Vietnamese president Truong Tan Sang will pay a state visit to Japan from March 16-19 at the invitation of Emperor Akihito. The visit, that follows a meeting between the two Ministries of Finance held in Tokyo at the beginning of the month, “highlights a significant political event that will bolster bilateral political trust and strategic partnership in the light of regional and global rapid changes,” as underlined by the Vietnam News Agency.
Vietnam officially established diplomatic relations with Japan on September 21, 1973. The bilateral ties have rapidly developed in various fields and have been growing unceasingly from a reliable partnership in 2002 to a strategic partnership in 2009. Currently, Japan is the largest official development assistance (ODA) donor for Vietnam, accounting for about 30 percent of total ODA commitment that the international community pledges for the Southeast Asian nation each year. Since 1993, Japan has committed more than 21 billion USD in ODA, contributing to the country’s socio-economic development. According to Japanese data, its commitment for the current year will not be less than the 1.94 billion USD it provided last year. The announcement was made in Hanoi on March 6 by Mutsuya Mori, the chief representative of the Japan International Cooperation Agency in Vietnam. Among the recent projects funded via ODA are a beltway around Hanoi, a terminal at Noi Bai international airport, and renovation of the Da Nhim hydropower plant built in the 1960s with Japanese funding in south-central Vietnam. According to the Vietnamese press, “the three projects received around 534.5 million USD.”
Japan is thus one of Vietnam’s most important economic partners, with the two-way trade estimated at 25.6 billion USD in 2013. Japan was the first G7 country to recognize the market economy status of Vietnam in October 2011, two years after which the Japan-Vietnam Economic Partnership Agreement (JVEPA) entered into force, thus marking a new milestone in two-way economic relations. Signed on 25 December 2008 the JVEPA is a comprehensive bilateral agreement that should boost trade liberalization of goods and services, economic cooperation and investment between the two countries. It has been also agreed to advance the Vietnamese Supporting Industries (SI) for Japanese and Vietnamese enterprises. Besides, according to Japan External Trade Organization (JETRO) SI development is one of the themes under the framework of the “Vietnam- Japan Joint Initiative”, which was launched to improve business climate in Vietnam upon the agreement by the two Prime Ministers. JETRO recently released the results of a survey on business operations in 2013. Accordingly, up to 70 percent of Japanese firms investing in Vietnam have plans to expand business and continue to consider Vietnam an important outpost.
“There are about 2,000 Japanese businesses investing in Vietnam, including representative offices. It can be said that the investment as well as business activities of these businesses have gone into its development trajectory. Therefore, these companies are looking to expand their operations in Vietnam. This was clearly shown in 2013 when the number of expanded projects dramatically increased,” Atsusuke Kawada, Chief Representative of JETRO in Hanoi, said at a press briefing during this week. However, according to the survey, investing in Vietnam still bears risks, namely sky-rocketing labour cost, administrative procedures, unclear policies, complicated tax regime, customs procedures and legal system. In particular, “over 60 percent of the businesses said that the laws and policies, administrative procedures, tax regimes, customs procedures, increasing labour costs are big problems.” Overall, about 90 percent of businesses are optimistic saying that the main reason to expand business is an “increase in sales”. And in fact, Japan is the number one investor in Vietnam. As of August 20, 2013, Japan invested 33.06 billion USD in 2,029 projects in Vietnam, ranking first among foreign investors in Vietnam by investment value and ranking third in projects. Japanese investors also disbursed 10.8 billion USD of registered capital, ranking second in this category. Adding to this, Vietnam and Japan are both negotiating the Trans-Pacific Partnership Agreement (TPP), promoted by the United States. An economic relationship that excludes China.
Apart from the economic front, some observers view the desire to deepen the strategic partnership between the two East Asian countries as a move to counterbalance the People’s Republic of China, although neither Hanoi nor Tokyo officially affirms this. It is not known if the two representatives will discuss the geopolitical situation in the South China Sea and in the East Sea, where both nations claim sovereignty on islands disputed with China. The speech that President Sang will deliver at the Japanese Lower House, where only a few of foreign heads of state have a chance to speak, will say more also on this front.