Japan sows seeds of agri-investment

According to Japanese investment consulting firm Seiko Ideas Corp., Japan is now increasing its agro-forestry-fishery investment capital in Vietnam as it must open up its own agricultural sector to certain sensitive items once it enters the Trans-Pacific Partnership (TPP).

As a result, Japanese agricultural products will have to compete on pricing with similar produce from other countries. This puts Japan at quite a disadvantage as its own agricultural sector is defined by its small scale and costliness.

“Therefore, Japan has decided to boost investment into Vietnamese agriculture as Vietnam is a TPP member with huge potential in this sector”, said a Seiko Ideals document on the TPP’s impact on Vietnam-Japan agriculture co-operation. “When exporting to Japan, the tax rate will be 0%. At the same time, this can meet the condition that export products must have 70% of intra-TPP origin”.

According to Seiko Ideas, while Japan needs a key partner for agricultural development, Vietnam needs a relevant “padlock” to access state-of-the-art agricultural technology.

The Japan International Co-operation Agency (JICA) said that it would increase its support to Vietnam’s agricultural sector through various projects invested in by Japanese firms.

“The number of Japanese firms wishing to implement agro-fishery projects in Vietnam has been strongly growing. Many are conducting market surveys”, said JICA Vietnam Office chief representative Mutsuya Mori.

For example, Kato Group is co-operating with the south-central province of Binh Dinh in a US$771,000 tuna-fishing project, which will run until June 2020. Also, Shudensha Company is implementing an US$820,000 project to improve water quality in the fishery sector. This project’s lifetime runs from 2015-2020.

OTA Kaki Company has been co-operating with the Central Highlands province of Lam Dong in a project to develop a high-quality flower market with an effective distribution system. This project will last through 2016.

Also, Nikko Foods Company is also working on an US$820,000 project to develop high-quality tomatoes in Lam Dong.

“Vietnam’s agriculture has big potential. For instance, under our survey in Lam Dong, if local farmers replace coffee trees with a flower planation, their income will rise nin fold”, Mori said.

Last year, our of new Japanese investments totalling US$1.3 billion in Vietnam, there was a sudden upsurge of agro-forestry-fishery projects. The 82 Japanese projects initiated last year bought the negligible percentage of Japanese agro-investments to 6%, putting it in the third-place ranking for newly-committed capital, after manufacturing (51%) and construction (28%).

According to Seiko Ideas, Japan is co-operating with Vietnam though its “Payroll Outsourcing” model. Specifically, Japanese firms, through outsourcing will pay salaries for their farming employees in Vietnam. It means that they come to Vietnam as transnational companies, hiring local labourers to implement their agricultural investment projects. 

This model is becoming increasingly popular as hired companies recognise the importance of personnel consulting service, including recruitment, salary payment, relocation, and performance assessment. As such, this service offers a high level of assurance for corporate customers.