Most Japan investors profit in Vietnam, loss-makers rise

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Quality control staff at a Toyota Vietnam service center in Ho Chi Minh City carry out maintenance of cars. Photo by Diep Duc Minh
Most Japanese investors in Vietnam are making profit and planning to expand operations, but the number of loss-making ones has increased over the last year, a survey has found.
The survey carried out by the Japan External Trade Organization (JETRO) during the last quarter of 2013, showed that 60 percent of Japanese investors in the country made profit, but poor policies and resources were still common problems.
It also found that 70 percent of 435 Japanese businesses in Vietnam had plans to expand their operations and make the market a major base. The trade agency had sent questions to all 585 Japanese firms in Vietnam, but 150 did not return valid answers.
The agency said that survey found confidence among Japanese investors in Vietnam was higher than those in nearby markets like Indonesia, Thailand, the Philippines, Malaysia and China.
Investors in Vietnam said the market has high growth potential thanks to its 90 million strong population and its political and social situations are more stable.
But 25.6 percent of the surveyed businesses said they were making losses, up 5.3 percentage points from the previous year.
Most of the winners are processors for export and losers are producers for the local market.
Atsusuke Kawada, JETRO chief representative in Hanoi, said producers made bigger initial investments while the local market was still troubled with weak spending last year, according to a Thoi bao Kinh te Saigon Online report.
Many Japanese businesses said red tape, vague legal and tax policies plus increasing labor wages have been major obstacles in doing business in Vietnam, he said. Labor costs are still only half that paid by Japanese investors in Thailand and Japan.
The rate of firms complaining about Vietnam’s investment and business climate had increased from the 2012 survey and higher than in other countries.
They also complained about expensive import costs as they could only source 32.2 percent of the materials they needed in Vietnam, which was 4.3 percent higher than the previous year but still modest compared to 64.2 percent in China, 52.7 percent in Thailand, 42.3 percent in Malaysia and 40.8 percent in Indonesia.
Hirotaka Yasuzumi, managing director of JETRO, had told Thoi bao Kinh te Saigon Online earlier this month that Japanese companies in Thailand are setting their sights on Vietnam because of its cheaper labor, but the latter needs to improve policies and its supporting industries to attract more investment.
The JETRO annual survey was first conducted in 1987 to provide a deeper look into Japanese businesses’ operations as also assistance for improving the business environment in the Asia-Pacific region.
The 2013 survey covered a total of 9,371 Japanese businesses in 20 countries and territories.

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