Japan eyes relocating plants to Vietnam

Many Japanese firms are considering moving their plants to Vietnam, after devastating floods have damaged much of Thailand’s industrial infrastructure.
The high risk of natural disaster and high labour cost in Japan itself, and in China, have also urged the businesses to revise their investment strategies, with relocating their manufacturing plants being the top priority, Sai Gon Tiep Thi newspaper reported.

Than Thanh Vu, chair of investment consultancy Sao Khue, said the number of Japanese firms visiting the industrial parks and building plants in Vietnam has recently risen.

“Many Japanese business delegations have visited HCM City or contacted the Japan External Trade Organisation to ask for locations to build their facilities,” he said.

“Their top priority when consulting about a particular location is whether that place will be affected by floods.”

According to a recent report by Bloomberg, a number of Japanese plants in Thailand, including those of Honda, Canon, Nissan, Hitachi and Toshiba, among others, have had to halt operation due to the unprecedented floods, Thailand’s worst in 70 years.

Japan is Thailand’s largest investor, but now many businesses have declared that they will move to other countries should infrastructure there Thailand remain unimproved.

Vu, of Sao Khue Co, said that besides the lower labour cost, another appealing factor of Vietnam to Japanese investors is presence of cultural similarities between the two countries.

Meanwhile, with an early anticipation of an investment flow from their country, many Japanese businesses such as Sojitz, Daiwa House and Kobelco Eco-Solutions have invested a total of $100 million in the Dong Nai-based Long Duc Industrial Park, expecting to receive around 150 [Japanese] businesses.

Japan’s Jesco Holding Inc, which specialises in engineering and infrastructure construction, last week also announced that it would join hands with Hoa Binh Construction & Real Estate Corporation to develop infrastructure for Long Hau 4 Industrial Park in the southern province of Long An.

Itochu, Sumimoto, and Fujitsu, for their parts, have also chosen Ba Ria – Vung Tau as their destination for investment, while some others chosen Da Nang city, Quang Ninh, and Binh Duong provinces.

The Japan International Cooperation Agency is offering funds to help Vietnamese industrial parks to upgrade infrastructure to meet the requirements of Japanese investors, especially those operating in the supporting industries, to build their plants there.

Tran Thi Huong, director of the Ba Ria – Vung Tau Department of Industry and Trade, said many businesses from Kawasaki city have recently shown interest in Vietnam’s investment promoting policies aimed at the supporting industries.

Many investment consultancies said that, although Japanese investors have been increasingly interested in entering Vietnam, it is unclear whether the country’s infrastructure can meet all requirements for the former to actually open their pockets.

Economic expert Le Dang Doanh said the problem is whether Vietnam could solve the problems of workforce and infrastructure to welcome the investment flow from Japan.

Nguyen Thi Xuan Thuy, a specialist in attracting FDI for the industrial parks from the Vietnam Development Forum, said the industrial parks should improve both infrastructure and marketing strategies to attract investors.
Tuoi Tre

Tags: invest in Vietnam, Japan investment in Vietnam, Vietnam FDI, Vietnam investment