With Vietnam’s strengthened bilateral ties with Japan and its improved business climate, a new wave of Japanese investment is expected to hit the country across various sectors. 

In Tokyo, PM Phuc met with Japanese property firms showing interest in expanding presence in Vietnam

Nine co-operation deals inked during the visit

- Diplomatic note of exchange on non-refundable aid to enhance the capacity of Vietnam’s Reference Testing and Agrifood Quality Consultancy Centre, in order to ensure the food safety of agro-forestry-fishery products

- Memorandum of understanding (MoU) on co-operation in maritime policy between Vietnam’s Ministry of Natural Resources and Environment and Japan’s Cabinet Office

- MoU on collaboration in trade and industry between Vietnam’s Ministry of Industry and Trade (MoIT) and Japan’s Wakayama prefecture

- Firefighting accord between Vietnam’s Ministry of Public Security and Japan’s Ministry of Internal Affairs and Communications

- Agreement between Vietnam’s Ministry of Education and Training (MoET), Japan’s National Police Agency and ministries of justice, foreign affairs, education, culture, sports, science and technology on affairs relating to overseas Vietnamese in Japan

- Build-operate-transfer contract between the MoIT, Sumitomo Group and Van Phong Power Company Limited on the Van Phong 1 thermal power plant

- MoU between Vietnam’s MoET and Japan’s Mizuno Group on physical education in Vietnamese primary schools

- MoU between the Vietnam Football Federation and the Japan Football Association

- MoU between Vietnam’s Viet Duc Hospital and Japan’s Kitahara Hospital

During his visit to Japan last week, Prime Minister Nguyen Xuan Phuc met directly with leaders of many major Japanese corporations and was told that Vietnam remains an important market for them, and that they will continue raising their presence in the country.

At his meeting with president and CEO of All Nippon Airways (ANA) Shinobe Osamu, the prime minister showed his expectation that the largest airlines in Japan will boost co-operation with Vietnam’s airlines. He also welcomed ANA to purchase more shares at Vietnamese flagship carrier Vietnam Airlines.

In 2016 ANA, Japan’s largest airline group, signed a memorandum of understanding (MoU) with Vietnam Airlines and acquired a stake in the company of approximately 8.8 per cent - worth VND2.431 trillion ($107.56 million).

The partnership has also enabled both sides to take maximum advantage of the increasing demand for air services in the Asian market. Cambodia, Laos and Myanmar, along with Vietnam, have the highest growth potential in the region and so are being particularly focused on.

Osamu also said ANA is accelerating the implementation of projects connected with Vietnamese localities such as Danang, Nha Trang and Phu Quoc, in a bid to transform these destinations into more popular tourist spots.

PM Phuc met with Okada Motoya, president and CEO at AEON Co Ltd., who said they are planning to produce Vietnamese-made products which will be sold at the group’s mall chains both in Vietnam and across the world.

Alongside that AEON is also planning to invest in private credit in order to boost advanced transactions in Vietnam. In addition, under its business strategy in Vietnam, AEON is expected to develop dozens of shopping malls in the country.

In May this year, AEON Mall was licensed to build a $180 million shopping mall in the northern city of Haiphong. Two months prior, AEON commenced construction of its shopping mall in Hanoi’s Hadong district, with the total investment capital of about $90.4 million. This is the second AEON shopping mall in Hanoi, and the fifth in Vietnam.

A new wave of Japanese ­investments

ANA and AEON are among big Japanese investors who took part in meetings with PM Phuc last week in Tokyo to discuss their upcoming business and investment plans in Vietnam. These investors, operating in infrastructure, property, finance and banking, included UFJ, MUFG, Japan Tobacco, Mitsui, and Mitsubishi.

At the Vietnam-Japan Business Forum chaired by PM Phuc in Tokyo, Japanese investors said they are planning to pour billions of US dollars in Vietnam, across many sectors. This has been expected to be “a new Japanese investment wave in Vietnam in the time to come”.

Umeda Kunio, Japanese Ambassador to Vietnam, told VIR, “Many Japanese companies are very interested in conducting business in Vietnam in the fields of agriculture, healthcare, retail, and beauty services as well as urban development - such as projects in the northern part of Hanoi, the Binh Duong project, subway route No.1 in Ho Chi Minh City, and subway routes 1 and 2 in Hanoi.”

“Vietnam is ranked third in a recent survey on the overseas deployment of Japanese manufacturing industries that the Japan Bank for International Co-operation conducts annually, and second in the same survey if it is limited to only medium- and small-sized enterprises,” he said. “The attractiveness of Vietnam as an investment destination is its market potential, relatively inexpensive and diligent workforce, and political stability. Based on several economic forecasts, Vietnam’s economic growth is predicted to remain high in 2018, and the Japanese investment into Vietnam this year is also expected to be at a high level.”

One current example of investment involves Japan’s International Total Engineering Corporation (ITEC), which is partaking in designing a million-dollar project to build a 40-hectare high-tech healthcare complex in Hanoi. The project’s investor is Vietnamese TH International Medical Development JSC.

One year ago in Tokyo, the MoU on constructing this 50-year project was signed. ITEC will supply management services and operations and human resource training for the complex. All doctors and nurses for the complex will also receive ITEC training.

In another case in this past May, Japan’s NIDEC Corporation was licensed for a project worth $1 billion in Hanoi’s Hoa Lac High-tech Park. It is expected that the plant, which will manufacture electric motors, will become operational in the first quarter of 2019.

Last November, companies from both Vietnam and Japan also inked co-operation deals worth $5 billion on the sidelines of the 2017 APEC Economic Leaders’ Week held in Danang. The deals were focused on the fields of energy, power, oil and gas, and healthcare.

Japan currently has over 2,500 operating companies in Vietnam, including many large ones such as Idemitsu Kosan, Sony, Panasonic, Canon, Mitsubishi, and Marubeni. Idemitsu Kosan in particular currently holds a 35 per cent stake of the $9 billion Nghi Son refinery and petrochemical complex in the northern central province of Thanh Hoa. It is expected that the plant will officially begin commercial operation next month. Also in Thanh Hoa, Marubeni and Korea Electric Power is investing in a $2.79 billion coal power plant, expected to become operational in 2021.

Sumitomo’s $2.64 billion coal plant in the central province of Khanh Hoa will be another notable project, expected to come into operation by 2022, while Mitsui Oil Exploration is participating in a $1.27 billion gas pipeline project in the southern province of Kien Giang.

An alluring investment ­destination

“Vietnam is considered an investment destination of great interest for the Japanese. The number of inflows into Vietnam from Japan has been following a growing trend over recent years,” said Hironobu Kitagawa, chief representative of the Japan External Trade Organization (JETRO) in Hanoi.

As of September 20, Japan boasted 3,900 valid investment projects in Vietnam, registered at $55.78 billion. In the first nine months of this year, Japan was Vietnam’s largest foreign investor, with total newly-registered capital, additional capital from operational projects, and acquisitions reaching a record $7 billion. Of this, a record $5.84 billion was attached to 318 newly-registered projects.

“The records were found in terms of both the number of projects and investment funding, placing Japan on top of the list of countries and territories investing in Vietnam,” Kitagawa said. “Out of the top five projects with the largest investment in the country for construction of thermal power plants, Japanese businesses are involved in three.”

A survey conducted last year by JETRO among Japanese businesses operating in Vietnam revealed that up to 70 per cent planned to expand operations in the country. This represents a high percentage compared to other countries in ASEAN. Under a Japanese survey questioning participants about countries and territories for potential expansion plans, the proportion of businesses choosing Vietnam has increased over three consecutive years, indicating that the country continues to be a destination of interest for many Japanese investors.

PM Phuc told Japanese investors that the Vietnamese government will create the best conditions for them, and called for them to engage in Vietnam’s equitisation of state-owned enterprises. Notably, Vietnam encouraged Japanese investors to purchase its weak banks and transform them into wholly-foreign-owned banks.

VIR