Japanese firms find Vietnam’s stability more appealing than rapid growth: JBIC

While Vietnam is often praised for rapid growth, it is the country’s stable, steady economic advance that Japanese firms find more appealing when setting up overseas bases.

This assessment is contained the 35th edition of the “Survey report on overseas business operations by Japanese manufacturing companies” released by the Japan Bank for International Cooperation (JBIC).

The report ranks Vietnam second among the most "promising" countries for overseas business over the medium-term (next three years), only behind India.

Other positive factors that Vietnam has going for it include a vibrant local market, good public safety and balanced diplomatic stances, says Ikenaga Azusa, JBIC’s Vietnam representative. “Vietnam stands out within ASEAN as a country with many cultural similarities to Japan,” she adds.

Vietnam has maintained a high GDP growth rate since 1990, averaging around 5% annually, with foreign investment as the driving force.

“In order to maintain economic growth, continuing efforts to attract overseas investment and building up highly skilled domestic human resources will be crucial,” Azusa says.

She notes that Vietnam has asked Japan to contribute to its economic modernization and decarbonization process through large-scale investments.

Some of the disadvantages encountered in Vietnam by Japanese firms include time taken to make decisions and resultant delays in issuing permits and approvals; as well as the bureaucracy’s continued reliance on paper documents to process administrative procedures.

Many Japanese firms plan to “strengthen the role and function of their Vietnam base within the ASEAN region’s supply chain” amidst the trend of businesses shifting production facilities from China to Vietnam.

“I believe that Vietnam’s promising prospects are due not only to its economic growth but also to its balanced geopolitical position,” Azusa says.

Registered foreign direct investment in Vietnam reached $11.07 billion in the year to May 20, up 2% year-on-year, according to the Ministry of Planning and Investment. Japan ranked third with $1.23 billion, behind Singapore with $3.25 billion and Hong Kong with $1.45 billion.