A production line at Canon factory in Bac Thang Long Industrial Park.— File Photo

HCM CITY (Biz Hub)— Trade and investment relations between Viet Nam and Japan will see strong growth in 2014 and 2015, Ho Thi Kim Thoa, deputy Industry and Trade minister, said at a forum held yesterday in HCM City.

The forum was organised by the city's Investment and Trade Promotion Centre in collaboration with the Japan External Trade Organization (JETRO) and Japanese Business Association of HCM City.

Thoa said the Viet Nam-Japan Economic Partnership Agreement that took effect in 2009 has reduced tariffs, contributing to an increase in trade, adding that over the next 10 years, under the agreement, tariffs would gradually decline to zero.

Up to 95 per cent of Viet Nam's exports to Japan will enjoy tax reductions, while the corresponding figure for Japan will be nearly 88 per cent. Preferential tariffs will be reserved for seafood, farm produce, textiles and garments, steel, chemicals and electronic spare parts.

"Japan – Viet Nam economic, trade and investment co-operation is a co-operation model between a developed industrial country and a dynamic developing country, which helps each other, creating a win-win situation," Thoa said.

Bilateral trade between Viet Nam and Japan has risen by an average 20 per cent per year since the agreement took effect in 2009, reaching $24.7 billion in 2012.

In only eight months, bilateral trade turnover reached $16.3 billion. Of that figure, Viet Nam's exports to Japan totalled $8.8 billion, with the main products being furniture, seafood, steel, rice, fruit and vegetables. By August 20, Japan ranked first in total registered investment capital ($33.06 billion) and third in total number of projects (2,029) after South Korea and Taiwan. Japan's investment projects are mainly in the manufacturing sector.

Japan is the biggest ODA supplier to Viet Nam. In the past five years, it has made major contributions to develop Viet Nam's electricity industry with 12 ODA projects worth $5 billion.

Yasuzumi Hirotaka, executive director of JETRO in HCM City, said labour costs in Thailand and China had rocketed in recent years, and that Japanese enterprises had decided to move production factories to other countries, including Viet Nam, since they wanted to disperse risks in production and business.

Full advantage

"Choosing Viet Nam as a key investment destination, enterprises want to take full advantage of benefits from the Trans-Pacific Partnership (TPP) agreement when it is signed," he said, adding that Japanese as well as Chinese and South Korean investors in the fibre sector had begun shifting production facilities to Viet Nam. Viet Nam has major advantages, including cheap labour costs and abundant human resources and a stable political situation. It is located in a key convenient transport location.

Hirotaka said that Japanese businesses expected to increase their competitiveness in price by purchasing locally made raw materials and parts to partly cut down expenses.

However, the ratio of local supply is only 28 per cent, while it is 53 per cent in Thailand. Development of support industries has become increasingly important. He urged the Vietnamese Government to develop support policies, including low interest-rate loans, to encourage domestic businesses to invest in the support industry.

Nguyen Thi Hong, deputy chairwoman of the HCM City People's Committee, said Japan was the fifth largest investor in HCM City with 570 projects worth $3 billion.

Japan is also a leading export market of HCM City. In the first nine months, export turnover of HCM City to Japan reached $1.5 billion. — VNS