Abundant opportunities for Vietnamese investors in Japan

Japan is keen to attract more foreign investment and many Vietnamese companies have decided to try their luck in the country.

Japan is keen to attract more foreign investment and many Vietnamese companies have decided to try their luck in the country.

Japan is opening its arms to foreign investors (source: VET)

After holding a traditional Japanese opening ceremony, called “Kagami-biraki”, CMC Japan, a unit of one of Vietnam’s largest telecoms operators, the CMC Corporation, officially began operations. CMC is the second technology group from Vietnam to invest in Japan, following the FPT Group in 2005. Mr. Nguyen Trung Chinh, Chairman of the CMC Corporation, said it will provide ITC services to Japanese enterprises and success in this market is an important goal in the years to come.

Ideal destination

Increasing numbers of Vietnamese corporations are boosting their investments in Japan. The first office of real estate giant the FLC Group is to be officially opened in January. Vietjet Air, meanwhile, is also expanding its direct flights to the country. “Approval is still to come from Japan’s Ministry of Land, Infrastructure, Transport and Tourism on which airport will cater to Vietjet flights,” said Mr. Nguyen Si Hai, Head of the Vietnam Office of the Japan External Trade Organization (JETRO) in Hanoi. Narita International Airport is unable to cater to more flights.

Last July, Japan Airlines (JAL) and Vietjet Air reached a formal partnership agreement aimed at improving customer convenience and the quality of operations and services while enhancing the corporate value of both. As a first step, JAL and Vietjet agreed to start code-share cooperation on all flights between Japan and Vietnam, the domestic flights of both, and flights between Vietnam and other Asian destinations. The two will further explore opportunities to develop the partnership in various areas, including a frequent flier partnership and in aircraft operations and maintenance, ground handling services, and training.

Vietnamese investment in Japan has been growing each year. Data from JETRO shows that Vietnam currently has 49 investment projects in the country, with capital of $7.5 million, of which 15 are in IT. According to Mr. Vu Van Chung, Deputy Head of the Foreign Investment Agency at the Ministry of Planning and Investment, Vietnamese enterprises have major investment opportunities in Japan because of the country’s open policies on attracting FDI.

Its government aims to attract $308 billion in FDI this year, double the current level, said Mr. Kitagawa Hironobu, Chief Representative of JETRO’s Hanoi Office, adding there were “no barriers” to attracting FDI. “Japan has many fields of potential that Vietnamese enterprises could pay attention to, including IT and tourism,” he added.

According to a recent survey from JETRO, most Vietnamese are keen to travel to Japan. Average daily spending by Vietnamese tourists in Japan is high, at $230 per person. The development of tourism presents opportunities for other support industries, such as aviation, logistics, e-commerce, e-payment, retail, and travel agents.

Boosting investment

FPT arrived in Japan in 2005 as the first fully Vietnamese-owned IT company in the country. More than a decade later, FPT Japan has three offices in Tokyo, Osaka, and Nagoya and works with nearly 200 leading Japanese corporations, such as Nissan, Toshiba, Hitachi, Fujitsu, NTT Data, IT Holdings, and Agrex. The group targets $600 million in revenue in Japan by 2020 and to become a leading provider of cloud computing services in the country.

In order to achieve its goals, FPT is striving to accelerate key development strategies, such as the 10,000 Bridge Engineers Program and investing in cloud / big data/ IoT technology in specialized fields including design, embedded software, and electricity. It will also promote cooperation with Japanese enterprises to bring their advanced IT solutions to Vietnam, to resolve problems in customs, transportation, and agriculture.

Staff of FPT Japan (source: FPT Co Japan)

The CMC Corporation anticipates employing 1,000 people in Japan by 2020 and will provide high quality software engineers and world-class, comprehensive IT solutions and services to customers. According to Mr. Kuroiwa Yuji, Governor of Kanagawa Prefecture, CMC Japan will be located in its Yokohama city, which has a range of support policies for new enterprises. This is an important starting point, creating stable development for CMC Japan in the years to come. There are also many other Vietnamese companies operating in the prefecture. “Kanagawa welcomes all companies to Japan,” he said. “I want this relationship to grow closer and be ‘win-win’.”

Making it happen

There is no limit to investing in Japan but it’s no easy task, said Mr. Hai. While the Japanese Government has no tax incentives for foreign investors, each locality has its own support programs. For example, when investing in Kanagawa prefecture, investors can receive up to $17,640 and dedicated guidance in administrative procedures. Mr. Hai, however, noted that one of the most pressing concerns in Japan is the cost of office space and labor, both of which are very expensive.

From his experience in opening representative offices in Japan, Mr. Nguyen Ich Vinh, CEO of the Tinhvan Outsourcing Company, pointed out that Vietnamese enterprises face a host of challenges when investing in the country, such as gaps in standards and quality, the high cost of trade promotion and market research, and a lack of information and business experience.
Mr. Nguyen Xuan Huy, Director of the Vietnam Precision Machinery, Trading and Services Company (VPMS), agrees, saying that doing business in Japan is difficult. The mistake of many Vietnamese enterprises is trying to resolve problems by themselves without informing their Japanese partners. “Businesses wanting to cooperate with Japanese partners need to establish a HO-REN-SO (Hokoku (to report), Renraku (to inform) and Sodan (to consult)) process to capture and exchange all information on products as well as customer needs,” according to Mr. Hai./.

The number of Vietnamese companies investing in Japan is still low, at just 49, despite the country’s potential in investment. Japan offers many preferential policies to foreign investors but has not previously promoted foreign investment. Therefore, there is little information on the market.
One of the reasons why Japan is now attracting foreign investors is its preferential policies in special economic zones. When forming a special economic zone, the Japanese Government adopts policies to attract talent and opens specialized schools. The Japanese Government will also create more favorable conditions for the zone than in other areas, such as reduced land costs, operating costs, and investment costs.
The Japanese Government aims to attract $308.7 billion in investment by 2020 and this is to gradually increase in subsequent years, thanks to investment promotion activities. IT is a sector where Japan wants to attract foreign investment the most, followed by tourism and nursing.

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