Many surveyed businesses expect positive business results this year, with around half forecasting increased profits, while 56 per cent want to expand their business in Vietnam in the next one to two years, the highest rate in the ASEAN region.

JETRO Hanoi held a press conference on January 21 to announce the survey. Photo: Bich Thuy

Haruhiko Ozasa, chief representative of JETRO in Hanoi, attributed this outlook to the increasing level of exports and demand in the domestic market. In addition, low labour costs, and Vietnam's stable political and social situation are all above the ASEAN average.

"Many businesses are considering expanding to take advantage of opportunities to increase sales and profits. Meanwhile, manufacturing businesses are focusing on expanding the production of multipurpose products and products with high added value," said Ozasa.

Some Japanese firms also pointed out limitations and risks in the investment environment in Vietnam. Just over 62 per cent of those surveyed believe that investment licensing procedures remain overcomplicated; almost 58 per cent said that the legal system still needs refinement, and implementation processes lack transparency.

On the other hand, the demand for expanding domestic purchasing by Japanese enterprises is increasing, but for many years the supply rate of raw materials and components from Vietnamese enterprises has remained stagnant. The reason is that domestic suppliers cannot meet the requirements of quality, technology as well as the lack of raw material suppliers.

The chief representative said, "To take opportunities from the trend of shifting investment and production, Vietnam needs to continue to improve the investment environment through simplifying administrative procedures, perfecting the legal system and enhancing the effectiveness of policy implementation. Furthermore, it is necessary to promote the development of supporting industries and improve production technology to increase the ability of foreign investors, including Japan, to participate in the supply chain."