Concerned about the political uncertainties in Thailand and the decreased attractiveness in China, Japanese tend to head for Vietnam, where they will not be bothered by political problems and can enjoy attractive investment incentives.
In November 2013, Fuji Xerox put its $120 million printing machine and photocopier factory in the Vietnam-Singapore Industrial Park in Hai Phong City into operation. The license was granted to the Japanese investor in late 2012.
Fuji Xerox is one of a lot of Japanese investors who have shifted their business to Vietnam. In this case, the Japanese investor has just relocated a part of its production base to Vietnam in an effort to disperse the risks in China.
However, Atsusuke Kawada, Chief Representative of the Japan External Trade Organization (JETRO), can see the important significance in the case.
According to him, the decision by Fuji Xerox showed that Japanese have begun moving their important production units, including the ones in the high added-value fields such as electronics, to Vietnam.
Prior to that, observers noted that Japanese investors flocked to Vietnam just to take full advantage of the cheap labor force here. This was why they only registered the projects in the labor intensive business fields in Vietnam.
While the Japanese investments in China and Thailand have scaled down, the Japanese additional investments in Vietnam have increased steadily. The sharp fall in the investments in China has been highlighted in the report about Japan’s outward investments in 2013.
The Japanese capital flowing to China dropped from $13.479 billion in 2012 to $6.497 billion last year, while the capital to Thailand dropped from $7 billion in 2011 to $2.5 billion in 2013.
Meanwhile, the number of expanded investment projects in Vietnam has been increasing rapidly from 35 in 2010 to 125 in 2013, with the additional investment capital increasing from $169 million in 2010 to $4.453 billion in 2013.
The new projects include the huge ones such as the Nghi Son petrochemical oil refinery capitalized at $2.8 billion, Bridgestone’s project ($650 million), Panasonic Industrial Devices ($175 million) and Saigon Precision $130 million.
“In Vietnam, Japanese can find the things they cannot find in other countries,” the JETRO’s Chief Representative explained.
Thailand is believed to have better infrastructure items than Vietnam, but it does not have the peaceful environment and low cost labor force.
Especially, Kawada highly appreciates the Vietnamese labor force. “Vietnamese are very diligent and hard working, which can be reflected in the lower numbers of workers’ days-off than in other countries,” he said. “Besides, it is easy to recruit workers in Vietnam, while employers do not have to pay too high to employ workers.”
JETRO has found from its surveys that every Vietnamese worker at Japanese invested enterprises received $3,000 in 2013 on average. The level was higher than Laos, Cambodia and Myanmar, but just equal to 1/8 of that in Singapore and ½ in Thailand.
Therefore, it is not a surprise that 70 percent of Japanese investors in Vietnam plan to scale up their business in the future, considering Vietnam as their important production bases.