2 ASIAN LEGAL BUSINESS – JAPAN E-MAGAZINE OCTOBER 2023 Vietnam is recovering from the COVID pandemic and investors are quickly finding their way back to the fast-growing Southeast Asian economy. Many of those investors are coming from Japan, which is currently the third-largest source of foreign direct investment (FDI) into Vietnam. Japan is currently running more than 5,000 projects in the country with investment topping $69 billion, according to Vietnam’s state media. Part of the attraction is a rapid rate of economic growth in Vietnam, whose gross domestic product (GDP) grew 8.02 percent in 2022, the highest annual increase in the last decade. Masatoshi Tanaka, a representative partner at Meilin International Law Firm that specialises in international investment and transactions, tells ALB that the lower cost of business expenses and investment, coupled with Vietnam’s economic growth, are the two main reasons driving Japanese businesses to expand in Vietnam. He observed that while cost was a dominant factor in the past, the growing market potential has pushed “even those businesses that initially looked to Vietnam for its relatively affordable business cost are setting their sight on the Vietnamese market.” And the investment into Vietnam is set to keep growing. A Japan External Trade Organization (JETRO) report earlier this year found that 60 percent of Japanese investors in Asia Pacific are keen to expand their business in the Southeast Asian country. “Vietnam, with its transformation in education, economy, governance, law, and having an important geographical location and large population size, will continue to be an attractive destination for Japanese businesses,” says Nguyen Quoc Vinh, senior counsel at Indochine Counsel. SECTORS AND INDUSTRIES Vietnam has ambitions that go well beyond being a manufacturing hub. The government launched the National Master Plan for 2021-2030 with a vision to become an upper middle-income country with a modern industrial base, and robust economic growth fuelled by science, technology, innovation, and digital transformation by 2030. To achieve this ambition, it might need help from other countries to develop its industrial bases. Vietnam is encouraging Japanese enterprises to increase investment in infrastructure, energy, manufacturing, high-tech agriculture, IT, smart urban development, financial services, banking, and innovation. “In recent years, Japanese businesses seem to be interested in areas MAIN STORY By Asian Legal Business RAPID GROWTH ATTRACTING MORE JAPANESE INVESTMENT TO VIETNAM 日本の対ベトナム投資が増加中 such as manufacturing and IT industries in the B2B sector, and education, cosmetics, healthcare, etc,” says Tanaka. With the government’s encouragement in mind, Ryo Matsutani, director at One Asia Lawyers Vietnam, also thinks of IT and healthcare are future growth areas. Nguyen of Indochine sees investors are increasingly interested in IT and healthcare for the elderly. He says that Vietnam has a well-trained and skilled workforce with relatively low labour costs in IT sector. The aging problem in Japan might push investors to look for more opportunities in healthcare industry as well. “The challenges posed by an aging society in the next decades may well create more difficulties for the healthcare system. Japan, known for its high-quality healthcare services and supplementary products tailored to the elderly, is likely to perceive Vietnam as a promising destination to expand their business opportunities,” says Nguyen. In addition to emerging industries, traditional sectors such as banking and finance, manufacturing and consumer products are still a key focus for Japanese companies, says Ngoc Anh Bui, Hanoi managing partner at VILAF. “They have been increasingly familiar with these sectors and have seen certain Image: Huy Thoai/