The economic cooperation between Vietnam and Japan has developed significantly, demonstrating remarkable breadth and depth
Vietnam and Japan hold in high regard the historical bond between the two countries, using it as a source of valuable lessons and considering it a foundational pillar for sustainable development in the present day. The bedrock of Japan-Vietnam relations lies in the deep understanding and empathy between their people.
Four centuries ago, an enchanting love story unfolded between Araki Sotaro, a Japanese businessman from Nagasaki, and Princess Ngoc Hoa of the Nguyen Dynasty, giving rise to the legendary tale that inspired the opera "Princess Anio." This poignant opera, performed on the occasion of the 50th anniversary of diplomatic relations between Vietnam and Japan, stands as a testament to the enduring and beautiful friendship between the two nations. Notably, during Vietnam's struggle for national independence and unity, the peace-loving people of Japan organized anti-war movements and provided support for Vietnam.
Fueled by the harmonious confluence of history, economics, culture, and mutual political trust, Vietnam and Japan formally established diplomatic relations on September 21, 1973. Over the course of history, their relationship has grown increasingly closer and stronger.
Figure 1: Prime Minister Pham Minh Chinh and Japanese Prime Minister Kishida Fumio
In the current context, there is ample potential to elevate Vietnam-Japan relations to new heights. Friendly relations and cooperation across various domains, including politics, economy, diplomacy, security, and defense, are continually being strengthened, consolidated, deepened, and have proven to be effective. Additionally, cultural initiatives and people-to-people exchanges serve as pivotal foundations for nurturing even closer and more trusting relations between the two countries.
The Prime Minister of Vietnam emphasized, "Japan is a country with a highly developed economy, boasting world-leading advanced technology and standing at the forefront of science and technology application, digital economy, and digital society development. Meanwhile, Vietnam possesses a highly open economy, maintains rapid growth, and boasts an abundant young workforce, requiring enhanced competitiveness and industrial production efficiency. These two economies complement each other exceptionally well, offering substantial potential for cooperation in technological innovation, digital transformation, and diversified supply chains."
With the forward-looking spirit of "closing the past and focusing on the future," the industrial and trade development cooperation between Vietnam and Japan has witnessed remarkable progress over the past 50 years. The two nations have established a strategic partnership and continue to reinforce collaboration across various sectors.
1. Increased Investment
Japan stands as one of the foremost foreign investors in Vietnam, with Japanese companies investing in various sectors, including automobiles, electronics, manufacturing, agriculture, and services. Prominent projects like the Toyota Automobile Factory, Canon Electronics Factory, and Panasonic Electronics Factory have not only generated employment opportunities for the Vietnamese population but have also significantly contributed to the country's economic development.
As of December 2022, Japan is Vietnam's largest ODA donor, the second-largest labor cooperation partner, the third-largest investor and tourism collaborator, and the fourth-largest trade partner. Both nations collaborate closely and effectively in key areas, including transportation infrastructure and the development of high-quality human resources.
In the realm of investment, Japanese investors have a presence in 57 out of 63 provinces and cities in Vietnam, with 4,978 valid projects amounting to nearly $69 billion in registered capital. This positions Japan as the third-largest investor out of 141 countries and territories investing in Vietnam. Notably, large-scale projects initiated by leading Japanese multinational corporations have also attracted numerous satellite investors, operating with notable effectiveness.
Figure 2: Minister of Industry and Trade Nguyen Hong Dien received and worked with Mr. Koichi Haguida, Minister of Economy, Trade and Industry of Japan
In 2022, it is forecasted that 59.5% of Japanese enterprises investing in Vietnam will experience profitable business activities, representing a 5% increase compared to 2021. Notably, large-scale projects led by prominent Japanese multinational corporations such as Canon, Panasonic, Toyota, Honda, Yamaha, Suzuki, Mitsubishi, and Sumitomo have attracted numerous satellite investors to Vietnam. The year 2022 has seen Vietnam's economy continue to thrive, achieving a growth rate of 8.02%, the highest in the past decade. The total import-export turnover with the world in 2022 is estimated to reach a record high of $732.5 billion.
Foreign direct investment capital realized in Vietnam in 2022 is estimated to approach nearly $22.4 billion, marking a 13.5% increase compared to 2021. This is the highest realized foreign direct investment in the past five years. Thanks to its positive results in attracting FDI, Vietnam has earned a spot on the United Nations' list of the world's top 20 countries attracting FDI for the first time. Forecasts for Vietnam's economic growth in 2023 by the International Monetary Fund (IMF) project it to reach 6.2%, while the World Bank (WB) anticipates a growth rate of 6.7%.
Achieving these accomplishments was not solely the result of Vietnam's dedication and determination; it was also made possible through close cooperation, effective coordination, and timely support from the international community, including the government, Japanese citizens, and businesses.
Both countries still have significant untapped potential for cooperation and mutual benefit. In the future, Vietnam and Japan should continue to promote investment cooperation, especially in key industrial sectors, and expand trade cooperation by leveraging the potential, advantages, and opportunities offered by bilateral and multilateral agreements. This will serve as a crucial driver for the two nations to move closer to their goal of achieving balanced bilateral trade turnover.
2. Technology Transfer
The process of deep economic integration also brings forth numerous challenges for Vietnam. The rapid increase in foreign investment has been concentrated heavily in processing and manufacturing, making an increasingly important contribution to exports. However, the proportion of the manufacturing sector in Gross Domestic Product (GDP) has not witnessed substantial growth, and the added value and technological content of Vietnam's exported goods remain limited. To address these issues, it is imperative to enhance the environment for technology transfer within Vietnam.
Japan is a crucial partner in Vietnam's industrial development. Various Japanese methodologies and models, such as the 5S and 3S, have left a discernible impact. However, the added value contributed by Japan in Vietnam's exports of processing and manufacturing products has been slow to improve.
For many years, Japan has generously shared advanced technology and techniques with Vietnam, bolstering its production capacity and product quality. Consequently, industries like automobiles, electronics, and consumer electronics in Vietnam have progressed significantly.
Cooperation with Japan has consistently been a priority for Vietnam due to the competitiveness and cutting-edge technological capabilities of Japanese businesses. On the other hand, Japanese investors maintain a strong interest in the Vietnamese market and priority industries. Thus, it is essential to formulate a joint action plan between Japan and Vietnam to address shared concerns in promoting technology transfer from Japan to Vietnam, particularly in the manufacturing sector.
Promoting technology transfer is a pivotal aspect of Vietnam-Japan industrial cooperation, exemplified through human resource development and the facilitation of links between Japanese and Vietnamese companies. Additionally, industrial cooperation is further supported by the transfer of knowledge and other intangible assets through Japanese ODA to Vietnam.
Notably, some of the transferred technologies are advanced and well-suited for Vietnam's production and export requirements, such as CAS technology, vaccines, and microelectromechanical systems.
In the realm of supporting industries, several Vietnamese component manufacturing enterprises currently possess strong capabilities in areas like mold manufacturing, standard mechanical components, plastic components, and technical rubber that are compatible with the production needs of numerous Japanese businesses. However, the level of cooperation still does not fully align with the existing potential.
Therefore, to enhance exports to the Japanese market, Vietnamese supporting industry enterprises need to invest in research and development, acquire modern equipment, and elevate the technical and technological content of their products. By doing so, Vietnamese businesses will be better positioned to process and export higher-value products, eventually progressing towards becoming joint venture partners and establishing equitable relationships with Japanese businesses.
3. Promoting Import and Export
Japan holds a significant position as one of Vietnam's crucial export markets. The two nations have forged free trade agreements and economic cooperation agreements, bolstering their trade relationship. Vietnam has successfully exported various products to Japan, including electronics, wood, agricultural goods, and pharmaceuticals.
Moreover, Japan stands out as the partner with the highest number of bilateral and multilateral free trade agreements with Vietnam. These include the Vietnam-Japan Economic Partnership Agreement (VJEPA) signed in 2009, the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP) in 2008, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2019, and the Regional Comprehensive Economic Partnership (RCEP) in 2020.
Furthermore, Vietnam and Japan have established numerous official cooperation mechanisms to address economic and trade-related issues, which encompass the Joint Committee on Trade, Industrial, and Energy Cooperation between Vietnam and Japan, the Vietnam-Japan Cooperation Committee, and the Vietnam-Japan Joint Initiative.
In 2022, the combined import-export turnover of the two nations is projected to approach nearly $50 billion, ranking Japan as Vietnam's fourth-largest trade partner. Vietnam's exports to Japan are estimated at nearly $25 billion, while imports are expected to reach approximately $24 billion.
Source: GSO; General Department of Customs
Figure 3: Proportion of imported and exported goods from Vietnam and Japan in 2022
The trade relationship between the two countries, Vietnam and Japan, is characterized by a clear complementarity in their import and export structures, with little direct competition. Vietnam primarily exports a range of products to Japan, including seafood, crude oil, textiles, electric wires and cables, wood and wood products, computers and components, coal, and various types of footwear.
Conversely, Vietnam imports a variety of goods from Japan that support its industrial production, such as machinery, equipment, tools, and spare parts, electronic products and components, various types of iron and steel, fabrics of different kinds, auto components, plastic raw materials, chemicals, textiles, garments, and leather raw materials.
The Trade Promotion Department, under the Ministry of Industry and Trade, has been working in collaboration with Japanese trade and investment promotion organizations to host trade promotion and investment events. These activities aim to facilitate direct information exchange between businesses from both countries.
Source: GSO; General Department of Customs
Figure 4: Proportion of imported and exported goods from Vietnam and Japan in 2022
During these trade and investment promotion events, Japanese companies consistently express their interest in the Vietnamese market. They wish to come to Vietnam to conduct research and learn more about the market's potential, particularly in product categories such as shoes and metals.
4. Cooperation in the field of training and human resources
Japan has played a crucial role in supporting Vietnam's efforts to train and develop its human resources. Japan's high-quality engineer and worker training programs have significantly enhanced the professional qualifications of Vietnamese workers, creating a pool of skilled labor resources for Japanese companies operating in Vietnam.
In recent years, Japan has emerged as one of the leading investors in Vietnam. The number and scale of projects with Japanese investment have seen a substantial increase, especially in the field of infrastructure construction. This has created favorable conditions for economic development in Vietnam, leading to a growing demand for high-quality human resources.
It is worth noting that Japan is widely recognized for having some of the most modern and advanced infrastructure technologies globally. These technologies have been effectively deployed in Vietnam, contributing to the country's progress.
The Vietnam-Japan labor cooperation program consistently receives attention and appreciation from both governments and their citizens. The effective implementation of cooperation programs has opened up opportunities for many skilled Vietnamese workers to find employment in Japan. Japan has become one of Vietnam's primary labor export markets, primarily due to the attractive income levels and the modern living environment it offers. For individuals, this represents an excellent opportunity for economic improvement and personal development.
Labor cooperation between Vietnam and Japan officially commenced in 1992, initially through the acceptance of Vietnamese interns for skills training in Japan. Over time, the results of this labor cooperation have continued to improve, benefiting the people and businesses of both nations. Recent statistics from the Department of Overseas Labor Management show that in 2022, over 127,000 workers came to work in Japan, marking a six-fold increase compared to 2021. Given Japan's aging population and a shortage of human resources, particularly in certain sectors, the cooperative relationship between Japan and Vietnam in this field is poised for further development. Both sides are collaborating closely and effectively in various critical areas, such as transportation infrastructure, high-quality human resource training, economic institution reform, and education.
Currently, approximately 500,000 Vietnamese individuals are living, working, and studying in Japan, making them the second-largest foreign community in the country, following China. A multitude of Vietnamese associations, including the Vietnamese Association in Japan (VAIJ), the Vietnamese Youth and Students Association in Japan (VYSA), the Vietnamese Academic Network in Japan (VANJ), the Association of Vietnamese Intellectuals in Japan (AVIJ), the Association of Vietnamese Professionals in Japan (VPJ), the Vietnamese Business Association in Japan (VJBA), and the Association of Vietnamese Buddhists in Japan, exist alongside 21 Vietnamese associations and unions at the local level. These organizations have forged cooperation agreements with more than 70 local counterparts, creating a synergistic environment for the Vietnamese community in Japan to effectively engage in various activities, including cultural exchanges, twinning initiatives, and economic, trade, and investment cooperation. This dynamic engagement is contributing to the continued development of the extensive strategic partnership between Vietnam and Japan, benefitting both nations and fostering peace, stability, cooperation, and development in the region and the world.
5. Cooperation in research and development
Vietnamese and Japanese companies, along with research organizations, have collaborated on numerous research and development projects. These initiatives have significantly contributed to bolstering Vietnam's research and innovation capabilities, particularly in advanced industries.
Under the framework of Vietnam-Japan cooperation toward 2020, with a vision for 2030, Vietnam's Industrialization Strategy has yielded positive results. Key sectors have played a pivotal role in the country's industrial and economic advancement.
The Strategy was designed with the aim of promoting technological innovation, elevating labor productivity, enhancing international competitiveness, producing high-value-added products, generating spillover effects, and meeting advanced quality standards for both export and domestic consumption. Its development and execution received active support from the Japanese Embassy in Vietnam, the Japanese Ministry of Economy and Industry, and the Japan International Cooperation Agency (JICA), in addition to numerous other Japanese agencies. The strategy was developed in consultation with businesses and scientists.
Recent Vietnam-Japan cooperation efforts have culminated in the formulation and implementation of a Strategy and action plan that focuses on developing six industries: Agricultural and fishery processing; electronics; automobiles and auto parts; environmental industry and energy conservation; shipbuilding; and agricultural machinery. The strategy prioritizes the exploitation of Vietnam's potential and comparative advantages.
This strategy has already achieved several favorable outcomes. It has stimulated the growth of supporting industries, increased localization rates, improved productivity, and boosted competitiveness within these six priority sectors. With the exception of the shipbuilding industry, which faces certain challenges, the remaining industries, particularly electronics, have created jobs, increased worker incomes, enhanced productivity, and made significant contributions to exports.
The development of these strategic industries has further driven the growth of Vietnam's supporting industries. Many domestic enterprises have become integral parts of the supply chains for large corporations in sectors such as electronics and automobile manufacturing, producing products that adhere to international quality standards.
The Memorandum of Understanding on scientific cooperation signed between the Ministry of Science and Technology and the Japan Scientific Promotion Agency (JSPS) on June 1, 2012, has served as a foundation for promoting and supporting collaboration between Vietnamese and Japanese scientists in the realm of research and development. Notable examples of this cooperation include partnerships between the Vietnam Institute of Agricultural Genetics and the Institute of Chemical and Physical Research in the field of Japanese biotechnology, as well as collaborations between the Vietnam Academy of Science and Technology and the Japan Aeronautics and Space Administration in the realm of space technology. Additionally, several joint research projects have been undertaken within the framework of programs supported by the Japanese government through the Japan Science and Technology Agency and the Japan International Cooperation Agency (JICA). Furthermore, science and technology organizations and scientists from both nations have actively engaged in information exchange and numerous research projects aimed at addressing the theoretical and practical challenges of mutual interest.
Laying the Foundation for a Bright Future
After 50 years of industrial and trade development cooperation between Vietnam and Japan, both nations have reaped significant benefits. They have created a conducive environment for mutual cooperation and development for businesses and organizations on both sides.
Vietnam and Japan still have substantial potential for cooperation and mutual complementarity. To further the extensive strategic cooperative partnership, it is essential to continue strengthening investment cooperation between the two countries, particularly in key industrial sectors. Simultaneously, efforts should be directed towards technology transfer to Vietnam and the promotion of green transformation.
Furthermore, it is crucial to expand trade cooperation between the two countries, including the effective implementation of bilateral and multilateral cooperation mechanisms such as the Vietnam-Japan Free Trade Agreement (VJFTA), ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP), CPTPP Trade Agreement, and Regional Comprehensive Economic Partnership Agreement (RCEP). This will help achieve the goal of increasing bilateral trade turnover, moving towards a balanced trade relationship, and laying the foundation for a bright future in the relationship between the two countries and the world.
Le Anh Tu
Department of Information and Trade Promotion – VIOIT