Workers at a Japanese hi-tech company in Long An province. More than half of Japanese companies operating in Vietnam expected improvements in profits in 2024. (Photo: VNA) The survey on the business conditions of Japanese companiesoperating overseas in the fiscal year 2023 showed that the percentage ofcompanies that expected to make a profit in 2023 was 54.3%, 5.2 percentage pointslower than the 2022 survey and equivalent to the level in 2021 during theCOVID-19 pandemic.
The figure is 6.6 percentage points lower than the average ratein ASEAN countries. In 2017-2019, the percentage of businesses expectingto make a profit was above 65%, higher than the region average.
The decline was attributed to lower demand in export markets andin the domestic market, increased business costs, and fierce competitions withothers in the sectors.
Regarding the operating profit forecast for 2024, 50.4% ofJapanese companies in Vietnam expected improvements compared to the averagerate in the region of 43.8%.
"Although exports had a difficult year, they are expected tobounce back in the coming time," Nobuyuki Matsumoto, Chief Representativeof JETRO’s Ho Chi Minh City, told a press briefing to announce the survey’sresults in the city on January 26.
The survey also pointed out that about 56.7% of Japanese companiesplan to expand their operations in Vietnam in the next one to twoyears, down 3.3 percentage points from the 2022 survey, and thesecond highest rate in the Association of Southeast Asian Nations (ASEAN), onlyafter Laos at 63.3%.
Although expansion ambitions remain high, Vietnam is the onlycountry among the six key ASEAN countries to have a decrease compared to thepreceding year.
In terms of sectors, 47.1% and 65.5% of respondents in themanufacturing sector and non-manufacturing sector, respectively, plannedto expand operations in the country to increase exports and capitalise onthe domestic market.
In particular, 100% of surveyed Japanese retailers in Vietnam haveexpansion plans.
As for the functions to be expanded, 62% plan to expand theirsales function driven by an increased demand in the domestic market.
"We see that more Japanese businesses are investing to expandand dominate the Vietnamese market. Information technology firms are tending toinvest more,” Matsumoto said.
In terms of the local procurement rate in Vietnam, the surveyfound that the rate has risen by 10 in the past decade and reached 41.9% lastyear, of which procurement from Vietnamese suppliers was 17.2%. But it remainedfar below that of China (68.3%), Thailand (59.6%) or Indonesia (53.3%).
He suggested local suppliers continue to expand theirproduction capacity and efficiency to meet requirements from foreign buyers.
The survey also pointed out that 34.4% of all respondents in Vietnammaking efforts toward decarbonisation, up 5 percentage points from the previoussurvey.
The majority of polled companies said market scale andgrowth, political stability, and low labour cost are the greatest advantages ofVietnam’s investment environment.
However, they were concerned about some risks of theVietnamese business environment related to the efficiency of administrativeprocedures, tax system, tax procedures, and the legal system, and rising labourcosts.
The survey was conducted from August 21 to September 20 last year.
JETRO sent questionnaires to 14,018 Japanesecompanies investing in 20 countries and territories in Asia and Oceaniaand received valid responses from a total of 4,982 companies, including 849 in Vietnam.
Japan consistently ranks among the top countries in terms offoreign direct investment in Vietnam.
According to the General Statistics Office, last year Japaneseinvestors injected 6.57 billion USD into Vietnam, accounting for 17.9% of totalFDI, an increase of 37.3% against 2022, ranking second among countries andterritories investing in the country./.
VNA
