Up to 70 percent of Japanese companies recently surveyed are looking forward to expanding business in Vietnam thanks to the country's advantages in terms of political stability, abundant labour force and low labour costs, a local economic newspaper reports.

Japan External Trade Organization (JETRO) Hanoi Chief Representative Atsusuke Kawada, addressing a ceremony to announce the results of a JETRO survey on Japanese business trends, said that Japanese companies would like to invest in Vietnam, according to the Vietnam Economic News.

The survey on business activities of Japanese companies in Asia and Oceania found that about 60-70 percent of companies made profits. In Vietnam, the number of Japanese companies that achieved good profits reached 59.9 percent.

In terms of the investment environment, over 70 percent of Japanese companies still faced difficulties when investing in countries in Asia and Oceania such as rising labour costs, complex administrative procedures, inconsistent and unclear policies, complicated customs procedures, incoherent legal systems, and poor transport infrastructure. In Vietnam, Japanese companies paid special attention to legal policies, administrative procedures, taxes, customs procedures and increasing labour costs.

Underdeveloped support industries remained a weakness for Vietnam’s investment environment. Compared to other countries in the region, the localisation rate of Japanese companies in Vietnam reached just 32.2 percent in 2013 while the figures for China, Thailand and Malaysia stood at 64.2, 52.7 and 42.3 percent, respectively.

Another drawback of Japanese companies when investing in Vietnam was an increase in the minimum wage. Vietnam’s minimum wage increased by 21 percent in 2012 and 12.2 percent 2013 compared to China’s 11.7 and 9.2 percent in and Thailand’s 13.4 and 6.4 percent in 2012 and 2013 respectively.

Despite an increase in the minimum wage, Japanese companies said salaries in Vietnam were much cheaper than other countries. They paid 24,179 USD, 7,795 USD and 7,503 USD per year for each worker in Singapore, Malaysia and China respectively while the figure was only 3,000 USD in Vietnam.

In addition, the salary per engineer in Vietnam reached 5,749 USD per year while the figures in Singapore, Malaysia and Thailand stood at 48,744 USD, 17,425 USD and 12,560 USD respectively. Cheaper labour costs remain an advantage of Vietnam.

Thanks to advantages in terms of political stability, abundant labour force and low labour costs, 70 percent of Japanese companies are looking forward to expanding business in Vietnam. This number is higher compared to other countries in the region such as Thailand, the Philippines, China and Malaysia. Japanese companies would like to invest in the manufacturing and processing industry and software in Vietnam in the coming time.

However, Vietnam needs to make greater efforts to improve the investment environment. According to Atsusuke Kawada, to attract more Japanese companies, Vietnam needs to simplify administrative procedures and prioritise the development of support industries.-VNA