Services and retail are forecast to attract a large amount of Japanese direct investment into Vietnam this year.

About 2,000 people line up to buy clothing products in the first Japanese Uniqlo
store in Vietnam when it first opened in HCM City last December. (Photo cafef)

Takeo Nakajima, Chief Representative of the Japan Trade Promotion Organization (Jetro) said “As the consumption power of the Vietnamese increases across the country, more Japanese retail and service enterprises find opportunities in the growing markets.”

He said there has also been an increase in FDI inflows from Japan into non-manufacturing activities to serve the Vietnamese market, with the footprints of two retail giants as Aeon and Uniqlo.

He expected this trend to continue.

Nakajima said though Japanese registered investment decreased last year, the number of new projects by Japanese investors increased compared to previous years.

He said: “The number of licensed Japanese projects reached its highest ever, at 435 projects last year.”

The latest survey from Jetro said 63.9 percent of Japanese enterprises in Vietnam intended to expand their business in the country, the highest rate of investment among the ASEAN region.

Nakajima said as most of Japan's large manufacturing corporations had already moved into Vietnam, the additional FDI inflows would be composed from their extended projects, forecasting that Japanese capital would increase thanks to non-manufacturing investment and from small and medium enterprises.

At the same time, Tetsuo Konaka, chief representative of Japan International Cooperation Agency (JICA), told local media that Thailand was a more attractive market for Japanese investors and enterprises three years ago, but the trend had changed now as many Japanese investors had shifted their investments to Vietnam.

Konaka thought the investment trend in Vietnam would continue over the next few years, not only focusing on manufacturing, but the whole service area of the country.

Konaka said, "Vietnam has a large market with more than 96 million people, so its service sector has huge potential," and said it was the reason why retailers like Uniqlo, Aeon and many other famous Japanese corporations entered the market.

"Japanese retailers have poured investment in Vietnam because the local middle class is growing rapidly and they are able to afford quality products," he said.

Besides retail and services, Takeo Nakajima also thought the investment would be also flowing strongly into other fields.

He said that: “Hotels, health care, IT service, transportation, HR, and education have room to grow.”

Jetro’s representative also said: “The rate of local procurement in Vietnam by Japanese manufacturers is 36.3 percent, which is far below the number in China with 69.5 percent.”

So he thought: “The Japanese SMEs will have more business opportunities.”

Do Nhat Hoang, Director of Foreign Investment Department, Ministry of Planning and Investment said that Japanese enterprises often took careful steps in investment. Last year, Japanese FDI with 1.07 billion USD ranked second after the Republic of Korea with 1.58 billion USD.