From manufacturing to retail: Japanese investors’ appetite in Vietnam sees shift

Food company Meiji recently announced the establishment of Vietnam operations with a charter capital of JPY200 million ($1.8 million) to import and sell infant formula, according to the Saigon Times.

Vietnam has around 1.5 million births a year, 70 percent more than Japan, and the number is projected to grow, it said.

Conglomerate Sojitz Corporation has tied up with Vietnam Livestock Corporation, a subsidiary of dairy giant Vinamilk, to import, process and sell beef in Vietnam.

Vietnamese consume nearly 500,000 tons of beef a year, half of Japan’s, and the figure is set to rise with a growing population and increasing incomes, it said.

In November retail chain Muji opened its first outlet in Ho Chi Minh City’s District 1.

Pharmacy chain Matsumoto Kiyoshi opened its first outlet in HCMC in October and plans to have 10 in the next three to five years.

Fashion brand Miki House opened its first store in Ho Chi Minh City last year and is preparing to open one in Hanoi.

Existing retail brands are expanding.

Aeon opened a mall in Hai Phong City in December, its sixth in the country, and plans to have 20 by 2025.

In March fashion brand Uniqlo opened its seventh outlet in the country in HCMC.

Hirai Shinji, chief representative of the Japan Trade Promotion Organization in HCMC, said in recent years there has been increasing Japanese investment in non-manufacturing sectors in Vietnam.

For decades Japan has been a major investor in Vietnam, and was second only to South Korea as of last year with total investment exceeding $60 billion, and global names like Honda, Toyota, Panasonic, and Canon have factories in the country, he said.

But investors’ focus seems to have changed in recent years, with the growing income of Vietnamese becoming an attraction, and many Japanese companies seeking to serve the expanding middle class in Hanoi, HCMC and other places, he said.

The country’s rapid economic growth and success in containing the Covid-19 pandemic are also major factors in attracting Japanese investment, he said.

"In 2021 we will see many Japanese manufacturing and service companies coming to Vietnam and existing ones expanding. They will not only build factories in HCMC and surrounding localities but also seek opportunities in the Mekong Delta."

Vietnam’s retail market was growing in double digits before the pandemic, and expanded at 6.8 percent last year to $172 billion.

Not surprisingly, Osamu Ikezoe, CEO of Uniqlo Vietnam, told the media that business has been beyond expectations.

The company would stick to its strategy of opening large outlets in prime locations in Vietnam in the coming years, he added.

Shinji said improvements are needed to infrastructure and supply chains to attract more Japanese investment.

For instance, companies in the Mekong Delta have to transport their goods to HCMC to export due to a lack of infrastructure in their region, he pointed out.

The supply chain needs to improve since Japanese companies in Vietnam are only able to source 37 percent of the items they need locally compared to 68 percent in China and 60 percent in Thailand, he quoted JETRO surveys as saying.