Vietnam most promising Asian investment destination in 2020 for Japanese firms

Vietnam most promising Asian investment destination in 2020 for Japanese firms

Strong growth potential and low-cost labor supply continues to make Vietnam the most promising Asian investment destination in 2020 for Japanese firms, with India and Southeast Asian countries dominating other top spots.
07:00, 12/01/2020
A corner of Hanoi. (Photo: VNA)

41.2 percent of the 820 valid responses chose Vietnam as the most promising destination for overseas investment in 2020, according to a survey released Wednesday by Japan-based News Network Asia (NNA), a news agency providing economic and business reports for Japanese companies operating in Asia.

The respondents preferred Vietnam for its growth potential and skilled and low-cost labor force as well as its proximity to China, the world’s second largest economy, showed the survey, conducted from November 26 to December 9 last year.

Vietnam's GDP expanded 7.02 percent in 2019, slowing from 7.08 percent in 2018, but remaining the second highest growth figure in the last decade.

According to the survey, India was second at 12.2 percent, with expectations for its growing market and its potential as a doorway to the Middle East and Africa among the reasons cited.

Myanmar jumped three spots from the previous year to third place at 11.6 percent, while Indonesia was fourth at 6.6 percent.

China, which appears to have lost its appeal somewhat as an investment location due to concerns about its trade war with the United States and rising labor costs, ranked fifth at 5.1 percent.

Japanese specialists work at the Ben Thanh - Suoi Tien metro project in Ho Chi Minh City. (Photo: VnExpress/Quynh Tran)

A survey conducted by the Japan Bank for International Cooperation last month revealed Japanese investors chose Vietnam the third most attractive investment destination behind India and China for the medium and long term.

FDI pledges for new projects, capital supplements and stake acquisitions in Vietnam rose 7.2 percent year-on-year to $38 billion in 2019, marking a 10-year high, according to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.

Japan was Vietnam’s fourth largest FDI contributor in 2019 after South Korea, Hong Kong and Singapore.

Japanese AEON Mall in Vietnam.

At the Vietnam M&A Forum 2019 held last August, Tamotsu Majima, senior director of Japan's leading M&A advisory service company RECOF Corporation, said that the number of transactions by Japanese enterprises in Vietnam had reached a record high number. In the past four years, there were about 20-25 transactions each year, but the figure hit 21 transaction alone last July.

Majima added Japanese companies were increasingly interested in Vietnam, especially in the fields of production and services, partly because the two economies are becoming closer. In recent years, more and more Vietnamese people travel to Japan and vice versa. Besides, Vietnamese people have also taken part in Japanese economic activities, while the Japanese are getting used to employing Vietnamese workers.

Masataka Sam Yoshida, RECOF's senior managing director, added the US – China trade war is one of the main reasons for Japanese investors to turn to Vietnam.

Besides, Vietnam’s high economic growth also attracts more Japanese enterprises to invest in the fields of consumption, goods and many other industries. Yoshida referred to some notable deals, such as Taisho Pharmaceutical with local DHG Pharmaceutical, Misui Corp buying stake at Minh Phu seafood, or Sumitomo looking for Gemadept’s shares, among others.

Yoshida expected the Japanese economy to slow down in the coming years, but this would not be the case with Japanese investments in Vietnam. Under fierce competition from countries such as South Korea, Thailand and Singapore, Japanese enterprises will continue to invest in the fields of consumer goods, health, real estate, construction, logistics, and finance in Vietnam.

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