According to Idei Ippei, a senior researcher at JETRO, a survey by the organisation revealed the percentage of domestic procurement in Vietnam for Japanese companies has improved from 22% in 2011 to 33.2% last year. However, the rate was still far lower than of other countries in the region like Thailand (56.8%), China (67.3%) and Taiwan (China) (55.4%).
Meanwhile, the demand for local supply of industrial raw materials and parts from Japanese enterprises in Vietnam was very high, as 80% of Japanese firms said they wanted to raise the localisation rate to reduce costs and improve competitiveness. Some 64% of the firms said they would increase local procurement to shorten delivery time.
To solve the issue, JETRO has aided Vietnamese manufacturers in supporting industries. It has made a list of Vietnamese suppliers of materials and parts in metal processing, mould making, electronics and more. At the same time, it has provided information for companies and organised networking events for businesses from both countries.
In addition, JETRO has cooperated with the Japan International Cooperation Agency (JICA) to implement pilot projects to support the local supporting industry.
These projects allow 10 Vietnamese companies, five from the north and five from the south, that produce parts for automotive, electric, electronics and lighting industries to receive consultation in production management, sales and marketing, human resources training, financial management, ect., so they can be more capable when participating in the supply chain of Japanese firms.
Last year, Japan became Vietnam’s largest foreign investor, with a total of US$9.11 billion, more than 25% of the country’s total foreign direct investment (FDI).
In the first six months of the year, Japanese enterprises have poured nearly US$6.5 billion in investment projects in Vietnam, accounting for 32% of total FDI.
According to Tsuyoshi Shimizu, a specialist at JICA and a consultant at Panasonic Excel International Co. Ltd, 1,600 Japanese enterprises are operating in Vietnam, with nearly 70% of them planning to expand business in the next two years because of the country’s economic growth.
Many Japanese manufacturers want to buy raw materials, machines and spare parts from Vietnam, but the supply and quality of human resources and products from Vietnam have not met their requirements, said Shimizu.