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Vietnam cultivating relations with Japan

Feb 17, 2016

Japan-invest_480_autoMore Japanese investment has been finding its way into Vietnam’s agriculture sector over recent times.

At the end of last year 1,150 barrels of Japanese apples, equivalent to 25 tons, bearing the Aomori brand were officially exported to Vietnam and sold in Aeon supermarket chains. On the first day on sale the apples attracted a great deal of attention among consumers in Hanoi. After Vietnamese mangoes were permitted to be exported to Japan last November the Japanese apples were also licensed to be exported to Vietnam. This was one of the achievements of Vietnam-Japan agricultural cooperation, which has developed substantially over recent years.

Japanese rice and fresh vegetables are also becoming more readily found in Vietnam and over the last two years increasing numbers of Japanese companies have arrived in the country seeking investment opportunities in the country’s agriculture sector.

Japanese phenomenon

FPT and Fujitsu recently announced the official completion of the FPT-Fujitsu Akisai Farm and Vegetable project, which applies cloud computing technology to develop smart agriculture. This was the initial step within a framework of cooperative projects in smart agriculture signed by the two corporations at the end of 2014. The project is also the first time an information technology solution from Japan has been applied in agriculture in Vietnam.

According to Mr. Atsusuke Kawada, Chief Representative of the Japan External Trade Organization (JETRO) in Hanoi, in 2015 there were 38 Japanese enterprises seeking opportunities or conducting investments in Vietnam’s agriculture sector. Links have been established to export mangoes from the Mekong Delta’s Dong Thap province to Japan, opportunities sought to invest in clean agricultural projects and high-tech agricultural projects in northern Vinh Phuc province, fishing and tuna processing developed in south-central Binh Dinh province, and agricultural and aquatic products such as fruit, shrimp, and fish were promoted around the Mekong Delta. “These enterprises not only come to Vietnam to learn about the investment environment but also want to boost exports of agricultural products and provide fertilizer and machinery for agriculture and tuna fishing,” Mr. Kawada added.

Figures from the Foreign Investment Agency show that last year Japan was the third-largest investor in Vietnam, with investment of $1.84 billion, accounting for 8.1 per cent of the total. Agriculture received among the greatest amount of this investment. In the central highlands province of Lam Dong were ten Japanese companies investing in agriculture, primarily growing clean vegetables. Others such as Yanmar, Maruyama MFG, Marumasu Kikai, and Nankai Kinzoku are not just interested in investment opportunities in high-tech agricultural projects but also want to import agricultural machinery.

Another form of cooperation taking shape and becoming popular over recent years is for Japanese engaging experts to direct Vietnamese farmers or for Vietnam to send trainees to Japan to study Japanese practices and in some cases take over from older Japanese farmers. Japanese enterprises have also come to Vietnam to directly produce and export their production to Japan.

Speaking with VET about the trend, Mr. Kawada said that Japan has an aging population and a shortage of young workers. Many Japanese farming families have therefore recruited Vietnamese workers as trainees. Experts from Japan, meanwhile, have signed contracts with cooperatives on the outskirts of Hanoi to train and conduct lectures for over 200 agricultural households.

Apple of their eye

Despite its small-scale, scattered production, Vietnam remains an ideal destination for Japanese investors in the agricultural sector. According to Mr. Nguyen Do Anh Tuan, Director of the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD), there are three main reasons why Japan has invested strongly in Vietnam over recent years. Since 2014 the Vietnamese and Japanese Governments have held high-level dialogue on bilateral agricultural cooperation and in August last year the two sides approved medium- and long-term goals of establishing an agricultural value chain in Vietnam, including growing, processing, transport, distribution, and marketing, to create the conditions for enterprises from the two countries to promote investment in the agriculture sector.

Whereas Japan has few advantages in agricultural development, many of its enterprises identify countries with favorable natural conditions, of which Vietnam is one. When products are exported to Japan their prices are competitive and investors can earn a handsome return.

As natural disasters can be all too frequent in Japan, many Japanese firms also actively seek out other investment environments. Japan possesses high-level science and technology but holds few advantages in agriculture, Mr. Tuan said. “Reducing agricultural protection as committed to under the TPP provides the opportunity for Japanese enterprises to shift their investments to Vietnam,” he added. “They will use capital and science and technology to invest in agriculture in Vietnam and then export products to Japan.”

Mr. Kawada, meanwhile, believes that as average incomes in Vietnam are increasing the demand for safe vegetables is rising and this represents a huge opportunity for Japanese enterprises to investing in the country’s agriculture sector. “Vietnam’s agricultural products do not have high added value, because processing and packaging are not overly effective,” he added. “Japanese enterprises therefore hope to become partners with Vietnamese enterprises.”

Solid prospects

The opportunities for cooperation between Vietnam and Japan in the future are enormous, especially in the context of both signing free trade agreements bilaterally and multilaterally at the regional and global levels, such as AFTA, ASEAN+ and, especially, the TPP. In agriculture, Japan has committed to immediately eliminate tariffs on 78 per cent of agricultural imports from Vietnam under the TPP. This offers Vietnam the chance to expand its export markets, improve access to the world’s largest markets, and participate in the global supply chain. It also means greater access to capital and science and technology via FDI, more jobs and higher incomes for local workers as qualifications and skills improve.

It also represents an opportunity for Japanese enterprises to invest in agriculture in Vietnam and take advantage of tariff preferences and lower labor costs while promoting their advantages compared with local enterprises in regard to technology and engineering. Japanese investors currently tend to invest in the production of rice, vegetables, fruit, and aquatic products with high quality and good branding to ensure they are safe for export to Japan or elsewhere. This provides the conditions necessary for Vietnam to integrate into global value chains, gradually increasing its agriculture exports, Mr. Tuan said.

“Vietnam remains a large agricultural country with many advantages,” said Mr. Kawada. “Japanese enterprises recognize that the global value chains are yet to be established in Vietnam, from production to preservation, distribution and sale.” Many Japanese enterprises are therefore keen to provide support. JETRO will continue to accelerate support to Japanese enterprises to explore and invest in Vietnam’s agriculture sector, especially in provinces along the Hanoi-Lao Cai Highway.

Source: VN Economic Times

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