Chapter 5
Development of Business Relations
p. 65-85
Texte intégral
Business Opportunity

1Economic relations between Japan and Vietnam cannot be analysed without taking into consideration the yawning gap that separates the two countries: Vietnam’s GDP of $33 billion in 2001 was only 0.8 per cent of Japan’s. In 2001, Japan’s exports to Vietnam were not even two days’ worth of its exports to all countries. Yet the Japanese authorities, as well as companies took the 1987 opening up of the Vietnamese economy very seriously. Right from the early nineties, the Japanese government showed its willingness to support the economic transition process. In 1992, Japan became the first country to give development aid to the tune of $282 million; in the following years, this quantum only continued to grow and in 1999, Vietnam was the fourth largest recipient of Japanese aid. For their part, companies developed a very systematic approach to the Vietnamese market.
2Considering that Japanese companies are powerful and have close relations with the State, many observers anticipated a Japanese tidal wave, which would lead to an absolute domination of the Vietnamese economy. As in Indonesia, and to some extent, in Thailand, the prevalent opinion was that after the influx of donations and public loans, the markets would succumb to the domination of Japanese firms. In Indonesia, Japanese companies controlled 70 per cent of the colour television, 80 per cent of the motorcycle and 90 per cent of the automobile markets.1 But as for trade in Vietnam, as seen today, it is considerably more diversified: Japan has indeed become Vietnam’s leading trade partner, but it is only the third biggest direct investor. While it occupies a dominating position in certain sectors, such as infrastructure and energy production, it has serious competition in others.
1991: The Starting Point
3As mentioned before, in the second half of the 1980s, exchanges between Japan and Vietnam were quite negligible since most of Vietnam’s trade was with the USSR and the socialist bloc countries. However, it was at this time that the Japanese sôgô shôsha came back to Vietnam, with the Nissho Iwai establishing a representative office there in 1986. Their first objective was to import Vietnamese oil, as production had just begun in the Bach Ho wells, in collaboration with the USSR. These trading companies also undertook detailed studies of Vietnam’s developmental needs and multiplied business delegations to this destination. From 1991 onwards, economic exchange was intensified for several reasons. First of all, Japan launched a series of diplomatic initiatives in the region. The Japanese Prime Minister Taro Nakayama went to Vietnam, Thailand and Cambodia. This was the first visit of a Japanese leader since diplomatic relations were established between the countries in 1973.
4At the same time, Japan participated in the negotiation of the Paris Accord, according to which Vietnamese troops were to withdraw from Cambodia, and a major United Nations peacekeeping mission was to be sent to this country. The resumption of trade relations thus took place in a specific political framework that encompassed not just Vietnam but the entire Indo-Chinese peninsula.
5The quantum of trade, however, remained moderate: Vietnam’s exports to Japan were worth $340 million in 1990, and comprised mainly oil, whereas imports from Japan were only to the tune of $169 million.
6Trade accelerated when the American embargo on Vietnam was lifted in 1994. In August that year, Prime Minister Tomiichi Murayama visited Hanoi to announce the launching of a 600 million dollar aid programme. Japanese companies that had earlier operated through front companies based in Hong Kong or Singapore could now work directly from Vietnam. The sôgô shôsha continued to establish themselves and by the late 1990s, Mitsui, Mitsubishi, Tomen and Kanematsu were all present in Vietnam. Exports from Vietnam to Japan would quadruple in four years, to settle at $1.2 billion in 1994.
Trade between Vietnam and Japan, 1986–2000 (in millions of current dollars)

Source: ADB, Economics and Development Resources Center, Key Indicators of Developing Asian and Pacific Country, 28 (Oxford University Press, 1999). www.adb.org/Documents/Books/Key_Indicators/1999/default.asp
7It should be noted that in sectors considered strategic by Japan, companies combined a strategy of commercial penetration and establishment with an “upstream” approach that, closely linked to Japanese public development aid, offered Vietnamese authorities strategic advice and analyses. The example of Mitsubishi in the automobile sector is an interesting case in point.
8In late 1992, Mitsubishi Corp. handed over to the Vietnamese authorities a report entitled “Development Plan for the Automobile Industry”, containing detailed suggestions for the sector. Among these were the means of transport to be given priority, as well as detailed demand projections targeting the year 2005, according to the type of vehicle, price levels and the evolution of customer preferences. It also contained extremely precise recommendations for the production of vehicles and spare parts. According to experts, the scope of the report was to simultaneously lay the ground for the development of a sound automobile industry in Vietnam, and to ensure this became the stronghold of Japanese firms. The Japanese would adopt similar measures in other sectors, particularly that of infrastructure, by financing studies and master plans through public development aid credit (see infra).
Trade
9Japan and Vietnam followed a trade model common between countries with very different models of economic development. Thus, in 1999, textiles accounted for 27 per cent of Vietnamese exports to Japan, marine products 21 per cent and crude oil, 17 per cent. For its part, Japan exported capital goods and manufactured goods. A part of Japanese exports to Vietnam was induced by aid flows: thus Japan exported construction equipment, bulldozers and excavators used by Hanoi to carry out major infrastructure work.
10During the course of the decade, a more or less parallel trade progression was observed between the two countries. Japanese exports increased, and Vietnam, in turn, increased its exports to Japan. It is interesting to note that this resulted more from the motivations of the Japanese authorities and sôgô shôsha than from the Vietnamese themselves. Vietnamese companies were not in a position to effectuate a real prospecting of the Japanese market, which was reputed to be a particularly difficult one. They had few or no representative offices in Japan. Therefore Japan was the one to play an active role in stimulating Vietnamese exports, by providing support mechanisms. JETRO (Japan External Trade Organization) organised several trade fairs in Vietnam, during which Vietnamese companies met potential Japanese importers, and managers and executives from Vietnamese companies were invited to Japan. In a rare and remarkable occurrence, until 1999, Vietnam had a trade surplus. It was almost as if Japan “accepted” a deficit just to promote the development of the Vietnamese economy. However, the figure was negligible in relation to total Japanese exports.
Japan’s and China’s share of Vietnam’s total import (%)

Source: ADB, Economics and Development Resources Center, Key Indicators of Developing Asian and Pacific Country, 28 (Oxford University Press, 1999). www.adb.org/Documents/Books/Key_Indicators/1999/default.asp.
11As we said earlier, the lifting of the American embargo gave an impetus to trade, and exports from Vietnam to Japan doubled from 1994 to 2000, from $1.2 billion to $2.4 billion, and Japan became Vietnam’s leading trade partner. However significant this progression might have been, considering Vietnam’s overall trade evolution during the decade, it was truly a boom. From $2.4 billion in 1990, Vietnamese exports grew 5.5 times to reach the figure of $13.9 billion in 2001. Vietnamese trade grew concurrently with a large number of countries and zones. For an idea of these figures, exports to Korea went up 13 times and to China 138 times.
12Simultaneously, Japan’s share of Vietnamese imports grew in relative value and settled at 13.9 per cent in 2001, but Japan was in significant competition with its Asian neighbours: imports from Korea touched 11.4 per cent of the total, and from China, 12.2 per cent. Particularly in the FMCG (fast moving consumer goods) markets, Chinese imports were in direct competition with Japanese products. In terms of trade, Japan was thus able to establish an important position, though not a predominant one, in Vietnam’s trade. An examination of the strategic choices made by the Vietnamese authorities pertaining to key sectors of the economy explains these figures. We shall return to this later.
Main products traded between Vietnam and Japan
| Vietnamese Products Exported to Japan | Products Imported from Japan |
| 1.Fish and sea-food | 1.Electrical equipment |
| 2.Deep-frozen shrimps | 2.Industrial products |
| 3.Cuttlefish | – chemicals |
| 4.Metal goods | – machinery, accessories |
| 5.Wood and coke | and building machinery |
| 6.Pharmaceutical products | – industrial machinery |
| 7.Fuels (coal, petroleum) | – equipment |
| 8.Silk | 3.Transport vehicles |
| 9.Garments | – lorries and buses |
| 10.Luggage | – motor coaches |
| 11.Household accessories | – motorcycles |
| and furniture | 4.Electrical goods |
| – electrical appliances | |
| – motors | |
| – audio-visual equipment | |
| 5.Metal products | |
| – alloys and steel |
Source: Ha Huy Thanh, External Economic Policies of Vietnam and Japan-Vietnam Economic Relations, no. 322 (Tokyo: IDE, VRF series, 1999), p. 27.
Direct Investments: An Evolution Over Four Periods
13During the first half of the 1990s, the quantum of Japanese direct investment remained very low: between $168 and $250 million per year. Admittedly, this was due to constraints arising from the American embargo, but it also reflected the stumbling blocks Japanese companies encountered in the Vietnamese context: the bureaucracy, complex decision making, absence of reliable information. In this regard, the Japanese approach was hardly different from that of western nations, and was quite in contrast to the “coups” that Singaporean and especially Taiwanese companies were wont to attempt, without hesitation. During this period, except for financing oil exploration (see infra), Japanese investments remained very modest.
14Despite that, companies were not passive. During the first half of the decade, there were tens of thousands of visits by Japanese companies that were gathering detailed information through numerous study missions, in careful preparation of their projects. The Japanese sought to win the confidence of their Vietnamese partners; most often public enterprises, and of the authorities.
15As soon as the embargo was lifted, trade saw a marked acceleration and in 1995, the annual investment flow rose to $1.2 billion. Many projects, drawn up in the preceding years, were implemented.
16The Japanese were interested in heavy and light industries, construction, real estate, and also constructed industrial zones: Nomura Industrial Park in Hai Phong (investment of $163 million), Thang Long Industrial Park in Hanoi ($53 million) and Long Binh Industrial Park in the Dong Nai province ($41 million). One of the aims of these industrial zones was to encourage Japanese firms to establish themselves. However, in 1996, Japanese investment flow dropped abruptly to $591 million; a fall that preceded the Asian financial crisis. This showed that Japanese companies were changing the way they saw the Vietnamese market, for, during the same year, Japan’s direct investments increased in other Asian countries.2
17Locally, Japanese investors complained of the difficulties they encountered when they operated their businesses, such as the state of Vietnamese infrastructure, the lack of information about projects, the complex decision-making process in Vietnam and corruption. These criticisms were not very different from those expressed by other investing countries of the time. The response of the Vietnamese authorities was to show their willingness to have talks and arrange various co-ordination structures with foreign investors, such as the Private Sector Forum, organised by the World Bank. In addition, a working group consisting of government directors and company heads of Japan and Vietnam was formed. Concomitantly, Japan put in place an arrangement to insure investments, to give them greater protection.
Japanese Direct Investments and Public Development Aid to Vietnam (1988–2000) (in millions of dollars)

Source: Ministry of Planning and Investment, Vietnam Investment Review; Embassy of Japan in Vietnam for ODA. www.vir.com.vn
18However, this dialogue initiative and the mechanisms actually put in place were not sufficient: during 1998 and 1999, Japanese direct investment flows dropped to an average of $85 million. And despite the acceleration in investments in the year 2000, with them crossing the highest level recorded in the decade with an amount of almost $2 billion, the leap was due only to oil exploration contracts and the construction of a gas pipeline.
19In December 2000, 290 Japanese investors were established in Vietnam, with a registered capital of $4 billion. This placed Japan in third place amongst foreign investors in Vietnam, after Singapore and Taiwan. In terms of realisation, that is to say, actual disbursement of funds, Japan was the leading investing country (see table on p. 75).
The Logic and the Modes of Establishment
20Japanese companies are found in many sectors of activity. This is because the groups are conglomerates, which permits them to position themselves simultaneously in different sectors, while getting the support of banks affiliated to each group. Four major lines of reasoning determine investment decisions:
- The logic of security of supplies. This can be seen in oil, gas and coal. In the case of oil, the requisite high figure of investments considerably affects the total figure of Japanese direct investments in Vietnam.
- The logic of out-sourcing. This means using Vietnam as production base, with a view to re-exporting products. From this perspective, Vietnam is included in the general strategy of Japanese companies that first made them choose Southeast Asia and China to set up activities that were not likely to attain a profitable level in Japan. According to a study conducted by JETRO in 2001, 36 per cent of the Japanese companies in Vietnam exported their entire production. Clearly, low salary structures were attractive, and not just for Japanese investors. Thus Nike, a company which recently faced disputes related to working conditions in Vietnam, carried out 90 per cent of its production in Taiwan and Korea in the nineties. Nike gave up on these countries, mainly because of the increase in minimum wage, and shifted operations to countries like Vietnam, China, Indonesia, and Pakistan (see figure on p. 74). However, cost was not the only consideration.
- The logic of market penetration. Many investors sought a presence in the Vietnamese market as soon as it opened up. Although they were aware that it was a small market, they thought it necessary to grab a significant market share by swiftly taking positions in the country. Further, being present in the market gave these companies the advantage of blocking the entry of competitors who came in late. This logic worked in the sector of products for mass consump-tion, such as electronic goods, motorcycles and cosmetics.
- Falling in line with priorities of Japanese public development aid. As we shall see again in Chapter 7, power generation, infrastructure and transport are the sectors most closely allied to the interests of development aid and the support of Japanese companies. The latter make an entry into the country by production units established on the spot through joint ventures or direct investment, or by importing equipment and machines to carry out projects.
Sector-wise Japanese investments in Vietnam (millions of current dollars from January 1988 to November 2000)

Source: Ministry of Planning and Investment, Vietnam Investment Review.
21Generally, the establishment of Japanese companies happens through close connections with the Vietnamese authorities. Thus in 2001, the Bank of Tokyo-Mitsubishi, Sumitomo and Mitsubishi signed a Memorandum of Understanding with the Vietnamese Ministry of Planning and Investment and the Industry Ministry. Their aim was to gather detailed lists of projects arising from Vietnamese public enterprises, so as to give them to Japanese companies.
Management and Performances of Companies
22It is not easy, by and large, to explain the management system set up by Japanese companies in Vietnam and the results it achieved. One criterion can however be considered first: an effective project set-up. In the first years of the opening of the Vietnamese economy, few were the foreign projects involving colossal investment figures that saw the light of day. In the case of Japanese companies, the rate of disbursement of investment projects was high: in 2001, a study by JETRO showed that only 9.8 per cent of the projects undertaken, representing 5.8 per cent of the capital had been cancelled, as against an average of 15 per cent for all foreign investment projects taken together3 (see box below).
The 23 leading Japanese subsidiaries in Vietnam*
(Investments larger than 10 million dollars)
| Name | Year of Creation | Activity (activities) | Province | Capital (millions of dollars) |
Japanese and Local Partners (share of total capital) |
| Nghi Son Cement Corp. | 1995 | Cement | Thanh Huoa | 104 | NM Cement, Vietnam Cement (35%) |
| Ajinomoto Vietnam Company | 1993 | Food products | Dong Nai | 53.5 | Vietnam Food Industries (30%) |
| Toyota Motor Vietnam** | 1996 | Automobiles and auto parts | Vin Phuc | 49.14 | N.a (30%) |
| Vietnam Float Glass | 1999 | Glass | Bac Ninh | 45 | Nihon Itagarasu, Viglacera (30%) |
| Honda Vietnam | 1996 | Two-wheelers | Vin Phuc | 31.2 | VEAM (28%) |
| Nidec Tosok Co. | 1998 | Auto ancillaries | Ho Chi-Minh City | 29.38 | Nihon Densan (100%) |
| Mabuchi Motor Vietnam | 1997 | Small motors | Dong Nai | 28.14 | Mabuchi Motor Vietnam (100%) |
| Mitsui Vina Plastic & Chemical | 1996 | Plastic products | Ho Chi-Minh City | 27 | Mitsui Corp, local (66%) |
| Yamaha Motor Vietnam Co | 1998 | Two-wheelers | Hanoi | 20.53 | VINAFOR (35.5%), Hong Leong Industries |
| Vina Kyoei | 1996 | Metal products | Vung Tau | 20 | Vietnam Steel Corp (40%) |
| Sakura Hanoi Plaza Joint Venture Co. | 1993 | Hotels | Hanoi | 20 | Hanoi Bus Station (40%) |
| San Miguel Yamamura Haiphong Glass | 1996 | Glass | Haiphong | 17.45 | Haiphong Glass (27.2%) |
| Than Long Industrial Park Corp. | 1997 | Industrial zone | Hanoi | 18.86 | Sumitomo Corp., Dong Anh Mechanical (48%) |
| Isuzu Vietnam | 1997 | Lorries | Ho Chi-Minh City | 14.7 | Isiuzu Motors (35%), Itochu Corp. (35%), Samco (20%), Govimex (10%) |
| Japan Vietnam Fertilizers Co. | 1998 | Fertilisers | Ho Chi-Minh City | 14 | Nissho Iwai (*60.4%), Central Glass (9.6%), Southern Fertilizer (30%) |
| YKK Vietnam | 1998 | Zip fasteners | Ho Chi-Minh City | 13 | YKK Vietnam (100%) |
| Vietindo Daihatsu Automotive Corp. | 1996 | Mini lorries | 12.32 | Daihatsu (26%), Kanematsu (2%), local (72%) | |
| Yazaki EDS Viet-nam | 1996 | cables | Bing Duong | 12.16 | Yazaki EDS Viet-nam (100%) |
| Thi Vai International Port Co. | 1997 | Port management | Baria-Vung Tau | 12 | Kyoei (52%), Vung Tau Shipping and Service (38.4%), Vietnam Steel (9.6%) |
| Vietnam Suzuki Corp. | 1996 | Two and four wheelers | Dong Nai | 11.7 | Suzuki (35%), Nishi Iwai (35%), Veam Vikyno Factory (30%) |
| Muto Vietnam Corp. | 1996 | Plastics | Dong Nai | 11 | Muto (97.5%), Tomen (2.5%) |
| Lotte Vietnam Co. | 1996 | Food products | Song Be | 10 | Lotte (60%), Marubeni (5%), Lotte Korea (10%), local (25%) |
| Inoue Rubber Vietnam Co. | 1998 | Tyres | Vinh Phuc | 10 | Sao Van Rubber (30%) |
Notes: * The Toyo Keizai has counted 172 subsidiaries of Japanese companies in 2000.
** Toyota has two other commercial subsidiaries, Toyota TC Hanoi Service Corp. (1996), and Toyota Tsusho Saigon Motor (1995).
Sources: Toyo Keizai, Rinji Zokan Data Bank, Kaigai Shinshutsu Kigyo SoKan, Koku Betsuan, 2001, pp. 519–29.
23Secondly, the profitability of Japanese companies in Vietnam is obviously an essential criterion for the quality of their management. This question seems to have provoked many debates in Japan. In an article published in 2001, in the magazine Diamond, Gene Gregory, a consultant who had lived for a long time in Japan, and then in Vietnam, wrote that the Japanese investment boom in Vietnam was over.4 He felt that the situation was the outcome of several factors, in particular, due to Japanese firms that were established in the course of the 1990s, such as Fujitsu, Mabuchi Motor, Ajinomoto or Sony, acquiring dominating positions in their respective sectors, which could discourage any possible new entrants. However, the companies that were already present were satisfactory performers: According to a study conducted by JETRO in 2001, 62 per cent of the 129 companies posted profits, a figure that was 4 per cent higher than the previous year. If the profitability of Japanese companies in Vietnam seemed perfectly tenable, it is nevertheless goes without saying that Japanese company heads kept a close watch on the respective performances of different Asian countries. Thus, in a certain number of sectors, Japanese companies showed growing interest in China (see table on p. 78).
Sectorial Elucidation
24We have singled out four important sectors in particular, not only from the angle of Vietnamese economy, but also considering its relations with Japan. The first one is oil, in which the Japanese interest can be traced back to the late 1970s. Secondly, the telecommunications sector is an important “test” sector to appraise the effectiveness of the enterprise strategies of foreign, and hence Japanese, companies. Next, infrastructure and power production deserve particular attention for these are, without a doubt, the sectors in which Japanese outlay (ODA and investment) is the heaviest. And finally, to complete our observations, the consumer goods sector; greatly favoured by the Japanese in other developing countries of the region.
The Importance of Oil
25The oil sector constitutes a major factor both for Vietnam and the relations between the two countries. The American company Mobil discovered oil during the Vietnam War, yet it was only in 1981 that drilling operations could begin, within the framework of a partnership with a Russian company Zarubezhneft, and a Vietnamese state enterprise Petro-Vietnam. The Vietsovpetro joint venture alone currently produces more than 80 per cent of Vietnamese oil. The country’s actual reserves stand at around 600 million barrels and it is expected that new wells will be discovered.
Membership figures for Japanese Chambers of Commerce and Industry in some ASEAN countries (number of member companies, March 2001)
| Country | Name | Number of members |
| Indonesia | Jakarta Japan Club | 363 |
| Malaysia | The Japanese Chamber of Commerce and Industry, Malaysia | 519 |
| Philippines | Japan Chamber of Commerce and Industry in the Philippines | 446 |
| Singapore | Japan Chamber of Commerce and Industry in Singapore | 838 |
| Thailand | Japan Chamber of commerce and Industry in Bangkok | 1,159 |
| Vietnam | Japan Chamber of commerce and Industry in Hanoi | 111 |
| Japan Chamber of commerce and Industry in Ho Chi Minh City | 211 | |
| TOTAL | 3,647 |
Source: Nihon Shôkô Kagisho, Tokyo, 2002.
26Japan’s interest in Vietnamese oil began as early as 1976, as it wanted to diversify its supply sources. All through the previous decade, Japanese trading companies bought around 80 per cent of the oil produced by Vietnam, on the basis of quotas negotiated with the Vietnamese state enterprise, Petrolimex. Though Mitsubishi-Meiwa, Sumitomo, Nissho Iwai and Marubeni are prominent amongst the buyers, the Japanese have only a minor role in oil exploration and production.
Japanese companies’ intentions regarding foreign investments
| Rank in 2001 | ||
| China | 82% | 1 |
| USA | 32% | 2 |
| Thailand | 25% | 3 |
| Indonesia | 14% | 4 |
| India | 13% | 5 |
| Vietnam | 13% | 6* |
| Taiwan | 11% | 7 |
| South Korea | 8% | 8 |
| Malaysia | 8% | 9 |
| Singapore | 6% | 10 |
| France | 4% | 15 |
Which are the promising countries for your medium term overseas operations? (for the 3 coming years; multiple replies)
Note: *Rank in 2000.
Sources: Results of a survey conducted in a sample of companies having activities and installations in foreign countries (in 2001, 792 companies, of which 63% replied); Japan Bank for International Cooperation (JBIC) 2001 Survey, The Outlook for Japanese Foreign Direct Investment (Tokyo: JBIC, 2002), pp. 39–40 and 43.
27As far as exploration is concerned, investments take place in the form of contracts for production sharing, in which the investment is made by the foreign partner. The exploration sector is controlled by the state enterprise PetroVietnam that is the obligatory partner of foreign companies. In 1990, Vietnam had granted nine exploration licenses to oil companies and in 2000, this number rose to 33, with around ten already having commenced operations. In order to reduce prospecting costs, the oil companies worked through joint ventures. MJC combines American and Japanese interests, Idemitsu and Zarubezhneft bring together Japan and Russia, and AEDC and JVPC are solely Japanese concerns.
Oil production and exports
| 1997 | 1998 | 1999 | 2000 | 2001 | |
| Production millions of metric tons | 10.1 | 12.5 | 15.2 | 16.3 | 16.7 |
| Exports millions of dollars | 1350 | 1400 | 1500 | 3570 | 3500 |
Source: The General Statistical Office, Statistical Yearbook (Hanoi: Statistical Pub-lishing House, 2002), p. 213 (for production), Ministry of Commerce and World Bank, Vietnam Economic Monitor (Hanoi: The World Bank in Vietnam, Spring 2002), p. 36 (for exports).
28For want of refining industries, almost all the crude oil is exported to other countries in the zone: Japan, China, Australia, and Singapore. Ten years ago, the Vietnamese authorities announced their intention to build a refinery; at first, slated for the south of the country. Many foreign companies, including Japanese ones, expressed an interest. Feasibility studies were conferred on Total, but these did not lead to an agreement, as the Vietnamese authorities decided to change the proposed site. They chose instead, Dung Quat, to the south of Danang, and, as a result, the projected profitability of the project was considerably reduced. Finally a decision was made to grant a license to a joint venture composed 50/50 of Zarubezhneft and PetroVietnam.
29In this sector, the situation of Japanese companies was restricted by two main factors. The first was an outcome of the hazards inherent in oil research: the large majority of oil produced now is done through the joint-venture Vietsovpetro. The second results from the desire of the Vietnamese authorities to strongly diversify partnerships with foreign countries.
Telecommunications
30Telecommunications is a strategic sector in many respects, as it serves to shape Vietnam’s future development opportunities; whether for exchanges with foreign countries or in relation to the internal development of the economy. Thus the Vietnamese have clearly understood that the standard of education and its development in the country were dependent on access to knowledge resources, especially the Internet.
31The field of telecommunications has witnessed nearly 20 per cent annual growth since the 1990s. In 1991, Vietnam had only 127,000 telephone connections, that is, 0.2 per cent for 100 habitants. By 1998, the number of connections went up to 2 million, and the percentage was 2.58. However, this was still far from Thailand’s 6 per cent, Malaysia’s 15 per cent and Singapore’s 40 per cent.
32Until 1996, Vietnam Post and Telecommunications (VNPT) had a monopoly, and regulations disallowed direct investments in the sector. So Vietnamese authorities set up an arrangement by which they authorised business cooperation agreements. Foreign investors installed telephone lines and the resulting communications provided remuneration. Between 1995 and 1997, VNPT signed three cooperation agreements, based on a common model, with foreign partners. In the case of Japan, collaboration was brought about through a consortium comprising NTT, Nissho Iwai and Sumitomo (see table).
Cooperation agreements for the construction and commissioning of telecommunications infrastructure
| Foreign partner | Date | Number of lines | Contract Value (millions of USD) |
| NTT, Nissho Iwai and Sumitomo |
November 1997 | 240 000 | 222 |
| France Telecom | November 1997 | 540 000 | 493 |
| Cable &Wireless | November 1997 | 250 000 | 207 |
| Telstra | Several contracts in succession 1998 | n.a | 237 |
| Comvik | 1993 | n.a | n.a |
Sources: Vietnamese Press, Company sites, and DGPT, Vietnam. Figures reconstituted by the authors from information that appeared in the Vietnamese Press and in the site www.vnpt.com.vn.
33At the same time, the Vietnamese government induced partial competition in the sector by authorising the promotion of a new company, Saigon Postel Corporation. Apart from land lines, this company was authorised to provide mobile telephone and Internet services.
34In 1998, the army floated another company, Vietel. In 1999, the Japanese authorities handed over a master plan for the period 2000– 2010 to the Vietnamese government. This plan showed an investment programme evaluated at $5.7 billion for the whole period; that is, no less than 17.3 per cent of Vietnam’s current GDP. The objective was mainly to increase the production of equipment so as to provide 15 to 20 telephone lines per 100 inhabitants by 2010.
35Of course, it was necessary to use the equipment; the market for which developed rapidly, going from $710 million in 1997 to $1,200 million in 1999.5 In this field, as in others, Vietnam followed a policy of systematic diversification of supplies, a part of which was manufactured on the spot through joint ventures. Goldstar produced optic fibre cables and digital switches, Daesung (Korea) took charge of cable production, Alcatel, the assembly of digital switches and Newtel (a group supported by Goldman Sachs and Nikko Securities) manufactured telephone equipment. For its part, Siemens produced optic fibre cables and digital switches.
36Though we are not able to provide the exact statistics about import of telecommunication equipment, most of the information gathered shows that in this respect too, diversification is the rule. The professionals of the sector estimate that there are currently not less than twelve different kinds of digital switches!
37It is interesting to note that the Japanese sôgô shôshas, especially Sumitomo, Nichimen and Kanematsu, intervene in the financing of equipment purchase, without, however confining themselves to products of Japanese origin. Eventually, the signing of the bilateral trade agreement in 2001, between Vietnam and the United States, would also have a profound impact on the sector. American companies suffered because of the American embargo. Until recently, they were not very active and they wish to make up for the delay. In early 2002, the Vietnamese government announced the intention of opening its market to American companies and asked the United States to participate in the Vinasat Communication satellite project, costing an estimated $197 million. Lastly, as this is a strategic, growing sector, Japanese companies face strong competition and cannot be regarded to be in a predominant position.
The Infrastructure Sector
38Infrastructure was a major bottleneck for the Vietnamese economy in the beginning of the 1990s. Since then, this sector has experienced a highly consistent growth. A good indication of this progress was the growth of construction equipment imports; the value of which rose from $106 million in 1995 to $377 million in 1998. This increase was chiefly based on public orders and development aid. Between 1996 and 2000, the proportion of infrastructure in the budget outlay for Vietnam was to the tune of 34 per cent, i.e. almost 3 per cent of the GDP.
39In this field, the Japanese took the pole position; here, the features of their development aid policy obviously worked in companies’ favour. According to the Japanese doctrine in this matter, the projects have to be generated by the beneficiary country. In a context where it is still difficult for Vietnamese ministries and agencies to create projects conforming to international standards, Japanese companies had all the time to take the initiative by “advising” their local partners.
40Preliminary studies were undertaken with the help of funding from Japanese public powers, which helped them establish themselves in the initial phase of the project. Thus, between February 1999 and June 2000, the Transport Ministry carried out a study financed by JICA, which resulted in the publication of a “master plan”, a strategic study of Vietnamese transports; a document that became the reference point for almost all the players involved in the sector. Most notably, it suggested the priority development goals to be targeted over the medium term (drawing up of a 5-year plan) and long term (10-year master plan and 20-year perspectives) for a number of major projects. Very recently, JICA declared its intention to finance the carrying out of the master plan for transports in Hô Chi Minh City and the Red river transport plan.
41At the same time, the Japanese ensured a more significant part of the finances, both in the form of donations (through JICA) or loans. Thus, from 1992 to 1999, the Japan Bank for International Co-operation (ex-OECF) committed to providing loans to the tune of $5.3 billion dollars, at concessionary interest rates. Projects financed by the Japanese are considerable in number and importance: renovation of the Da Nang port, in the centre of Vietnam and the Hai Phong port in the north; renewal of the main highways and construction of bridges, both on the country’s major communication routes and in rural areas. In these circumstances, it is not surprising that Japan occupies an important place as far as construction material supply to Vietnam is concerned. In 1997, its market share of these imports was 26 per cent, but it is interesting to note that the overall share of European suppliers was more, at 37 per cent. Asian competition was also in the running, with a market share of 16.6 per cent for Korea, 6.3 per cent for Taiwan and 5.4 per cent for China.
Consumer Goods
42The consumer goods market, which is growing steadily, shows two distinct characteristics: in urban areas, it is close to the models that can be observed in other, more developed Southeast Asian countries, such as Thailand or the Philippines; on the other hand, the weak purchasing power in rural areas considerably affects overall sales. The best selling products are often those manufactured by Vietnamese companies, and the market share of imported goods is extremely low.
43In cities, the market is very competitive since all available products are made by purely Vietnamese companies or joint venture companies, or are imported. Japanese products penetrated the market in the early eighties, often smuggled in from Thailand. Subsequently, the Vietnamese government adopted an import substitution policy that in principle, restricted consumer goods imports and favoured those that were locally produced. Japanese companies preferred a cautious approach and were content to export their products for several years. The company Honda, for example, was established only in 1996, as a joint-venture, and began production only in 1997.
44Japanese companies are mainly active in areas in which they are traditionally strong competitors, such as motorcycles and popular electronic products. In the as yet tiny automobile market, in 2001, Toyota was responsible for around 29 per cent of the sales. In recent times, Japanese companies have expressed concern about the steady influx of Chinese products, especially motorcycles, which tend to impinge on the Japanese market share, as they are sold at much lower prices than Japanese products. Companies are also increasingly worried by the rise of the fake goods market: very recently, Matsushita Electric bought advertisement space in the Vietnamese Press to warn consumers about the imitations of one of its brands and threatened to sue the counterfeiters.
Vietnamese Interests versus Japanese Interests
45In the introduction, we spoke of the yawning gap between the Vietnamese and Japanese economies. Seen from the Vietnamese angle, the development of relations with Japan could only be profitable; whether in terms of development, trade or investment aid. Let us not forget that in the early nineties, Vietnam faced the collapse of its external trade with the USSR and People’s democracies, and so the diversification of its markets and supplies was of vital importance. Seen from the Japanese angle, however, the benefits are less apparent. Admittedly, that the Japanese wished to diversify their oil supply sources should be duly noted. But even Vietnam’s enormous hydrocarbon reserves would not be enough to meet Japan’s requirements. Besides, even after a decade of increasingly intense economic trade, the Japanese did not manage to establish a dominating position in the oil sector. The major part of the production still arises from collaboration between Vietnam and Russia, and the Vietnamese tend to multiply their international collaborations for prospecting new wells. So we cannot be satisfied with an analysis that reduces the economic relations between the two countries to an aid for oil “accord”, as seen in other countries supported by Japan.
46In fact, Japan’s interest in Vietnam rather reflects the desire of Japanese companies to acquire a market share with the taking off of the economy, orchestrated by the great strategic choices of the Vietnamese government (see Chapter 7). However, these dynamics must be broken down into two sub-groups, the characteristics of which are quite heterogeneous.
47In the first sub-group, infrastructure construction and energy production, especially electricity, should be included. In this regard, development aid would be a way of ensuring Vietnamese demand and also, since it concerns infrastructure, a way of creating a good circle of development. The rapid development of infrastructure, in particular, of ports, simultaneously enables Japanese companies to find new markets and Vietnamese external trade to develop. Further, it results in increasing the overall efficiency of the Vietnamese economy by reducing transport costs, which indirectly benefits Japanese companies established in Vietnam.
48The second sub-group includes the sector of mass consumption goods, motorcycles and cars. Here, aid “mechanics” work very slightly, if at all. Japanese companies deal with the Vietnamese market within the framework of their general approach to Asian markets; which is a long-term one, as they rely on the gradual increase of demand.
49At this point, we must bring into question the economic viability of the Japanese approach, in terms of the ratio of the costs/advantage of development aid funds to the purely economic investment (direct investment and the setting up of trade networks). The economic hazards of the Vietnamese market, even seen in a medium term perspective, are quite low as compared to other Southeast Asian countries, not to mention China. According to a purely economic logic, this investment has some meaning only if it allows Japan to achieve a sustained and significant market share in Vietnam. Now, if we examine the structure of Vietnamese imports, we see that if Japan has actually increased its market share in ten years, from 7 per cent in 1987 to almost 15 per cent in 1999, the figure is still considerably lower than those it has achieved in other countries of the region (24 per cent in 1999 in the case of Indonesia, for example). Moreover, in the coming years, Japan’s position in Vietnam is set to be strongly challenged by China, on the one hand (and Korea, to a lesser extent) and on the other by the United States, that stands to benefit from the opening of Vietnamese markets, at least in certain sectors, such as telecommunications.
50We are therefore inclined to think that as far as Japan is concerned, notwithstanding its economic objectives, its orientation is predominantly political in nature. In other words, as we have already seen, the initiatives come more from the Japanese State, and the companies more or less “follow them up”. For their part, the Vietnamese authorities, even though they obviously want to benefit from Japanese funding, have adopted a deliberate strategy of proliferating political and commercial alliances in order to avoid a situation of over-dependence on Japan.
Notes de bas de page
1Nobuyuki Takahashi, “The Scandal of Japanese Aid to Indonesia”, AsiaTimes (2 August 2002), www.atimes.com/atimes/Japan/DH02Dh01.html.
2JETRO (Japan External Trade Organization), White Paper on foreign investment, Jetro, Tokyo, summary in English 2002, www.jetro.go.jp.
3Let us remember that as far as direct investment is concerned, we should differentiate between the commitments — investment amounts fixed when the investment approval was given, and disbursements — amounts actually invested. The difference between the two large figures can be significant and arise from various causes: investment approvals can be withdrawn if the project implementation is delayed. Similarly, because of hazards in project implementation, there can be delays in the actual disbursement: imports, starting the work, etc.
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