Vietnam continues to be a key destination for Japanese investment, driven by robust market demand and favorable profitability. A recent survey by the Japan External Trade Organisation (JETRO) sheds light on investment trends, business optimism, and challenges faced by Japanese businesses in Vietnam.

Key Insights and Data

Category	Details	Statistics
Investment Expansion	Japanese companies plan to expand operations in Vietnam over the next 1-2 years, making it the most preferred ASEAN country for investment.	56.1% of businesses
Business Optimism	Japanese companies express confidence in profitability for 2024.	64.1% expect profitability
	Companies forecasting profit growth.	50.4%
	Companies anticipating a decline in profits.	9.2%
Production Shift	Vietnam is a primary destination for production relocations from Japan and China.	90/176 shifts to Vietnam
Investment Challenges	Complicated investment permit applications.	62.4%
	Incomplete and non-transparent legal systems.	57.8%
	Local suppliers not meeting required standards.	Not quantified
Survey Scope	Number of responses from Japanese-affiliated companies in Vietnam (out of 5,007 globally).	863

Drivers of Japanese Investment

Japanese businesses are drawn to Vietnam due to:

• Increasing domestic demand in the Vietnamese market.
• High profitability in comparison to other ASEAN countries.

Vietnam’s role as a key hub for production relocation is bolstered by the ongoing trend of companies diversifying away from China and Japan.

Challenges in Vietnam’s Investment Environment

Despite its attractiveness, Vietnam faces several barriers to investment, such as:

• Administrative Complications: The lengthy and complex process of obtaining investment permits remains a significant hurdle for businesses.
• Legal Framework Issues: An incomplete and non-transparent legal system creates uncertainty for foreign investors.
• Supplier Quality: Many local suppliers fail to meet international standards, posing challenges to businesses dependent on high-quality inputs.

Recommendations for Vietnam

To sustain and attract more Japanese investments, Vietnam should:

1. Simplify and streamline administrative processes for investment permits.
2. Enhance the transparency and completeness of its legal framework.
3. Strengthen the support industry by upgrading local supplier capabilities and fostering advanced production technologies.

Conclusion

Vietnam’s position as a preferred destination for Japanese investment reflects its potential as a major player in ASEAN. By addressing existing challenges, Vietnam can further capitalize on its growing appeal to Japanese businesses, solidifying its role as a regional economic powerhouse.