JETRO: Japanese Enterprises Want to Expend Businesses in Vietnam

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	Japanese enterprises want to expand supply chains in Vietnam
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The findings of the "Survey on the current situation of Japanese enterprises investing abroad in 2024" (the Japan External Trade Organization (JETRO) in Ho Chi Minh City) indicated that the market demand and the increasing rate of profitable business are a great motivation for Japanese enterprises to continue to expand in Vietnam,

Accordingly, the rate of businesses expecting to be profitable in 2024 reached 64.1%. This is the first time in 5 years that this rate has exceeded 60%. In most industries, the percentage of profitable enterprises increased compared to the previous year. The percentage of profitable enterprises exceeded 80% in 4 industry groups, namely transportation machinery components, medical/precision equipment, plastic products, and chemicals/pharmaceuticals.

In the non-manufacturing industry, the rate of profitable enterprises reached nearly 58%, an increase of 11.2% compared to the previous year. Meanwhile, the rate of enterprises reporting losses was more than 21%, down 5.8 points compared to the previous year. In the fields of trade/wholesale, mining/energy, and business-related services, 15% more enterprises experiences profitable business in 2024 in comparison to the previous year.

Also, 50.4% of surveyed enterprises expect an increase in profits in 2025, and only 9.2% of enterprises forecast a deterioration in profits. There are 56.1% of enterprises that want to expand their business in Vietnam in the next 1-2 years, this rate ranks first among ASEAN countries.

The enterprises are motivated thanks to the increase in exports and the expanding demand in the domestic market. Other reasons include the growth potential, labor costs, and stable socio-political situation.

(Photo: Getty Image).

Also, there is a trend of shifting production from Japan and China to Vietnam that has emerged since 2019, due to the US-China trade conflict. For example, out of a total of 176 cases of shifting production from China to ASEAN, 90 cases were transferred to Vietnam.

On the other hand, Japanese businesses also point out the limitations and risks in the investment environment in Vietnam.

“Up to 62.4% of enterprises surveyed in 2024 assessed that the procedures for applying for investment licenses are still complicated; 57.8% of enterprises said that the legal system is not complete, and the implementation is not transparent,” Matsumoto Nobuyuki, Chief Representative of JETRO in Ho Chi Minh City said.

For many years, the supply rate of raw materials and components from Vietnamese enterprises has remained stagnant. This is because of many reasons, namely the lack of raw material suppliers, or domestic suppliers do not meet the requirements of quality and technology.

According to the Japanese expert, to make good use of the opportunities from the trend of investment and production shifts, Vietnam needs to continue to improve the investment environment by simplifying administrative procedures, perfecting the legal system, and improving the efficiency of policy implementation. Vietnam also must promote the development of supporting industries, and improve production technology to increase the ability of foreign investors to participate in the supply chain, including Japan.

"Survey on the current situation of Japanese enterprises investing abroad in 2024" was conducted by JETRO through a questionnaire on the operation of Japanese enterprises investing in 20 countries and territories in Asia and Oceania. A total of 5,007 enterprises responded, 863 of which are operating in Vietnam.

The main survey criteria include business profit outlook, plans for future business activities, the implementation of business activities in recent years, attractive and difficult investment environment, competitiveness, supply chain management, import and export situation, and wages.

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