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Vietnam expects strong growth of Japanese investment inflows

Japanese firms have been pouring large amounts of capital into Vietnamese manufacturing enterprises to create new business opportunities, and these investment inflows are forecast to maintain their robust growth.

M&A waves

apanese capital flows into Vietnam not only via direct investment channels but also indirectly through merger and acquisition (M&A) deals and investment in the securities market. In addition to famous brands such as Honda, Toyota, Sony and Panasonic, other Japanese investors are also involved in nearly 450 capital contributions and M&A deals in Vietnam despite the Covid-19 pandemic.

Since the beginning of 2020, nearly 20 M&A deals involving Japanese investors have been announced. These include large projects, such as the ASKA Pharmaceutical Co., Ltd. acquisition of a 24.9 percent stake in the Ha Tay Pharmaceutical Joint Stock Company, and the Haseko Corporation acquisition of a 36 percent stake in the Vietnam-based construction firm Ecoba. Most recently, the JX Nippon Oil & Energy Vietnam Consulting and Holdings Company Limited, a subsidiary of the ENEOS Corporation, purchased an additional 13 million PLX shares of the Vietnam National Petroleum Group (Petrolimex), raising its holding in the Vietnamese firm to nine percent. In 2016, JX Nippon Oil & Energy poured nearly VND4 trillion in Petrolimex to hold eight percent of its stock.

In the field of finance, the Orient Commercial Joint Stock Bank (OCB) has successfully sold 86.68 million shares to the Aozora Bank (Japan). Prior to that, Sumitomo Life spent more than VND4 trillion to buy an additional 41 million shares of the Vietnamese finance and insurance firm BaoViet Holdings, raising its holding in BaoViet to more than 22.09 percent.

According to Nikkei Asia, Japanese firms pour capital into leading Vietnamese companies in order to create business opportunities. Japanese investment is one of the major sources of capital for the Vietnamese economy, which is forecast to continue growing strongly in the coming time.

Data from the Foreign Investment Agency under the Ministry of Planning and Investment show that by the end of October 2020, Japan had 4,595 investment projects operating in Vietnam with total registered capital of US$59.87 billion.

Moribe Hiroyuki, Director of the Vietnam Economic Research Institute (OERI), said Vietnam is a high-yield investment destination for Japanese firms. Over the past two decades, the Vietnamese economy has grown five to six percent annually. Today, Vietnam has become not only a manufacturing hub but also an attractive market with nearly 100 million consumers. Prior to Japanese Prime Minister Suga Yoshihide’s visit to Vietnam in October 2020, many Japanese investors listed Vietnam among prioritized destinations in their overseas investment strategies.

Expectations of further growth

Hirai Shinji, Chief Representative of the Japan External Trade Organization (JETRO) in Ho Chi Minh City, believes Japanese investment in Vietnam, both direct and indirect, will keep increasing. In his opinion, Vietnam should get ready to welcome Japanese capital flows shifted from China and intensify the attraction of Japanese investment given Japanese government encouragement of overseas investment expansion. More than 56 percent of Japanese companies plan to invest overseas in the next three years, of which 41 percent have opted for Vietnam as their first destination, followed by Indonesia and Thailand.

According to Kanayama Jun, head of the representative office of Mitani Sangyo Co., Ltd. in Vietnam, Vietnam’s foreign investment attraction policy has yielded successful results. The cost of investment in Vietnam is reasonable. Japan and Vietnam share many similarities and they can cooperate for mutual development.

The presence of Japanese firms in the Vietnamese market helps Vietnam increase investment in vocational and technical training for small and medium enterprises, especially in non-service sectors such as agriculture, fishery and various manufacturing industries.

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