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Japanese Taste Sweet Success In Vietnam Candy Company

Japan is Vietnam's biggest trading partner, but it lags behind in investment

IF Isao Wada has his way, soon the Christmas cakes of Americans will be festooned with candy moldings of that make-believe character, Santa. Mr. Wada also offers tiny candy dwarfs, penguins, and bridegrooms wearing pink bow ties, all from Vietnam.

For all the sweetness of Wada's products, his experiences in Vietnam have been no cakewalk. Sometimes it takes a tough guy to make a cute Santa.

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Wada's enterprise, Vinabico Kotobuki Company, is a joint venture between one of the largest candymakers in Vietnam and Kotobuki Group, based in Amagasaki, Japan, a Japanese confectionery. Wada and his colleagues were among the first Japanese executives to take advantage of Vietnam's five-year-old economic transformation, which has cleared the way for foreign investment and capitalist entrepreneurship in what was for almost two decades an isolated, centrally planned economy.

Although Japan is Vietnam's biggest trading partner and aid donor, it has lagged behind in investment. But officials of both countries say Japanese investment in a few years may surpass that of Hong Kong and Taiwan companies, the leaders so far.

A Japanese government official in Tokyo says he wishes that the United States would enlarge its economic involvement in Vietnam. He worries that Japan might appear to be monopolizing the region, a notion that evokes unpleasant historical memories.

President Clinton lifted a 19-year trade embargo last February. However, Vietnam does not yet have most-favored-nation trading status with the US, making it costly for Vietnamese companies to export to the country with the world's largest economy.

In the late 1980s, with the confectionery market in Japan becoming saturated, the Kotobuki Group started to look to foreign shores for customers and cheaper places to manufacture. Besides pursuing projects in China and Thailand, the company invested in Vietnam in early 1991.

But once Kotobuki found a suitable partner in Vinabico, a state-run enterprise based in Ho Chi Minh City, it took 400 days to win government approval to set up shop. Wada, a crisp, military-type man with silver hair who is extremely protective of company information, concedes that there were some tense moments on his way to winning government sanction.

One occurred when the bureaucracy decided to move Vinabico's chief executive, Vu Manh Hai, to another company. Desperate appeals were made to Vietnamese officialdom. Ultimately, Mr. Hai stayed and became the joint venture's general director. (Wada is general manager.)

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The Japanese had to go through a round of nail-biting when the government suddenly changed regulations governing land prices. The right to use or own land is one issue that Vietnamese partners can bring into a joint-venture negotiation, so a shift in the value of land meant an increase in the value of Vinabico's stake in the enterprise.

More desperate appeals were made to the Vietnamese bureaucracy, which was again implacable. Before dawn, Kotobuki executives called on the house of Ho Chi Minh City's mayor, an early riser, to win his intercession. It worked, and the land crisis was resolved.

The government approved the project in November 1992, and Kotobuki-Vinabico began operation in January 1993. Another venture, with a Hanoi-based confectionery, started three months later. The business is profitable, but not wildly so, Wada says. Total sales for the two companies are about $10 million a year.

The ventures make a range of goods - biscuits, snacks, and cookies, along with the cake decorations - for the Vietnamese market. But Wada says he would like to expand exports, which now account for one-fifth of production. His sights are set on Europe and the US.

But ``the raw materials here are not as good as in Japan,'' Wada says, so Kotobuki must import flour, sugar, and margarine from Singapore to make products for overseas consumption. ``It's not a good way for us to make a profit,'' he worries.

Even so, says Vu Tien Phuc, an official of Vietnam's State Committee for Cooperation and Investment, Kotobuki-Vinabico ``is one of the country's most successful projects - now they are looking to expand.''

Wada confirms that Kotobuki is part of an $80 million hotel and office project in Ho Chi Minh City and is pursuing other enterprises in Vietnam. ``We're keeping profits low and investing,'' he says.

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