Japanese companies plan to expand operations in Vietnam

Wednesday, 06 April 2016

About 64% of Japanese companies operating in Vietnam plan to expand their operations this year, a recent survey of the Japan External Trade Organization (JETRO) has revealed.


This percentage was much higher than that reported in other neighboring countries such as China (31.8%), Thailand (49%), Malaysia (44.6%) and Indonesia (51.9%).

According to the survey, 85% of surveyed companies believed that their revenue would go up while 50% said their growth rate would be positive in 2016.

 


Illustrative image
 

For 2015, nearly 60% of the firms reported earnings while 26.2% reporting losses for the year.

Meanwhile, enterprises responding the survey thought that Vietnam’s labor costs were relatively low in comparison to other markets.

For example, labor costs in the manufacturing sector were less than a half of that in China, Thailand and Malaysia.

 

In terms of risks, the survey respondents cited administrative formalities, customs formalities, the tax system, laws in Vietnam as the greatest risk to them.

Vietnam's localization rate, which defined the percentage of raw materials and intermediary goods that could be sourced locally, is 32%. However, it is much lower than China, Thailand, Indonesia and Malaysia, which were 65%, 56%, 41 %, and 36%, respectively.

 

JETRO suggested that in order to increase competitiveness in terms of cost, Vietnam should strengthen its localization rate that could facilitate cost reduction for Japanese companies and thereby increasing profitability.

The survey, conducted between October and November of 2015, received valid responses from 4,635 Japanese companies and 557 of those operating in Vietnam.

The annual survey has been conducted since 1987 by JETRO to understand the business activities of Japan-affiliated companies in Asia and Oceania, including Vietnam.

 

The surveyed firms were involved in a wide range of sectors, including automobiles, machinery, chemicals and pharmaceutical products, food, textiles, retail, transport, ICT and finance. 

 

According to the Ministry of Planning and Investment, Japan was Vietnam’s third largest source of foreign direct investment (FDI) in 2015 with US$1.8 billion, accounting for 7.4% of the FDI registered in the country during the period./.

Van Hai (Source: vietrade)

Related items