Japanese trade official wants more from Vietnam besides just low wages

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Hirotaka Yasuzumi, managing director of Japan External Trade Organization, speaks about what Vietnam needs to do to attract more Japanese investors. Photo courtesy of Thoi bao Kinh te Saigon Online

Japanese companies in Thailand are setting their sights on Vietnam because of its cheaper labor, a Japanese trade official said, urging the country to improve policies and its supporting industries to attract more investments.

Hirotaka Yasuzumi, managing director of the Japan External Trade Organization (JETRO), said many Japanese businesses in Thailand intend to invest in nearby countries and Vietnam is on the radar.

Wages in Thailand are at three times the level in Vietnam, and foreign investors there want to move labor-intensive parts of their production to Vietnam, Laos, and Cambodia, he told Thoi bao Kinh te Saigon Online on the sidelines of a meeting between Ho Chi Minh City leaders and Japanese businesses.

A JETRO survey in 2012 found that average wages in Thailand were around US$6,704 for workers and $27,204 for managers compared to $2,602 and $12,245 in Vietnam.

Vietnam is more competitive than Laos and Cambodia in terms of having a skilled workforce, and the organization has advised Japanese businesses in Thailand to choose Vietnam over the others.

But Yasuzumi noted that since Thailand’s supporting industries are more developed, the more valuable parts of the production processes would stay there.

The lack of supporting industries is the biggest challenge for Japanese investors interested in Vietnam, he said.

Thus, though the threats to the auto industry from political instability in Thailand have increased, the chances of Japanese manufacturers moving to Vietnam is very slim since Thailand has been a Southeast Asian car hub for a long time with well-developed supporting industries, he said.

Japanese investors are determined to stay and expand in Thailand despite years of political uprisings and the severe floods in 2011.

Underdeveloped supporting industries, vague policies, tax problems, raw materials shortage, and poor information have made Vietnam the second most difficult market for Japanese investors only after Myanmar, a survey of 19 countries by JETRO found.

Japanese carmakers can source only around 28 percent of parts in Vietnam and have to import the rest, entailing import taxes and related costs, it said.

China and Thailand meanwhile provide twice that rate.

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