in Hanoi.
Japanese firms have poured a total investment of $43.1 billion into Vietnam over the first eight months of the year, according to the Foreign Investment Agency at the Ministry of Planning and Investment.
With the investment, Japan was the biggest foreign investor in country over the period, accounting for 51.1 percent of the foreign direct investment so far this year, said the agency. Most Japanese-invested projects are medium and small ones, mainly operating in the electronics, manufacturing and hi-tech fields.
Nguyen Mai, chairman of the Vietnam's Association of Foreign Invested Enterprises, said Japanese investors were probably expecting opportunities from an economic recovery in Vietnam in the medium-term.
"This investment expansion is a good sign, demonstrating their belief in the Vietnamese market," he said. "Maybe they expect good opportunities for their business in the next one or two years, not now."
Echoing Mai, Phan Huu Thang, director of the Foreign Investment Research Center, said the expansion was a positive development that needed to be encouraged.
Yoshifumi Tsujio, a senior advisor for the Foreign Investment Agency, said now is the time for Vietnam to lure Japanese investors.
Many Japanese firms recognize that they cannot do too well in Japan because of low economic growth and an ageing population, he said. Thus, China, Indonesia, Thailand, and Vietnam have become attractive destinations for them.
Other Japanese firms are moving out of China, where labor costs have increased sharply and the yuan has risen in recent years, to other countries, including Vietnam, where production costs are lower, he said.
However, Japanese investors are facing difficulties due to poor infrastructure and weak supporting industries. Vietnam needs to improve the latter to add value to its products and compete with other Southeast Asian countries like Thailand and Singapore, he said.
The leader of a Japanese firm in Hanoi said many investors from his country do not have enough information about the Vietnamese market because the country does not promote itself abroad well enough.
If promotional work was better, Japanese firms would pour even more investment into the country, he said.
Investors now also face difficulties seeking local qualified laborers who speak English or Japanese. Thus, Vietnam should do more to deal with that issue as well, he said.
Admitting to these shortcomings, Foreign Investment Agency Director Do Nhat Hoang said Vietnam should develop workshops, infrastructure, and electricity and water systems to woo more foreign investors.
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