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Sumitomo looks to entice Japanese makers to Vietnam rental plants

Local production made easy with inexpensive launch for smaller companies

A section of Sumitomo's Thang Long Industrial Park II on the outskirts of Hanoi is a dedicated "rental area," where companies can set up Vietnam operations with minimal initial investment.

TOKYO --Sumitomo Corp. hopes to boost the use of the rental plant areas at its Vietnamese industrial parks, targeting small to midsized Japanese manufacturers and taking advantage of agreements with local governments in its home country.

Working with localities such as Kanagawa, Hyogo and Osaka prefectures, the general trader will allow manufacturers to set up operations for a low initial investment at its industrial parks on the outskirts of Hanoi.

The company is particularly keen to expand the scope of tenants using its two parks ahead of the opening of a third.

Thang Long Industrial Park and Thang Long Industrial Park II contain rental lots measuring a total of about 50,000 sq. meters in floor area, and offer buildings and manufacturing infrastructure as a package to allow tenants to set up production lines and start operating relatively quickly. They currently host about 10 companies.

The rental plans start from a minimum three-year contract. The low investment requirements mean tenants can minimize losses should they decide to close the operation.

In the past three years, however, none of the tenants have done so, given the low-cost and hard-working local labor force, according to Taro Kawachi of Sumitomo's overseas industrial park business division.

Akebono Brake Industry and Bando Chemical Industries have set up their own factories in Vietnam after testing the waters by making use of the rental facilities.

The industrial support bureaus of local governments in Japan play their part by referring manufacturers that wish to launch operations in Vietnam to Sumitomo.

This spring, Sumitomo signed a contract with the Osaka prefectural government, under which a section of the TLIP II is designated as an "Osaka industrial park." Sumitomo waives the administrative charges and service fees required to set up a local company for manufacturers from the prefecture.

The local government bodies hope the support they provide will boost corporate tax revenues in the long run, due to the companies' increased productivity.

The two existing industrial parks, the first of which was launched two decades ago, currently host 150 companies, including the likes of CanonPanasonic and bathroom fixture maker Toto.

Most tenants initially used the facilities as a manufacturing base for products for export to Japan and other advanced economies. But in recent years, several, like air-conditioner maker Daikin Industries, have shifted their focus to the Vietnamese market, where income levels are rising and high growth is expected. The average age of the country's 94-million-strong population is 30.

Panasonic also ships fridges and washing machines to the Vietnamese and other Southeast Asian markets from the parks.

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