Vietnam maps out strategy to attract FDI in supporting industries: focus on Japanese SMEs

The Ministry of Industry and Trade’s (MoIT) drafted strategy, with a focus on attracting investment from small- and medium-sized (SMEs) foreign companies, has been sent to provincial and ministerial bodies for comment and outlines Vietnam’s call for investment from key markets such as Japan, Taiwan, Korea and South East Asia.

To make Vietnam more attractive to foreign SMEs, the MoIT proposed the government adjust regulations on import and export taxes that would give supporting industry investors more incentives, but only if they built a supporting industry facilities and used local market input materials.

Particularly, the strategy demands reform of Decree 87/2010/ND-CP issued in 2010 detailing import and export duty regulations, with supporting industry firms to be eligible for five-year import duty exemption.

It added that big foreign companies’ investment in the past had failed to help Vietnam develop supporting industries, because capital was focused on assembling facilities to take advantage of cheap labour.

Statistics of the MoIT’s Industry Policy Study Institute show that Vietnam had just 364 enterprises operating in supporting industries, of which 56 were foreign-invested enterprises, or 16 per cent of the total.

Apart from changing investment promotion with a revised incentive policy, the country will develop a series of industrial parks for supporting industries like Japan has. The parks will include manufacturing facilities, completed water and electricity supplies and waste treatment.

The Ministry of Planning and Investment’s Foreign Investment Agency (FIA) last week signed a memorandum of understanding with Tokyo-based Forval Corporation to promote direct investment of Japanese SMEs in Vietnam.

The Ministry of Planning and Investment’s Foreign Investment Agency (FIA), as part of its mission to build supporting industries, last week signed a memorandum of understanding with Tokyo-based Forval Corporation to promote Japanese SMEs’ direct investment in Vietnam.

After 26 years reforming its economy, Vietnam has emerged as one of the most attractive manufacturing bases in Asia, attracting interests of many multinational companies such as Canon, Intel, Samsung, General Electrics, Toyota, Ford and General Motors.

However, most Vietnamese SMEs have been using out-dated technology, weak management skills and failing to measure up to multinational companies’ requirements. The FIA expects Japanese SMEs’ investments to help fill the gap and create a magnet to attract more multinational companies.

Japan is now the biggest investing country in Vietnam, with $27 billion registered, but Hoang said this figure was modest in comparison with the total overseas investments of Japanese companies.

“We learnt that Japanese companies have invested $2 trillion in overseas markets, of which only $27 billion has been registered in Vietnam. This is not adequate considering the relationship between Vietnam and Japan,” he added.

From January to May, Japanese companies committed to invest $3.68 billion into Vietnam, accounting for 69 per cent of total committed foreign investment in this country. Big companies like Bridgestone, Suzuki and Kyocera Mita has also decided to invest in Vietnam.

Hideo Okubo, chairman of Forval Corporation, said Vietnam had a big opportunity to attract Japanese SMEs. He said Japan had around four million SMEs and just 6,000 had invested in overseas markets. More importantly, more Japanese SMEs increased overseas investment because of the weaknesses in Japan’s economy and concerns over the tsunami in 2011.

Indonesia is emerging as an attractive place for investment in Asia, as FDI inflows in this country increased sharply last year and in the first quarter of this year.

“If we don’t do anything in the next three years, Japanese SMEs will expand investments in other countries like Indonesia, Malaysia and even Myanmar and Cambodia. I expect the cooperation with Forval Corporation will bring good results,” he added.

Read more …

Vietnam maps out strategy to attract FDI in supporting industries, Jun 25, 2012

Japan’s SMEs to support struggling firms, Jun 5, 2012