With the Government’s open door policy, stable political environment and vast economic potential, many Japanese small-and medium-sized enterprises (SMEs) have listed Vietnam as one of the most attractive destinations for doing businesses in Southeast Asia, said radio the Voice of Vietnam (VOV) on July 22.

Approximately 30 percent of Japanese firms have firmly considered Vietnam as top choice for expanding their business activities overseas, VOV quoted Atsusuke Kawada, Chief Representative of the Japan External Trade Organisation (JETRO) Office in Hanoi, as saying.

Vietnam’s investment environment has been improving day by day. Provincial authorities have spent huge investment in building infrastructures in a bid to attract foreign businesses to their localities. They are also eager to offer attractive incentive packages to lure even highly demanding foreign investors to do business in their localities.

However, Vietnam should remove quite a few of obstacles to attract more Japanese investors, said Hirokazu Yamaoka, Director, Overseas Business Support Division under the JETRO.

Labour costs in some parts of the country are surging too rapidly (around 20 percent annually). Yet the rise in labour costs did not go together with improved productivity. This has led to increase the prices of products, negatively affecting competitiveness in the global marketplace, Yamaoka said.

This phenomenon is leading many Japanese investors to pay more attention to newly emerging markets like Cambodia and Myanmar and, if wages continue to rise too rapidly, it will be more difficult to call on foreign investment, Hirokazu said.

Some Japanese businesses are also finding it exceedingly difficult and costly to import input and other raw materials from outside the country as the local support industry is fledgling.

Reliance on imported raw materials has brought in increased production costs and reduced business competitiveness. This situation should be fixed. Meanwhile, a dministrative procedures need to be simplified.

Recently, a delegation comprised of 26 Japanese SMEs operating in the support industry made a fact-finding tour of Vietnamese localities to seek investment opportunities. These businesses which supply products to major groups are facing numerous difficulties at home, such as increased production costs and shrinking market. As a result, they are eying their investment overseas.

At the end of April, 2014, Japan was the largest foreign investor in Vietnam with 2,266 projects totaling 35.51 billion USD, according to the Foreign Investment Agency.

Japanese firms are operating in 18 fields, mainly the processing and manufacturing industry (1,227 projects worth 29.9 billion USD), real estate (30 projects worth 1.4 billion USD) and construction (56 projects worth 1.06 billion USD).

Investment is spread throughout 49 provinces and cities. Thanh Hoa province tops the list with 9 projects capitalised at 9.68 billion USD, followed by Binh Duong, Hanoi, Ho Chi Minh City, Hai Phong and Dong Nai.-VNA