Nakajima Takeo, chief representative of the Japan External Trade Organisation (JETRO) Hanoi. (Photo: VNA)Hanoi (VNA) - After a long-standing collaboration, Vietnamand Japan have made remarkable strides in trade and investment. Commemoratingthe 50th anniversary of diplomatic relations between the two nations, the Vietnam News Agency speakswith Nakajima Takeo, chief representative of the Japan External TradeOrganisation (JETRO) Hanoi, to gain deeper insights into future advancementsaligned with the global trend of green growth.
Reporter: What do you think about the development of Japan - Vietnamrelations over the past 50 years, especially in the economic area?
Nakajima Takeo: Thetwo nations established (or resumed) diplomatic relations in 1973. However, dueto the post-war chaotic situations in Vietnam, the economic and business tiesdid not happen in substance.
Japanese firms began investing in Vietnam around 1995, in whichwas the first investment boom, after the US lifted the economic sanctions inthe mid-1990s. However, the Asian currency crisis that began in 1997 weakenedthe power of ASEAN, leading to the shift of Japanese investments to China whichemerged rapidly as a production centre.
In 2006, Vietnam joined the WTO, drawing attention to itssuperiority and triggering a wave of Japanese investment in the country, whichwas the second investment boom. Then, after the Lehman Shock and financialcrisis, investment in Vietnam further accelerated and diversified around 2012and beyond, making it the third investment boom.
Japan now ranks third in terms of investment value, second interms of project numbers, and first in terms of investment execution.
Most Japanese investments were in the manufacturing andexporting sectors in the early stages of economic relations between the two.Later, more non-manufacturing firms started businesses in retail, trade,hotels, professional services, and IT industries.
On the other hand, the entry of Vietnamese IT firms into theJapanese market shows significant growth in Vietnamese business performance andcapability. FPT, CMC, Rikkei, and other IT firms opened businesses in Japan inthe last ten years, taking advantage of Japan's engineer shortages.
As the Vietnamese businesses grew, Japanese enterprises startedtargeting the domestic markets.
The merchandise trade between the two has doubled in ten years.For Japan, Vietnam is the ninth largest trading partner globally and second inASEAN. For Vietnam, Japan is the fourth biggest trading partner.
Vietnam is an indispensable country for Japan to integrate itssupply chain network, where Japan exports parts and materials to the country,assemble them, and reexport to Japan for the final products. We witness moreJapanese firms transfer value-added processes to Vietnam.
Reporter: With numerous Japanese enterprises channellinginvestments into Vietnam, how would you assess the effectiveness of theseinvestments? Please provide your insights on the investment landscape in Vietnam,including potential future investment sectors which Japanese companies hope toinvest in?
Nakajima Takeo: Accordingto JETRO's surveys last year, 60% of Japanese firms in Vietnam are profitable,showing a steep recovery during the COVID-19 pandemic, while the sameproportion plans expanding operations here, which is the highest among Japanesecompanies in the ASEAN.
The surveys also point out that Vietnam was the second-mostfavourable FDI destination, next to the US, for Japanese firms. That is thesixth consecutive year that Vietnam ranked second, which is impressive.
For future investments, we plan to move capital frommetropolitan regions to suburban cities, meaning that due to higher costs in Hanoi,HCM City, Da Nang, Hai Phong, Japanese companies are trying to invest in ruralareas or suburban cities.
Also because of the increase in costs, there will be morelocalisation in human resources, leadership, and procurement. And it ishappening already. Japanese firms are trying to look for Vietnamesepartnerships to procure more, instead of importing from China or Thailand.
Furthermore, we will invest in adding more value inmanufacturing to counter cost increases, with Japanese firms aiming forupstream and downstream expansion. The upstream activities include materialprocurement and production, while the downstream is marketing, delivery, orother services.
Japan is attempting to make the supply chain more integrated,including a trend of transferring manufacturing functions from China or Japanto Vietnam to cut costs and shorten the delivery time.
We also focus on digital transformation as IT and digital are Vietnam’sstrengths.
Also dedicating to that, investing in start-ups is a new trendamong Japanese investors. There are many Japanese companies interested inVietnamese start-ups, with many good ones in the fields of e-commerce,healthcare, gaming, and logistics.
The supporting ecosystem is still underdeveloped, but itattracts investment and collaboration requests from Japanese firms.
Solving social issues of energy, transportation, healthcare,education, and finance is also an important investment space. There are manysocial issues Vietnam should tackle now, and Japan has already undergoneproblems like energy shortages and traffic jams, so we can share our experiencewith the Vietnamese Government.
Lastly, the consumer market is on target. To meet and serve thegrowing middle class and affluent people, Japanese companies have invested moreto capture opportunities in the market.
In the last five years, Vietnamese households have increasedtheir ownership of air conditioning, washing machines, and refrigerators. Theyspend money on food, education, tourism, healthcare, and entertainment.Japanese foods, houseware, baby goods, beauty care products, and processedfoods will have more chances to penetrate the market.
Reporter: The two governments have agreed to boost cooperationtowards green growth, could you elaborate on the collaborative undertakings andplans for cooperation between enterprises on both sides?
Nakajima Takeo: Theemission of greenhouse gas (GHG) and CO2 of Vietnam has increased over the last20 years. And now the share of GHG and CO2 of the country reaches more than 15%in the ASEAN, which was only 10% 20 years ago. Every year, Vietnam producesmore GHG and CO2 than many other nations.
So there is a lot of room to improve, including environmentalprotection, energy conservation, and renewable energy (RE), while upgradingVietnamese fragile legal framework and weak law enforcement.
Japan can help Vietnam develop, as our enterprises have greatproducts and services in energy efficiency and conservation, like LED lighting,building management, air-conditioning, LNG to Power, and hi-tech agriculture.Or firms in the environmental protection sector, including Marubeni inwastewater treatment, Toyota Tsusho and Hukunaga Engineering in recycling, andNagase in the GHG emission reporting system.
Vietnam also needs more renewable energy like biomass, water,solar and wind power, and many Japanese enterprises, including EREX, JFEEngineering, and Toyota Tsusho, are working in this area.
Also, JICA and other Japanese government agencies are helping Vietnamto make a transparent legal framework to prevent pollution and destruction.
Vietnam has introduced numerous legal frameworks but there areproblems in integrating and implementing those policies in businesses.
JETRO is the secretary of the Asia DX subsidy project thatprovides support to digital transformation trial projects, including greenbusinesses. A dozen projects are financially supported by the Japanesegovernment. And about ten projects underway in Vietnam now, of which some areusing digital to reduce pollution and emissions from automation ortransportation vehicles.
So greener projects are one of the important pillars of the AsiaDX.
We are also secretary of the supply-chain diversificationproject. We grant financial support to certain projects involving Japanese andVietnamese collaboration to strengthen the supply chain. Some interestingprojects target environment protection, efficiency, and conservation.
Business matching and trade shows in green businesses are alsoour activities. Our office sometimes opens showcases of Japanese greenproducts, and we invite many Vietnamese buyers or government bodies to look atthe products./.
