Support industries seen as key to drawing investment

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"Although Japan is a big investment partner in Vietnam , most Japanese small and medium-sized enterprises are hesitant to invest in Vietnam ," Do Nhat Hoang, director of the Foreign Investment Agency (FIA) said at a meeting held on February 28 in HCM City .

The conference, organised by the Ministry of Planning and Investment's FIA in collaboration with Japanese's Forval Corporation, discussed attracting Japanese firms into local industrial parks.

Hoang blamed the Japanese investors' reluctance on a lack of information about investment opportunities, investment environment and preferential policies, especially in Vietnam 's industrial parks.

Japan is the fourth biggest foreign investor in Vietnam with more than 1,600 projects worth $23.6 billion. In the first two months of this year, Vietnam attracted about $1.2 billion of foreign direct investment, of which 80 per cent came from Japanese investors.

Hideo Ohkubo, chairman of the global promotion committee for small and medium enterprises of the Tokyo Business Association, said the aging demographics in Japan has narrowed down the domestic market.

Several export industries in Japan have stagnated because of continuous appreciation of the yen, a sharp decline in international competitiveness of Japan compared to other countries in Asia and the consequences of the earthquake and tsunami last year.

"Up to 97.3 per cent of the 220,000 SMEs in the manufacturing industry in Japan do their business at home and are not used to investing abroad," he said.

India , Indonesia and Thailand have developed industrial zones that meet the conditions of Japanese investors. Even recently opened up Myanmar has accepted to build Japanese-style industrial parks to lure investors, he added.

He recommended that Vietnam turn its industrial parks into small cities to attract FDI from Japanese SMEs.

Masahiko Koumura, former Minister for Foreign Affairs of Japan, said: "Japanese firms want to make contributions to Vietnam 's economic development, based on a win-win co-operation between the two countries. Vietnam needs to improve its investment environment to become an appealing destination for Japanese investors."

Tran Duy Dong, deputy head of the Economic Zone Management Department under the Ministry of Planning and Investment (MoPI), said as of December last year, there were 283 industrial parks in 58 provinces and cities nationwide, attracting more than 4,113 FDI projects with a capital investment of $59.6 billion.

However, up to 35 per cent of the space remained unoccupied, he said, adding Vietnam wanted to get connected to Japan 's overseas investment strategy to fill up these industrial parks.

He said investment projects in the manufacturing sector and infrastructure projects in industrial parks would receive preferential treatments.

In its industrial park development policies in the coming time, the Vietnamese Government will offer preferential policies to businesses who invest in building houses for workers or wastewater treatment plants in industrial parks. The incentives will include free land lease, corporate income tax breaks, and preferential credit and import tax exemptions.

According to the nation's development plan, by 2015, 212 new industrial parks will be set up by 2020, covering an area of 60,000ha.

The total area covered by industrial parks is expected to reach 130,000ha by 2015 and 200,000ha by 2020.