Takeo Nakajima, chief representative of the Japan External Trade Organization (JETRO) in Hanoi told Hanoitimes about the prospects for future cooperation between Japanese and Vietnamese firms.

Takeo Nakajima, chief representative of the Japan External Trade Organization (JETRO) in Hanoi.

In JETRO’s recent survey, Vietnam was ranked fourth among countries/territories that Japanese firms are looking to expand their operations. What is your view of this trend?

In our survey, 46.8% of Japanese firms in Vietnam said they would expand investment activities in the next one or two years, down 17.1 percentage points against last year. Meanwhile, Vietnam is among the countries with the fewest enterprises (6.1%) seeking downsize or relocate production facilities to a third country, only behind Pakistan and Taiwan in the Asia-Pacific region.

Given the current difficult economic climate as a result of the Covid-19 pandemic, such results are considered positive and reflected strong efforts from the government in effectively containing the pandemic and improving the business environment. 

It is worth mentioning that the ratio of enterprises keeping their operations unchanged was 47.1%, significantly higher than the 33% rate of the previous year. This indicates enterprises have taken a more cautious approach in doing businesses.

Once the pandemic is contained along with a recovered global economy, it is likely that those enterprises with a cautious stance would soon expand their activities to ride on the recovery wave of global economy.

This also came from the fact that Japanese firms in Vietnam are gaining more profit from exports than from the local market (53% versus 47%).

While Vietnam is pushing for a greater role in the global supply chains, weak linkage between local and foreign firms, including Japanese companies, remains a major issue. What should Vietnamese firms focus on to improve the situation?

Japanese companies are known worldwide for being highly demanding for product quality, so there are a lot of works that Vietnamese firms should do to meet Japanese standards.

However, JETRO’s survey shows Japanese companies hold high hopes for their Vietnamese peers and the market potential, in which 75% said they are looking to partner with Vietnamese companies.

To form a long-term partnership, it is essential for Vietnamese firms to ensure consistent product quality for a large number of products, on-time delivery, and capabilities to quickly replace defective products, if any.

This year, the Covid-19 situation is causing difficulties for Japanese firms to import input materials from Japan or China, so there is a huge demand for input supplies from local firms and subsequently open up opportunities for them to join Japanese firms’ supply chains.

To further boost the linkage between Vietnamese and Japanese firms, JETRO is planning to host a business matching event in early March for two sides to look for suitable partners.

On the other hand, we are currently working with Japan’s Ministry of Economy, Trade and Industry (METI) to explore new cooperation opportunities between Vietnam and Japan enterprises in digital transformation and innovation, which could be a potential field for the two countries to press on in the future.

What steps are required for Vietnam to further attract investment capital from Japan?

The infrastructure system, which was considered a major issue in the past, has now been vastly improved, as only 7.6% of Japanese firms voiced concern on inadequate infrastructure.

However, there remain issues of complicated administrative procedures, including the overlapping functions between different legal documents and the slow issuance of decrees that provide instruction for law implementation, in turn causing confusion among investors.

For example, the Vietnamese government has issued the Law on Public-Private Partnership (PPP), but a decree related to the law has not been provided, so many foreign firms do not know whether they are entitled to government guarantee in PPP projects or not.

A clarified and simple laws, therefore, would build trust among investors and spur the investment capital inflows into Vietnam to help the country improve infrastructure system.

As the Vietnam’s economy is growing fast, the labor cost is also increasing, but it also should be justified with higher labor productivity and more production of high-added value products. Otherwise, one of the country’s competitive advantages would soon be diminished.

Following the success of the 13th National Party Congress, what is your expectation and assessment for Vietnam’s outlook?

I think the domestic market and exports are two driving forces for growth. With the mass roll-out of Covid-19 vaccination programs worldwide, the current pandemic situation would soon be put under control. As such, Vietnam’s exports would go strong in the coming time, with the US, Europe, ASEAN and Japan among major markets.

Along with Vietnam’s strong economic rebound, the domestic market could be on a recovery track but may not reach its pre-Covid-19 level. This is due to the strong dependence on tourism and the return of foreign investors. But again, all these issues would rely on the Covid-19 situation globally.

With neighboring countries such as Malaysia or Thailand still struggling with Covid-19, the Vietnamese economy is still limited in growth given a high level of economic openness.

I understand Vietnam in the future would continue to maintain its economic development strategy, including the Make in Vietnam strategy.

While this is an effective move to improve the capabilities of local industries, it is essential for the government to ensure fair competition environment between domestic and foreign products. 

Thank you for your time!