Cars being assembled at a Japan-invested Nissan plant in central Da Nang City. The city has encountered challenges in attracting Japanese investors with a small market, lack of direct flights, overloaded ports and poor supportive industries being the biggest factors. — VNS Photo Hoai Nam

DA NANG (Biz Hub)—Da Nang faces major challenges in attracting Japanese investors, including a small market, lack of direct flights, overloaded ports and poor supportive industries.

This was stated by representatives of Japanese businesses operating in Da Nang at a meeting with the central city's leaders on Friday.

"There are major Japanese investment projects in eight key cities and provinces in Viet Nam, but Da Nang is still a modest market in comparison with HCM City, Ha Noi, Hai Phong and Binh Duong," said Yuichi Bamba, deputy head of the Japan External Trade Organisation (JETRO) in Viet Nam.

"Although it has many advantages such as infrastructure, cheap labour and education centres, the central city still has some barriers that need to be eliminated in the coming years."

Japanese businesses have invested US$356 million in the city with 68 projects in total. However, they struggle to find appropriate partners for joint ventures and receive slow responses from local agencies in dealing with procedure, tax and labour difficulties.

A survey on the investment environment of Da Nang revealed that the salary of labourers increased by 20 per cent two years in a row, while policies changed unexpectedly.

Shinichi Iwama, president of Daiwa Viet Nam, said the local administration should provide clear plans on upgrading infrastructure and regulations on waste water treatment at industrial parks.

"Some enterprises have installed waste water treatment systems, so a change of regulations would be costly. Shuttle bus routes linking industrial parks and the public sewage system have yet to be built," Shinichi said.

He added that there should be tax priorities for businesses that invest in the city for a long time as well as a cultural environment, hospitals and schools for Japanese residents.

According to the department, investment from Japan to Da Nang accounts for only 1.06 per cent of capital that Japan pours into Viet Nam.

Director of the city's planning and investment department Huynh Duc Tho said 95 per cent of Japanese investors have to import original equipment, components and material from their country.

"Only 56.4 per cent of the foreign-invested companies from Japan use materials and supportive products from local providers," Tho said.

"Da Nang has not yet developed its supportive industries to meet the demand of Japanese investors in the manufacturing field," he stressed.

Chairman of the city's people committee Van Huu Chien said the city would work on developing infrastructure, supportive industries, sea ports and air flights in coming years.

"We plan to build a 23-km Bus Rapid Transit route next year, while Lien Chieu and Tien Sa Port will start the second phase of construction," Chien said.

"The city has started Japanese language and technical courses to provide quality employees for Japanese businesses. A Japanese Culture Centre will be built in Ngu Hanh Son district," he revealed.

More favourable conditions and priorities would be offered for Japanese investors, he added.

Japanese enterprises operating at Da Nang's six industrial zones employ over 27,000 people.

Tokyo Keiki Inc and Niwa Foundry were the first two investors in the 1,010-ha Hi-Tech Park last year with a total investment of $62 million. — VNS