Opportunities in Vietnam’s New Industries

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By Tran Que Chi

Mar. 9 – Vietnam’s food processing, software and environmental technology sectors have been labeled as new industries with great potential.

Hanoi, Ho Chi Minh City and the Central Highlands in particular have been identified as future centers for the food processing industry, with Da Nang, Hanoi and HCMC expected to become major software hubs.

In the HCMC Metropolitan Area, almost 20 different food processing companies from Japan and South Korea have a presence; including Acecook, Lotte, Kyoei Food, Meiji, Nittofuji and Nissui.

Software enterprises concentrated in Hanoi include Fujitsu, NTT Data and Nomura Research, while Da Nang hosts Milestone and Denogo. Based in HCMC are Pasonatech and Tokaipowdex, to name a few.

According Mr. Aimoto, an expert from the Japanese Ministry of Economy, Trade and Industry, Japanese investors are very interested in the food processing industry in Vietnam.

“The visits, which explore investment opportunities in this area, are organized continuously. The number of Japanese enterprises to invest in this area is not small, but is insignificant compared to the agricultural development potential of Vietnam,” said Mr. Aimoto.

The problem, according to a survey of Japanese businesses, is that Vietnam’s distribution system is not very effective, which makes investors hesitant to invest.

“If the retail industry develops, the domestic market could expand more, food processing companies will increase investment to take advantage of the domestic market and exploit raw materials for processing agricultural products to export,” said Shimomura from the Japanese Embassy in Vietnam.

Supporting industries, such as electronics, textiles, petrochemicals and automobiles also present good development potential; but the current shortfall in these services also presents problems for the growth of Vietnam’s major industries.

Professor Kenichi Ohno, a Japanese expert, said that Vietnam needed to answer the question of whether to build industrial facilities or specialize in a particular product or a number of certain stages of production.

“If this content is not clarified, failures which have occurred in the implementation of selected sectors to develop supporting industries, may be repeated. We note that, in the context of deep integration today, choosing to build a complete industrial base becomes extremely difficult,” said Mr. Ohno.

In addition, Mr. Ohno emphasized that Vietnam’s dependence on foreign industry was a hindrance and pointed out that the value added by Vietnam’s manufacturing industry is low. Furthermore, in order for Vietnam to achieve the transfer of technology necessary to establish world-class centers of industry, it would need to considerably improve the quality of human resources and research and development.

In this regard, Dr. Nguyen Thi Tue Anh, Head of Business Environment at the Central Institute for Economic Management, said the selection of potential target industries needs to be developed in parallel with the mechanism to attract and allocate investment capital to ensure feasibility.

It is envisioned in the industrial development strategy, which Vietnamese and Japanese experts are working to complete, that FDI capital will act as the driving force behind in-country private investment capital in this field. Policies of attracting FDI are required, which correspond to the targets for developing high-potential industries, to ensure business opportunities for Vietnamese enterprises to join the production value chain.

Currently, a number of Japanese and Korean companies are seeking opportunities to participate in the food distribution sector in Vietnam as a way of laying the foundation for significant long-term investment plans. Firms currently negotiating a joint venture plan include the Japanese group Itochu, with Phu Thai, E-Mart from South Korea and the U & I Group from Vietnam. Foreign investors have set goals for technology transfer in food distribution before making their investments in Vietnam’s food processing industry.

Dezan Shira & Associates is boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in Vietnam. To contact the firm, please email vietnam@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.

For business enquiries, please contact us as at Vietnam@dezshira.com

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