About 66 percent of surveyed Japanese firms operating in Vietnam said they are considering business expansion in the Southeast Asian country, according to a survey recently announced by the Japan External Trade Organization (JETRO).
It is part of four major points Japanese firms are considering when investing in Vietnam, according to the results of JETRO's survey on the business situation of Japanese firms operating in Asia and Oceania in 2014.
These four main points include the evaluation of future expansion, the risk in the investment environment, the supply of raw materials and components, and the expectations of economic integration, according to the results recently sent to the Ministry of Planning and Investment.
Regarding the assessment of market expansion in Vietnam, 66 percent of surveyed businesses in Japan said they want to continue to expand in Vietnam, as the country is considered an important investment destination in the region.
Regarding the risk in the investment environment, Vietnam came in 3rd place among 15 regional countries on "a legal system that is not perfect and does not operate transparently".
In addition, more than half of polled businesses indicated problems in "the complexity of the investment mechanism", and "rising labor costs". However, the "complex administrative procedures" have improved slightly and "infrastructure incompletion" is also significantly improved.
However, many surveyed Japanese firms are still not satisfied with the supply of raw materials and components, though the localization rate in Vietnam in 2014 edged up 1 percent compared to 2013 to 33.2 percent.
This rate is higher than the Philippines (28.4 percent) but much lower than China (66 percent) and Thailand (55 percent).
To improve competitiveness in terms of cost, Vietnam needs to increase procurement from local businesses and support businesses operating in supporting industries in the form of low-interest loans, tax incentives, and human resource training, according to the survey.
Most Japanese firms are interested in the expectations for the economic integration of Vietnam, and wish for the situation to be improved more. They want "simplified customs clearance procedures" in the first place, followed by "simplified taxation mechanism, "import tax exemptions" and "explanation and application of the rules of origin for imported goods".
Positive changes to come
In an evaluation of the JETRO survey results at a recent meeting in Hanoi, Minister of Planning and Investment Bui Quang Vinh said the survey will not only help the Japanese government but also regional governments to know about the opinions of Japanese firms.
It can help Vietnam compare its regulations with those in the region and thus enable relevant Vietnamese state agencies to innovate and improve their policies.
The results of the JETRO survey in 2014 show that the general situation of Vietnam investment is markedly improving, though it has not yet met the expectations of Japanese businesses, said Minister Vinh.
In 2014, the Government of Vietnam drastically improved the business and investment environment of Vietnam with the revised Investment Law and amended Business Law, which were all approved by the National Assembly, he said.
Those changes, including more transparency in law and the abolishment of many administrative procedures, were appreciated by both the local and international business communities, including Japanese firms, he added.
However, the new laws will only take effect on July 1, 2015, so they were not reflected in the results of this survey, Vinh said.
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