Vietnam is the most promising destination in Southeast Asia for Japanese enterprises after the Covid-19 epidemic
As a result of the Covid-19 epidemic, Japan has earmarked a support package of US$2.2 billion to help Japanese companies relocate all or part of their production in China to other countries. In early April, Japan's Ministry of Economy - Trade - Industry (METI) also announced policies to support Japanese businesses wishing to move equipment and production plants to other investment locations in ASEAN. In particular, Vietnam is considered an attractive destination for many Japanese enterprises.
The wave of shifting Japanese enterprises' production out of China
The US$2.2 billion budget, compiled to try to offset the devastating effects of the pandemic, includes 220 billion yen (US$2 billion) for companies shifting production back to Japan and 23.5 billion yen for those seeking to move production to other countries.
China is Japan’s biggest trading partner under normal circumstances, but imports from China slumped by almost half in February as the disease closed factories, in turn starving Japanese manufacturers of necessary components.
That has renewed talk of Japanese firms reducing their reliance on China as a manufacturing base. The government’s panel on future investment last month discussed the need for manufacturing of high-added value products to be shifted back to Japan, and for production of other goods to be diversified across Southeast Asia.
Vietnam is the most promising destination in Southeast Asia for Japanese businesses after the Covid-19 epidemic
With factors such as rising labor costs in China and Vietnam being considered the center of Southeast Asia, Japanese companies are investing more and more in Vietnam.
An online survey of Japanese company NNA shows that, in the eyes of Japanese investors, Vietnam is considered the most promising destination in Asia in 2020 with the potential for development markets and skilled labor supply. The new model of Japanese enterprises combined with enterprises already investing in Vietnam is increasingly popular in industrial parks.
According to Japan External Trade Promotion Organization (JETRO), Vietnam has received a lot of attention from Japanese companies because of its ability to recover from Covid-19. In addition, Japanese enterprises highly appreciate Vietnam's risk management capacity when the Government has implemented good disease control. Currently, Japanese businesses that want to invest in Vietnam are well supported by banks. Not only large banks, but also local banks are involved in the investment promotion process. They have a Vietnamese section who specializes in policies and information support for Japanese companies to facilitate this process. JETRO said that with the Covid-19 catalyst, the wave of production shifts will be stronger than after last year's US-China trade tensions. Therefore, Southeast Asia in general and Vietnam in particular will be more attractive to Japanese businesses in the near future.
