HANOI - Japanese agricultural businesses are making a beeline for Vietnam since the Trans-Pacific Partnership (TPP) is set to open up their country’s market and bring import tariffs down to zero, according to a source from Vietnam Investment Review newspa
A report by Japanese investment consulting firm Seiko Ideas Corp. said Japan would have to allow imports of even the most sensitive items from all TPP members.
This would put Japan in a disadvantageous situation since its agricultural production is small and expensive, it said.
Japanese firms therefore decided to step up investment in the Vietnamese agriculture sector since the latter is also a TPP member.
They could then export products from Vietnam to their country paying zero tax. The TPP stipulates that to enjoy the zero tariff, a product must have 70 per cent content from member countries.
Seeing the writing on the wall, Kato Group began to collaborate with Binh Dinh province last year to invest US$771,000 in tuna fishing through 2020.
It has helped the central province master the technologies used in sea tuna fishing and on-board storage so that the products meet quality requirements when exported to Japan.
The province has bought five sets of Japanese tuna fishing equipment at a cost of 1.5 billion dong (US$66,355) for training its fishermen.
Shudensha Company has been implementing an $820,000 project to improve water quality at aquaculture farms.
OTA Kaki Company is collaborating with the central highlands province of Lam Dong to develop a flower market with an effective distribution system.
Also in Lam Dong, Nikko Foods Company is working on a $820,000 high-quality tomato farming project.
The Japan International Co-operation Agency (JICA) said it would step up support to the Vietnamese agricultural sector through various projects in which Japanese firms would invest.
Mori Mutsuya, former head of JICA Vietnam, said that Vietnam’s agriculture sector had massive potential.
“For instance, our survey in Lam Dong found that if farmers replace coffee trees with flowers, their income will rise nine fold.”
Scouring the country
Nguyen Do Anh Tuan, head of the Institute for Policy and Strategy for Agriculture and Rural Development, told Vietnam News Agency that Japanese investors had already started going around the country looking for opportunities to invest in hi-tech farming.
Some had already begun production, including of vegetables in the central highlands province of Lam Dong and mangoes in the Mekong Delta province of Dong Thap and through a hi-tech project in the northern province of Vinh Phuc.
He underscored that Vietnam and Japan saw great opportunities for agricultural co-operation, especially after signing a number of bilateral and multilateral free trade agreements, including the TPP, which has comprehensive commitments.
Once it takes effect in 2018 the TPP is expected to give a push to Vietnam-Japan agricultural investment and trade by opening the market for 38.4 per cent of their agricultural products, 64.8 per cent of aquatic products and 17.2 per cent of wooden products, according to Tuan.
Japan will immediately remove tariffs on 78 per cent of Vietnamese agricultural exports and the figure will rise to 88.5 per cent in the next five or six years.
This is a good opportunity for Vietnam to expand its exports, increase its access to major markets around the world and join global supply chains.
Japanese firms can invest in Vietnam’s agricultural sector to take advantage of tariff incentives, abundant natural resources and cheap labour.
With their advantages in technology and market access in Vietnam, Japanese businesses can invest in making agricultural machinery, fertilisers and pesticides.
They can also look at support industries like packaging, preservation equipment, glass and net houses, and processing.
Tuan said Japanese companies should join hands with their local counterparts to develop large-scale fields and complete value chains and brands for the domestic and international markets.
But to boost such investment flows, Vietnam should provide policy support for investors to resolve difficulties, develop land funds and build infrastructure, he said, adding that local governments should be more proactive in supporting businesses.
The country should focus on fostering small and medium-sized enterprises which can co-operate with Japanese companies in production, processing and distribution, he said.
Figures from the Foreign Investment Agency show that last year Japan was the third largest investor in Vietnam with $1.84 billion, accounting for 8.1 per cent of the total.
Agriculture was among the sectors to attract the largest amounts of investment.
In the central highlands province of Lam Dong, 10 Japanese companies have invested in agriculture, primarily growing clean vegetables.
Others such as Yanmar, Maruyama MFG, Marumasu Kikai, and Nankai Kinzoku are interested in not just investment in high-tech agricultural projects but also want to import farm machinery.