Vietnamese enterprises need to improve their capacity to produce raw materials, components and machines of high quality to meet requirements of Japanese manufacturers in the country, experts said at a meeting held in HCM City last week.

Mechanical production at the Japanese company RK Engineering Co. Ltd in Dinh Vu Industrial Zone in Hai Phong.

Vo Tan Thanh, director of Viet Nam Chamber of Commerce and Industry (VCCI) in HCM City, said that Japan was stepping up investment in Viet Nam, creating more opportunities for cooperation with domestic enterprises.

“However, some Vietnamese enterprises are not capable of participating in the supply chain of Japanese enterprises,” he said.

Last year, Japan became Viet Nam’s largest foreign investor, with a total of US$9.11 billion, accounting for more than 25 per cent of the country’s total foreign direct investment (FDI).

In the first six months of the year, Japanese enterprises have poured nearly $6.5 billion in investment projects in Viet Nam, accounting for 32 per cent of total FDI.

The Japanese investment trend was expected to continue, said Thanh, adding that the two countries had become comprehensive strategic partners, creating more opportunities for Vietnamese enterprises.

According to Tsuyoshi Shimizu, a specialist at the Japan International Cooperation Agency (JICA), who is also a consultant at Panasonic Excel International Co Ltd, 1,600 Japanese enterprises are operating in Viet Nam, with nearly 70 per cent of them planning to expand business in the next two years because of the country’s economic growth.

“Japanese businesses want to expand business in trade and manufacturing of high added value products and consumer goods,” Shimizu said.

Many Japanese manufacturers want to buy raw materials, and machine and spare parts from Viet Nam, but the supply and quality of human resources and products from Viet Nam have not met requirements of Japanese businesses, according to the specialist.

Most Japanese businesses said they would like to prioritise purchasing raw materials and components made in Viet Nam and use local labour to cut costs and shorten delivery time, thus enhancing competitiveness.

The cost of raw materials bought from other countries could be expensive, but the businesses emphasised that quality, not cheap prices, would be more important.

Japanese manufacturers only buy about one-third of raw materials in Viet Nam, mostly from Japanese enterprises or FDI enterprises working in Viet Nam.

In addition, Vietnamese companies’ compliance with delivery deadlines and transparency in doing business are important for Japanese manufacturers.

To be able to participate in the value chain of Japanese enterprises, Viet Nam needs enterprises that can produce raw materials, components and machines of high quality, according to Shimizu.

Products such as steel, copper, aluminum, plastic materials, molds, stamps and electronic components are among the items that Viet Nam should invest in production.

Japanese experts recommended that local enterprises should make plans for the long term and keep their promises they make while doing business.

Japanese firms are cautious about working with new suppliers. “Once they have established trust, they will cooperate for the long term with the local partners,” Shimizu said.

The seminar was held by the Viet Nam Chamber of Commerce and Industry (VCCI) in HCM City and the Viet Nam Japan Institute for Human Resources Development. — VNS