Over 60 percent of the Japanese firms currently active in Vietnam are weighing business and production expansion in the Southeast Asian country over the next one or two years, according to Matsumoto Nobuyuki, chief representative of the Japan External Trade Organization (JETRO) in Ho Chi Minh City.

Speaking at a conference on orientation for industrial development in Ho Chi Minh City on Wednesday, Nobuyuki hailed Vietnam as a popular destination of Japanese investors.

The percentage of Japanese enterprises planning to expand their business activities in Vietnam is impressive compared to the total number of Japanese firms doing business worldwide, according to the JETRO representative.

In order to increase the diversity of their supply chains, many investors are tapping into the Vietnamese market, mainly Ho Chi Minh City, despite difficult administrative procedures, low labor productivity, and weak industrial production.

Dr. Truong Huy Minh Vu, deputy head of the Ho Chi Minh City Institute for Development Studies, said that it is vital to review the city’s industrial production policy and that the city should concentrate on manufacturing hi-tech products, boosting regional connectivity, enhancing research and development, upskilling laborers, and beefing up smart production.

Challenges for industrial production in Ho Chi Minh City

Addressing the conference, Vo Van Hoan, vice-chairman of the Ho Chi Minh City People’s Committee, discussed the relationship between economic sustainability and industrial production.

He noted that Ho Chi Minh City is moving toward modern and hi-tech development with a focus on production.

“As such, it is necessary to change the mindset of officials, enterprises, and residents in order to advance industrial production transition,” Hoan remarked. 

Industrial production accounts for 20 percent of the city’s gross regional domestic product growth and 30 percent of the industrial production volume in the southern key economic zone, which includes Ho Chi Minh City and some other southeast provinces.  

It contributes 10 percent to Vietnam’s industrial production.

Industrial production is meant to turn out competitive products for export and the domestic market.

Therefore, the city sees the orientation for industrial development as a driver of the economic growth in the southern key economic zone and in the nation.

Ho Chi Minh City aims for modern industrial production development with high added-value in 2030.

The city wants to become an industrial research and development hub in the country and in Southeast Asia by 2045.

Dr. Vu also said that at least four main challenges are currently facing the city’s industrial production sector.

Specifically, the scale of Ho Chi Minh City’s industrial production sector is shrinking and is gradually being surpassed by that of other localities such as neighboring Dong Nai and Binh Duong Provinces.

He also pointed out that industrial land in the city is limited.

Tran Viet Ha, deputy head of the Ho Chi Minh City Export Processing and Industrial Park Authority, said that the city is home to three export processing zones and 14 industrial parks covering a combined area of 3,900 hectares with an occupancy rate of over 80 percent.

As of October 2022, these parks had attracted over 1,670 operational projects with a total pledged capital of VND291.7 trillion (US$12.5 billion).

Accordingly, each hectare of industrial land in these parks has attracted an average of VND145.2 billion ($6.23 million) in investment, Ha said, adding that the value is low.

Firms active in these parks are hesitant to expand production and invest in new machines and equipment as the remaining operation duration of these export processing and industrial zones is short.

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