Senior advisor: Vietnam should take advantage of the yen appreciation

VietNamNet Bridge – The appreciation of the yen will make Japanese enterprises become potential investors in Vietnam, while it will provide great opportunities to Vietnamese enterprises to boost exports to Japan, according to Kyoshiro Ichikawa, senior advisor to the Ministry of Planning and Investment.

Mr Kyoshiro Ichikawa, senior advisor to the Ministry of Planning and Investment.

Kyoshiro Ichikawa, in the recent interview given to Tuoi tre newspaper, said that the more expensive yen has made the labour cost in Japan increase. This has prompted Japanese enterprises to set up their production and business bases in foreign countries instead of Japan in order to reduce the production cost. Meanwhile, Vietnam has been topping the list of foreign attractive markets in the eyes of Japanese investors in recent years.

“My understanding is though China remains the biggest outward investment market for Japanese investors, the emerging problems in the China-Japan diplomatic relation and the territory dispute between the two countries have prompted many Japanese enterprises, both big and small, think of shifting their operation to Vietnam. This is really a great opportunity for Vietnam to attract Japanese investors,” he said.

The number of investment projects developed by Japanese enterprises once hit its highest peak in 2008 and then reduced sharply in 2009 as the result of the global economic crisis. However, the number of projects tends to increase again this year thanks to the recovery of the world’s economies.

When asked about the prospect of the Japanese yen in the time to come, Mr. Ichikawa said that it is really difficult to predict the performance of the currency value. However, in short term, he thinks that the yen would continue appreciate because the US economy now is not in good conditions. It is the great opportunity that Vietnamese enterprises should grab in order to boost exports to Japan.

However, in principle, the appreciation of the yen will make Vietnam’s debts heavier. Japan is now the biggest ODA provider to Vietnam, with the ODA capital from Japan accounting for 42 percent of total ODA capital.

In the latest report, the Ministry of Planning and Investment (MPI) said that the rapid appreciation of the yen recently has made Vietnam’s actual ODA debt increase by 50 trillion dong.

On September 14, the yen traded at a record 82.88 per dollar, the highest in the last 15 years.

Mr. Ichikawa said that it is true that the weaker Vietnam dong will make Vietnam’s debts heavier and put difficulties for Vietnamese Government in debt payment. However, he thinks that this would be just temporary problem.

“When considering the yen value, it is necessary to keep a long term vision. At this moment, the yen price is increasing, thus causing difficulties to Vietnam in ODA debt payment. However, the yen once depreciated, which brought benefit to Vietnam,” he said.

He went on to say that ODA is long term capital which always has very low interest rates.

The most important thing that needs to be done is to try to reduce the reliance on ODA, he said. There are two ways including improving the taxation system and strengthening the cooperation between the private sector and the Government, which will help reduce the state’s investment, increase the private investment in big projects.

Source: Tuoi tre