Illustrative ​image. (Photo: VNA)

HCM City (VNA) – Japanese investors have shifted their focus from manufacturing industry to service as the growing domestic market in Vietnam offers a very promising prospect for the sector.

Japanese investors poured money into 549 projects, both new and existing, in Vietnam last year with the number of projects in retailing and hospitality doubling that of a year earlier. By contrast, manufacturing projects accounted for only 20 percent of the total new ones, down from 30 percent in 2015.

Supermarket, convenience store and shopping mall operators from Japan, such as Aeon Mall, Family Mart, Ministop and Takashimaya, have been accelerating the expansion of their presence in Vietnam.

Japanese investors highly appreciate the political and social stability in Vietnam; and they have turned their attention to producing consumer goods to meet rising demand in the country besides developing distribution network, said Chief Representative of the Japan External Trade Organisation (JETRO) in HCM City Takimoto Koji.

It is a natural trend for a developing economy like Vietnam to move from primary sectors – agriculture, forestry and fishing – to the service sector, Teramoto Ryohei, a Japanese market researcher explained.

With robust economic growth and a young population, Vietnam is an alluring market for Japan retailers, he added.

The middle class in the country is explosively expanding and rising income encourages spending; Vietnamese consumers also favour high-quality goods and services from Japan.

At the same time, the decrease in investment in manufacturing is attributable to the fact that Vietnam has become less competitive in costs of labour and input materials as the country’s minimum wages have been raised over years. Moreover, local suppliers of components are only capable of meeting 20-30 percent of Japanese manufacturers’ needs.

To keep investors as well as attract more manufacturing projects, Vietnam should work towards improving technologies and worker skills. Experts suggested the country send its workers to Japan for vocational training and put more effort to develop supporting industries.-VNA