Vietnam an ideal destination for manufacturing

Vietnam
an ideal manufacturing base
for Japanese investors
Le Huu Quang Huy, M.A
Counsellor, Vietnam Embassy
Osaka, 20th September 2011
Vietnam
an ideal manufacturing base
for Japanese investors




Why investing in Vietnam?
Japanese FDI status quo
Where and how to invest?
Specially encouraged investment sectors
Vietnam – Heart in Southeast Asia
1. Why investing in Vietnam?






Strategic location (heart of Southeast Asia), most dynamic country, GDP
growth of 7 ~8% per annum (Socio-economic Development Strategy for 20112020 approved by Communist Party of Vietnam, Jan. 2011)
One of 15 most attractive economies for foreign investors (UNCTAD) and
ranks highest position on FDI attraction among ASEAN countries (JETRO)
Abundant natural resource (i.e. oil & gas, coal, titan, rare earth…)
Political and social stability with “Golden population” (65% under 35)
Good access to ASEAN market (600 mill. population)
Economic global integration: VN - US BTA (2001), WTO member (2007), APEC,
ASEAN…

Japan - a leading strategic partner of Vietnam with best ever economic tie:
1. No. 1 in ODA: Some US$ 18 bill. so far, 30% total ODA in Vietnam
2. No. 2 in two way trade US$ 16 bill. yearly in average
3. No. 4 in FDI US$ 21.8 bill, 10.7% of total FDI in Vietnam (92 countries and
territories investing in Vietnam, US$ 203.4 bill. as per August 2011)
4. Flight network: 46 flights weekly from Tokyo, Osaka, Nagoya and Fukuoka to
Hanoi, HCMC and Danang city and vice-versa
2. Japanese FDI status quo






Legal framework: Official diplomatic tie (21 Sept. 1973), ODA Agreement (1992),
Airlines agreement (1994), Double avoiding taxation agreement (1995), Technical
cooperation agreement (1998), Vietnam – Japan IEPA (2004), Vietnam – Japan EPA
(2009), Vietnam – Japan joint initiative (1st July 2011 - phase 4)
FDI: At present, Japan ranks No. 4 with 1572 licensed projects amounting to some
US$ 21.8 bill., after Korea, Taiwan (China), and Singapore (First 8 months of 2011,
some 100 licensed projects, US$ 844 mil. or 8.8% of total FDI of Vietnam)
Highlights: some US$ 14 mill./project as average, disbursement: 28.7%
By sector: (i) Manufacturing and processing industry of 86.1% total JP FDI, (ii) IT
&Telecommunication of more of 4.8% (iii) Construction of 2.7% and (iv) Others of
6.4%
By location: Japanese FDI over 44 provinces and cities, mainly in Hanoi, HCMC,
Thanh Hoa and Dong Nai with some US$ 15 bill. or 68 % of total JP FDI
Some big projects: JV Nghi Son oil refinery of US$ 6.2 bill., JV Nghi Son cement of
US$ 621.9 mill., Vietnam – Japan human development Co. of US$ 610 mill., Canon
Vietnam Co. of US$ 306.7 mill. , Toyota, Honda, Mitsubishi and so on.
FDI BY ECONOMIC SECTORS
AS OF JULY 2011
Ord.
10 BIGIST FDI SECTORS
1
Manufacturing & processing industries
2
3
No. of
projects
Total
registered
capital
(US $ Mil.)
7.654
99.747
Real estate business
361
48.198
Construction
761
11.868
310
11.774
65
7.395
Hotel & restaurant services
4
5
Power, gas, water & air-con.
6
Information & telecommunication
669
4.828
7
Art and entertainment
127
3.636
8
Transport and warehousing
307
3.218
9
Agro, forestry and aquatic sector
488
3.171
69
2.975
2.148
6.540
12.959
203.349
10
Mine ores
08 other sectors
TOTAL
5 Các ngành
khác
22%
Công nghiệp
chế biến,chế tạo
45%
sản xuất, phân
phối điện,khí,
nước,điều hòa
3%
Dịch vụ lưu trú
và ăn uống
5%
Xây dựng
5%
Kinh doanh bất
động sản
21%
FDI is mostly focused on
manufacturing & processing sector
3. Where and how to invest?

Vietnam consists of some 230 IPs, EPZs and 14 costal EZs widespread in 58 cities
and provinces nationwide (US$ 18 bill., 85% Japanese total investment, such as
Canon, Sumitomo, Fujitsu…)

Key advantages:
1. Most favorable location (close to material source, transport hub…)
2. Comprehensive infrastructure (available utility supply)
3. Highly preferential investment policies (10% CIT for 15/30 years or whole duration,
0% VAT, 50% personal income tax, non-requirement of purchase or use of domestic
goods or services, 0% import tax for commodities to form fixed assets of project…)
4. Speedy admin. procedures with “one stop service” shop
5. Local authorities support (compensation & site clearance, providing technical
infrastructure “to the fence” of functional zones, exemption from land rental fee, soft
loans, state budget for sewage treatment plant construction…)
6. Easier access to good service provision, i.e. well-trained labor force available,
banking and custom services, post office, hospitals/clinics, restaurants, dormitory for
worker and entertainment…

Forms of investment: invest in biz development, set up an economic organization
(100% foreign own capital, JV), purchase shares, M&A of enterprises, invest in
contractual form s of BCC, BOT, BTO and BT

Reliable partners: 540,000 Vietnamese SMEs – dynamic, labor incentive & low ICOR
(97% of enterprises in Vietnam, 47% GDP, 40% of consumer goods and export)
Basic monthly salary comparison
Manufacturing industry - worker
Unit: U.S dollars
Ref: *Yokohama: 2,965
231
217
250
188
200
150
151
101
100
50
0
Vietnam
Indonesia
Source: JETRO, 2010
China
India
ThaiLand
Basic monthly salary comparison
Manufacturing industry - manager
Unit: U.S dollars
Ref: *Yokohama: 5,395
1,342
1400
1,034
1200
1000
783
736
837
800
600
400
200
0
Vietnam
Indonesia
Source: JETRO, 2010
C hina
India
ThaiLand
Ready made factories for lease in Vietnam IP
(US$/m2/month)
Area
Q3/2008
Q1/2009
Q1/2010
South East
US$2,3-7,0
US$2,3-5,5
US$2,2-6,5
Center
US$2,0-3,0
US$2,0-3,5
US$2,0-3,5
Red River
Delta
US$3,0-6,5
US$3,0-4,5
US$2,5-8,0
Source: CBRE Vietnam
Vietnam IPs land lease price vs China
Province/City
(USD/m2)
Red River Delta in Vietnam
US$ 50- US$120
South East in Vietnam
US$53- US$120
Beijing (China)
US$201
Shanghai (China)
US$209
Shenzen (China)
US$125
Quangzhou (China)
US$68
Source: CBRE Vietnam & MPI
4. Specially encouraged investment sectors








Manufacture of new materials, new energy, hi-tech, bio-tech, IT (i.e. using
intelligent transport technology – ITS for sustainable transport control)
New seeding and breed with hi-productivity in agro production
Use and creation of hi-tech and advanced technique, protection of
ecological environment (i.e. waste treatment plan, whole country 24,000
tons/day, Hanoi 6,000 tons/day…90% by land field method, 10% by
collecting and recycling one, JICA).
Labor incentive industries (using 5.000 or more workers)
Construction and development of infrastructure facilities (i.e. roads, bridges,
tunnels, railways, urban transport, airport, seaport, power plant under PPP)
Supporting industries, namely (i) mechanical engineering, (ii) electronics –
informatics (iii) manufacturing & assembly automobiles, (iv) garment-textile,
(v) leather-shoes and (vi) hi-tech industries (localization of 95% in
motorcycle industry, 500 enterprises providing components in motorcycle
and electronic industry…to reduce import surplus)
Development of education, training, healthcare, sports and physical
education
Other manufacturing and service sectors (R&D, salvage operation at sea…)
Conclusion: Vietnam – an ideal manufacturing base
+ target to domestic consumption
中国・インド等
カントリーリスクの分散
ベトナム
経
済
発
展
人
口
増
加
ベトナム国内市場の開拓を狙った進出
Source: JERI, 2011
ア
ジ
ア
・
・
・
・
・
現地との合弁事業
100％外資
マイノリティ出資
委託加工及び委託販売
ASEAN
現
地
の
安
い
労
働
力
を
活
用
し
た
製
造
拠
点
進出形態
へ
の
輸
出
製
品
の
中
継
拠
点
アジア・
ASEAN
Vietnam
an ideal manufacturing base
for Japanese investors
Thank you &
Welcome to Vietnam!
For more information, please contact
INVESTMENT PROMOTION SECTION
EMBASSY OF THE S.R OF VIETNAM

Download Report