Interview with representatives of organization

The Japanese Chamber of Commerce and Industry (JCCI)　

Chairman: Mr. Tadahiro Kinoshita

2023 was a challenging year for Japanese companies investing abroad.

According to the JETRO survey on the situation of Japanese companies investing overseas in 2023, overall business confidence of Japanese companies in Vietnam declined in both the manufacturing and non-manufacturing sectors. The proportion of profitable enterprises decreased, indicating an unfavorable trend in business. In terms of foreign direct investment, the depreciation of the Japanese yen led to a reduction in the scale of new investment projects, and Japan fell behind Hong Kong and China as an investor.

For JCCI, 2023 was a milestone year, marking the 50th anniversary of the establishment of diplomatic relations between Japan and Vietnam, and the 20th anniversary of the launch of the Japan-Vietnam Joint Initiative, a policy dialogue framework for improving the investment environment between the Japanese and Vietnamese governments. In preparation for the next phase of the Japan-Vietnam Joint Initiative, scheduled to start in March 2024, we are currently considering topics that will bring equal benefits to both countries.

In 2024, the slump in external demand is expected to bottom out, and the growth in the export-oriented manufacturing industry is expected to recover. Furthermore, although the high economic growth of the past decade may show signs of slowing down, personal consumption remains relatively strong, and there are likely to be business opportunities in the consumer goods manufacturing, retail, and personal service industries.

Furthermore, the investment trend of Japanese companies will shift from new investments in traditional export-oriented manufacturing to acquisitions and business expansions to penetrate the consumer market, as well as investments in enterprises to address social issues in Vietnam. We hope that in the future, through policy dialogues under the Japan-Vietnam Joint Initiative, the investment environment in Vietnam will improve and attract more new investments from Japan, contributing to the development and addressing of social issues in Vietnam.

KEIEIJUKU Community - Chairwoman: Ms. Tran Thi Thu Trang

2023 was a difficult year for Vietnam's economy in general and the manufacturing industry in particular. Due to the bleak global economy, monetary tightening to combat inflation, and the risk of a global recession in Europe and the United States, consumption and investment (especially investment in the global real estate sector) have plummeted, and the domestic real estate market has declined. The economy froze, and public investment slumped. Many companies were severely affected, and even among those that were able to maintain orders, many saw their order volumes drop by 10-30%. Some companies saw order volumes drop by 40-50%.

In 2022, we witnessed global supply chain disruptions, shortages of raw materials, and high transportation costs. Businesses had to accept higher costs of raw materials to fulfill orders. However, in contrast, 2023 saw a different trend. The supply chain became completely stable, raw material prices started to decrease, and transportation costs returned to normal levels. However, there was a lack of orders. As a result, the overall situation became even more challenging than in 2022.

However, alongside the difficulties and challenges, 2023 also presented several bright spots and opportunities for businesses to seize and develop:

• In September 2023, Vietnam and the United States elevated the comprehensive strategic partnership. This is a significant opportunity for Vietnam to enhance its economic relationship with the United States, especially considering that the US is one of Vietnam's top import partners.
• In November 2023, President Vo Van Thuong and Prime Minister Kishida Fumio of Japan agreed to upgrade the Vietnam-Japan relationship to a "Comprehensive Strategic Partnership for Peace and Prosperity in Asia and the World." Vietnam and Japan further strengthened the already good relationship.
• China increased its FDI (Foreign Direct Investment) into Vietnam. In the first nine months of the year, China's FDI surpassed that of South Korea and Japan, making it the second-largest investor in Vietnam after Singapore. This shift in investment is noteworthy, considering that China is the world's leading manufacturing hub. The clear shift in supply chains, particularly in the case of Apple, over the past three years, is evident.

Regarding the prospects for 2024, we expect inventories to decline after the first quarter, begin to recover in the second quarter, and return to prosperity from the third quarter. However, our advice to businesses is to have flexible risk mitigation plans that allow them to adapt to new and unforeseen changes in the world that impact their industry.

2024 will bring many opportunities for businesses under the macroeconomic conditions supported by the government.

• First, the government continues to actively support businesses, including through monetary easing, interest rate cuts, and the provision of preferential policy packages.
• Additionally, foreign direct investment continues to increase, and the shift trend from China to Vietnam continues with the recovery of traditional capital flows from Singapore, South Korea, and Japan. These are all countries with strong capital flows in manufacturing.
• Furthermore, the export market is starting to show signs of improvement. The recovery in the European and American markets is particularly remarkable. Export growth is projected to recover strongly in 2024.

In addition, there are several significant challenges that businesses need to address:

• Global market interest rates are high and show no signs of cooling down anytime soon. Countries continue to tighten monetary policy, and the recovery in consumer demand is delayed.
• Ongoing wars and trade tensions are disrupting global supply chains and impacting consumer demand.
• The strong shift of Chinese businesses to Vietnam has led to an increasing number of competitive rivals in the Vietnamese market.

Vietnam Innovation Network in Japan (VJOIN) - Founder: Mr. Cao Minh Viet

In 2023, the majority of manufacturing businesses faced difficulties as the volume of orders decreased, leading to a decline in revenue. This trend started in the semiconductor industry and then spread to other sectors. Businesses became more cautious in expanding production and instead focused on maintaining and fine-tuning their current operations. As for Japanese businesses, during this period, their main objective in expanding into the Vietnamese market remained selling their products. With domestic demand in Japan gradually weakening, they were willing to accept risks and higher costs to expand into foreign markets, including Vietnam.

In the coming year, there may be some positive changes in several aspects. First, in the electric vehicle sector, with the development of electric cars, the demand for related components will increase, stimulating the growth of businesses in this industry. Secondly, in the energy sector, under the 8th Power Development Plan, the Vietnamese government has eased regulations on direct power purchase. Along with this, the development of renewable energy sources is also highly valued. This could encourage foreign investors to invest in renewable energy in Vietnam, making them potential customers for domestic businesses. Thirdly, at the end of November 2023, Vietnam and Japan upgraded their relationship to a "Comprehensive Strategic Partnership for Peace and Prosperity in Asia and the World." This will serve as an important premise for businesses between the two countries to continue actively expanding their cooperative and trade activities. It is expected that Japanese businesses will invest even more in the Vietnamese market.

As an institution that connects Vietnamese and Japanese companies, researchers and experts, VJOIN hopes that the cooperation between Vietnamese and Japanese companies will become more substantial and extensive. Japanese companies have strengths in technology and human resources management. These are two things that Vietnamese companies would like to learn from. However, currently Japanese companies are still quite cautious about technological cooperation with Vietnamese companies. One of the reasons is that in Vietnam, awareness of intellectual property protection is still low, leading to concerns among Japanese businesses about potential technology loss when cooperating with Vietnamese counterparts.

In this context, we hope that the business environment in Vietnam will continue to improve, creating favorable conditions for Japanese businesses to share their knowledge and experience in an open manner. At the same time, Vietnamese businesses will gradually enhance their awareness of technology protection, creating a collaborative environment that is positive and sustainable. We believe that unity and sharing will promote progress and innovation, bringing significant benefits not only to businesses but also to the community and the country as a whole.

Interview with representatives of manufacturing companies

Hirota Precision Vietnam Vinh Phuc Co., Ltd - Mr. Hirota Atsushi

• Metal product manufacturing
• https://hirota-vp.com/

In 2023, the global economic growth rate declined due to various factors, such as the instability of the global banking sector. Vietnam was also affected and experienced a slowdown in exports and imports, along with issues related to real estate corporate bond issuance. The GDP target was adjusted downward, and many companies had to temporarily close or go bankrupt due to economic downturn. Domestic demand also decreased, and our orders were about 20% lower compared to mid-year.

At the same time, companies from other economically recessed countries have increased their investments abroad, intensifying competition further. The depreciation of the Japanese Yen has exacerbated the situation.

However, the current economic conditions are gradually improving. The tourism sector is gradually recovering, inflation has slowed down, and there is high demand during the year-end and Tet holidays. The exchange rate situation with Japan has also improved. As a result, new orders are starting to come in.

In 2024, along with the benefits brought about by trade facilitation through agreements such as RCEP and ACFTA, competition among businesses is expected to intensify. This year, we plan to consider increasing differentiation and value-added for our products, while improving costs, labor efficiency, production effectiveness, developing human resources, and investing in suitable new equipment according to the needs. Additionally, to prepare for the possibility of another power shortage during the summer, we will ensure good safety stock management and adjust production accordingly.

We hope that this year will be a year of continuously evaluating the changing and diverse market, optimizing our strengths, not missing out on future growth opportunities, and achieving definite results in all circumstances.

Okamoto Engineering Vietnam – Mr. Okamoto Makito

• Manufacturing and sales of precision cutting components
• http://www.ok-okamoto.asia/

The year 2023 began under the influence of the global economic downturn since the second half of 2022 and ended without any signs of recovery. At our company, the production of semiconductor-related components was severely affected, and we had to adjust our personnel and equipment accordingly.

Besides, the situation in the world is also volatile, for example Russia's invasion of Ukraine in 2022, tensions in Palestine in 2023. As a company that mainly produces components for entertainment products, We feel concerned about the current world situation.

However, the challenges we faced have become a driving force for us to make 2023 a year in which we can lay a solid foundation to cope with unforeseen changes through digital transformation, system building, and improvement. Furthermore, we were selected to participate in an overseas supply chain diversification project by JETRO, which allowed us to make the largest investment in processing equipment to date. Currently, we are building our second factory, successfully expanding our investment in the Vietnamese market.

I hope that 2024 will be a year without conflicts and disputes, where people around the world can live and work together in harmony.

Vietnam Nagashima Co.,Ltd – Mr. Nagashima Shigeru

• Plastic molding
• https://vietnamnagashima.group/

For most factories, 2023 was a year that required patience as production activities came to a standstill. We tried to overcome difficulties by managing cash flow, eliminating waste, and maximizing efficiency as much as possible. Although existing projects were stagnant, we were fortunate to acquire new customers, and we expect that sales figures for 2024 will be higher than in 2023.

In the current economic downturn, where labor costs, rent, and electricity expenses are increasing, what we can do is to establish a management system that enables stable production and supply. At the same time, we need to continuously engage with both existing and potential customers through PR efforts.

In 2024, we will strive to eliminate instability factors within the factory and management departments, set value targets for each category, and ensure that production capacity and quality are maintained.

Alpha Autosystem Co.,Ltd – Mr. Yonemoto Keita

• Equipment producing/ mechanical processing
• https://alpha-as.com.vn/

For our company, 2023 was a year of significant changes. Since its establishment, we have overcome numerous challenges and fluctuations such as the COVID-19 pandemic and the depreciation of the Yen. Finally, in April 2023, our business took a leap forward as we moved to a new factory and invested in improving the work environment and equipment.

However, from an industry perspective, it is not difficult to see that the economic situation in Vietnam and Japan continues to be sluggish. Most of our customers have experienced a decline in sales compared to 2022. As a company, we have focused on approaching new customers and projects, and we have also received special demands from different industries or projects that we haven't encountered before. As a result, our sales figures have surpassed those of 2022.

Our company primarily designs and manufactures automation equipment for the domestic market in Vietnam, while also selling processed components to the Japanese market. However, the majority of our customers are still Japanese companies, so we have been significantly impacted by the depreciation of the Yen since 2022. I believe that the investment and production demand of Japanese companies in Vietnam are also heavily influenced by exchange rates. However, recently, the interest rate differential between Japan and the United States has narrowed slightly, so the Yen may appreciate in 2024. I hope that investments in Vietnam will continue to grow, and the economic outlook will become more dynamic.

It has been three years since our company was established, and each year has brought different challenges and changes. Therefore, I cannot predict what will happen in 2024. Nevertheless, I hope to build a flexible company that can adapt to future changes and make positive contributions to our customers and society.

Takase Molding System Vietnam Co.,Ltd – Mr. Takase Yoshihiro

• Mold producing / Plastic injecting
• http://takasekanagata.co.jp/

In 2023, many companies in the mold and plastic industry were affected by the prolonged recession since the end of 2022. Although the travel restrictions related to the pandemic were lifted, there were still many other factors preventing companies from recovering their pre-pandemic levels of revenue and profit. In my opinion, the current situation will not end in 2023. It would be wiser to think that we are currently in a period of change, and this situation will continue even after 2024.

In order for small and medium-sized businesses like us to continue operating in this challenging period, it is crucial to become a company that can meet the world's demands. In the case of Takase Molding, although we primarily engage in plastic molding, we cannot sustain ourselves by competing with other companies in the industry solely on low prices. For example, if we propose plastic molding products to customers who previously used cutting or other non-plastic materials, we can help them reduce costs while saving raw materials, electricity, etc. From now on, we must strive to become a company capable of implementing such unique sales strategies. I believe we can achieve this by continuously improving our knowledge and closely collaborating with our parent company in Japan.

An Mi Tools Co.,Ltd – Mr. Le Hong Fong

• Manufacture and sale of cutting tools, jigs, etc.
• https://www.anmitools.com/

In the first half of 2023, Vietnam economy started off strong, particularly in the motorcycle industry, automotive parts industry, and machine tool parts industry. However, in the second half of 2023, investment in equipment declined rapidly due to the impact of a weak Yen and high crude oil prices. The Vietnamese economy began to face difficulties, especially with many Japanese companies specializing in cutting tools reducing their production output by 30 to 40%. The Vietnamese government initially predicted a GDP growth rate of 7%, but in the second half of the year, it was revised down to below +5%.

The order situation for our cutting tools, machine holder tools, and jigs deteriorated rapidly in the second half of 2023 as the Vietnamese economy started to decline. On the other hand, we intensified our sales activities and received large orders for specialized jigs for smartphone production, as well as a special demand for cutting tools for the Vietnamese military. Although our sales amount in 2023 will be slightly lower than originally planned, we expect to reach 15 million USD (approximately 2.13 billion Yen), representing a 42% increase compared to the previous year.

Starting in the first half of 2023, we have made large-scale capital investments to expand our southern branch and factory. We expanded the Ho Chi Minh factory building by 3 times, installed new equipment more than 3 times as much, and significantly increased the number of employees (+11 people). As a result, we were able to execute our plan to triple the production capacity of our Ho Chi Minh factory. Japanese tool trading companies, which are our competitors, had a tough time in 2023 as their Japanese-made cutting tools became 30% to 40% cheaper across the board due to the weaker Yen.

The machine tool parts industry is expected to continue its sluggish performance until the first half of 2024 but is anticipated to recover in the latter part of the year. At An Mi Tools, 2024 will be the first year we expand our sales overseas. We project that our revenue this year will double compared to 2023, reaching $30 million (approximately 4.3 billion yen).

Vinson Plastic Co.,Ltd - Mr. To Thanh Thung

• Manufacture of cosmetic plastic packaging products
• http://vinsonplastic.com.vn/

Looking back to 2023, the plastic molding industry faced many difficulties. There were almost no new orders, and the main source of income was the backlog of orders for 2022, resulting in a 10-15% decrease in revenue compared to the previous year. Additionally, the 5-10% appreciation of the US dollar has further increased our input costs for purchasing raw materials from overseas.

Although the economy may recover slightly in 2024, the overall difficult situation is expected to continue until the end of 2024. In response to this situation, our company plans to diversify products in 2024 by developing plastic film tube packaging and aluminum film, etc. Additionally, in order to take advantage of all business opportunities, we will consider increasing the number of small orders. I think this is very important not only to overcome difficulties, but also to expand and strengthen our position in the market.

JAT Auto Parts & Industry Equipments Production Jsc – Mr. Tran Duy Nhat

• Manufacture of automotive and motorcycles components
• http://jat-autopart.com/

Changes in the global economy in 2022 had a significant impact on the Company, particularly in the second half of the year. New capital investments that had been planned for early 2023 were also forced to be postponed and moved to 2024. We are more focused on resource management rather than trying to invest at all costs. In terms of customers, the European and American markets have been the most affected by the recession, with significant declines of up to 50-60%. Conversely, Japanese customers were less affected and were able to remain stable despite an average decline of 15-25%. We are making efforts to approach and explore new customers; however, it can take 1-2 years to reach a final decision on placing an order.

We hope that the war between Russia and Ukraine will end in 2024, the energy crisis will be resolved, and the business environment will improve. We are hopeful that overall demand will increase, which will help restore orders from some major customers.

Our plan for 2024 is to continue to transform our business model to be lean, efficient and agile. First, focus on building and standardizing business processes, then promote digitalization. However, we are keeping our plans flexible and will review our business strategy depending on the actual situation.

Jk Vietnam Industrial Jsc – Mr. Le Minh Duc

• Manufacture of precision mechanical parts
• https://jkvn.com.vn/

In 2023, the economic situation in the world and Vietnam was extremely difficult, resulting in a decrease in orders compared to previous years. Although sales were stable in 2023, the expected growth did not occur. However, they were able to identify potential opportunities from new markets and develop new products to increase their competitiveness.

We believe cost optimization of the current system is extremely important in order to meet the price demands of new customers under pressure from competition with China. From 2023 to 2024, we will focus on innovation to reduce unnecessary costs and improve price competitiveness.

In 2023, we implemented improvement plans and saved billions of VND. Based on this experience, we have decided to continue promoting improvements in 2024. At the same time, we will develop and expand new industries to ensure diversity and resilience in times of change.

Tomeco Mechanic - Electrical Service – Mrs. Vu Thi Quynh

• Design and manufacture industrial fans
• http://tomeco.vn

In general, Vietnam's economic situation in 2023 faced many difficulties. Input material prices, transportation costs, electricity prices, etc. all tended to rise, leading to increased production costs for companies, while selling prices tended to fall. Particularly in fields such as building materials, real estate, steel, and cement, many companies have been forced to temporarily suspend or reduce production. All of these are our major customers.

There were also projects that had contracts with customers but could not be implemented. In the past year, the number of orders has decreased by approximately 15%, and the total value of orders has decreased by about 30%.

However, because we were facing many difficulties, we thought it was time to prepare necessary resources for our company to enter a new period of growth. Therefore, we upgraded our machinery and equipment and completed necessary processes for the operations. On the other hand, we were able to maintain the number of employees. It also provided opportunities for everyone to improve their professional abilities and necessary skills to adapt to the new era.

The forecast for the economy in 2024 indicates that it will continue to face numerous challenges, especially in the industrial manufacturing, extraction, processing, construction materials, and manufacturing sectors. In the face of these challenges and the dynamics of the era, we recognize that quality is a crucial factor in determining the sustainable development of a business. Therefore, in the coming year, TOMECO will intensify its R&D efforts by collaborating with leading domestic and international experts and partners to provide customers with industrial fan products that offer outstanding technical features, high performance, energy efficiency, and intelligent connectivity for handling operational situations on the 4.0 technology platform. Furthermore, we will continue to explore new markets and enhance our corporate management to improve operational efficiency.