Prolific advances in VN industrial zones

Must Read

Funding into industrial zones is expected to be fruitful for the majority of the year, when the demand for land lease recovers and a range of contracts are completed.

Prolific advances in industrial zones

More than 250 hectares of industrial land has been assigned among different investors in the southern province of Binh Duong to become operational in 2022 and beyond.

Of those, Cay Truong Industrial Zone (IZ) and Nam Tan Uyen 3 IZ in the province will come into operation this year, according to Binh Duong Industrial Zones Management Authority.

In addition, more than 200ha of land were also assigned in MoU contracts in Ba Ria-Vung Tau and Long An provinces, ready for implementation in 2022.

The rental demand is increasing enormously due to shifting production from China to Vietnam (see table).

Prolific advances in industrial zones

Citing the Investment Trends Monitoring report from the United Nations Conference on Trade and Development announced in early 2022, Lam Dieu Tam Hieu, deputy general director of Kizuna JSC, was confident in the development of industrial property.

“Foreign direct investment (FDI) inflows will record a strong recovery in 2022 as in the past year it has increased globally from 77 per cent and $929 billion in 2020 to $1.65 trillion in 2021, of which capital flows into developing economies increased by 30 per cent to nearly $870 billion. Eastern and Southeast Asian countries increased by 20 per cent respectively,” Hieu told VIR.

According to the General Statistics Office, Vietnam recorded the total registered FDI as of January 20 of $2.1 billion, or a 4.2 per cent increase over the same period last year. Of those, 103 were newly-licensed projects with the total registered capital of $388 million, an increase of 119.1 per cent in the number of projects.

“This is a good sign for the trend of sustainable FDI attraction in Vietnam in 2022, with the increase affecting many small- and medium-sized enterprises in the manufacturing and processing sector. This is also an opportunity for IZs and factories with a model similar to Kizuna to attract investment in supporting industries,” said Hieu.

She further added that with the strong development and innovation of businesses, the behaviour of employees towards digital transformation and the impact of the pandemic, many large corporations have also chosen to invest in serviced factories at scales of 10,000-50,000 square metres compared to the size of other factories in several tens of hectares. These small-scale factories help optimise operations due to the value superiority of the production environment at serviced factories for businesses.

Chi Vu, industrial manager at Colliers International, said it is likely industrial real estate will continue to shine with production continuously shifting from China and free trade agreements increasing the demand for industrial land across the country, attracting not only domestic investors but also a magnet for foreign manufacturers.

Besides that, with the strong growth momentum of e-commerce, the logistics service segment also promises great potential in the next 12 months.

Meanwhile, a report released by SSI experts last month cited improving infrastructure to support connection of IZs.

Infrastructure projects such as Bien Hoa-Vung Tau, Dau Day-Phan Thiet, and the North-South expressways, and Thi Vai-Cai Mep Port create convenient traffic connecting IZs. Long An, for example, is estimated to receive nearly VND30 trillion ($1.3 billion) for infrastructure improvements in the 2021-2025 period.

Infrastructure projects in Ba Ria-Vung Tau for the same period include Phuoc An Bridge connecting to Nhon Trach district in Dong Nai province with the total investment of about VND4.8 trillion ($208 million), and Road No.991B connecting National Highway No.51 and Cai Mep Port, costing around VND4 trillion ($173 million).

The researchers at SSI believe that Chau Duc IZ, Phu My IZ, Vietnam-Singapore Industrial Park, Becamex, and KBC would benefit from the aforementioned infrastructure projects.

Together with improvements in this area, some other factors are increasing IZ competitiveness in the regional market. Industrial land prices in Vietnam are still low compared to other countries in the region, at 20-33 per cent lower than Indonesia and Thailand.

Figures from Colliers International show that rent in IZs such as Bogor-Sukabumi, Tangerang, and Bekasi in Indonesia, on average, are now ranging from $160-295 per sq.m per rental cycle. These prices are from 42-50 per cent higher than those in other zones in Vietnam such as Binh Duong, Dong Nai, Bac Ninh, and Haiphong.

However, industrial land prices in Vietnam are estimated to increase from 8 to 9 per cent in the south and 6 to 7 per cent in the north this year. Compensation and site clearance costs will also continue to increase in 2022. The land price framework for 2020-2024 is used to calculate land use fees for IZ developers.

Accordingly, the price of industrial land in tier-1 localities (Hanoi, Ho Chi Minh City, Binh Duong, Dong Nai, Bac Ninh, Haiphong) may increase by 5-10 per cent per year compared to the previous 5-year cycle.

The price of industrial land in tier-2 provinces (Ba Ria -Vung Tau, Long An, Binh Phuoc, Hai Duong, Bac Giang, Hung Yen and Vinh Phuc), meanwhile, will increase by 10-20 per cent compared to the 2016-2020 period.

The changing land prices will increase compensation and site clearance costs of new IZs for 2022 and therefore, the gross profit margin for them is estimated in the range of 35-40 per cent, lower than that of existing zones by 50-65 per cent.

Some investors such as Nam Tan Uyen Joint Stock Corporation, Investment and Industrial Development Corporation, Long Hau Corporation, and Kinh Bac City Development Holding Corporation are expected to increase profit sharply due to additional revenue from new projects put into operation.

Among those are Nam Tan Uyen 3, Cay Truong, Long Hau 3, and Nam Son Hap Linh IZs. Existing IZs with the advantage of low investment costs, such as Huu Thanh and Sonnadezi Chau Duc, will continue to have a high profit, according to SSI.

Source: VIR

The existing industrial parks (IPs) in HCMC are nearly full as land available for lease is being exhausted, hindering the city’s industrial production expansion, according to the HCMC Export Processing and Industrial Zones Authority (HEPZA).

Specialised industrial zones are getting the go-ahead in Vietnam, ushering in new activities from investors looking to get involved in increasingly modern ecological models and high-tech projects.

- Advertisement -spot_img

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -spot_img

Latest News

Vietnam to host Miss Grand International 2023

A signing ceremony for the agreement to organize Miss Grand International 2023 took place in Ho Chi Minh City...
- Advertisement -spot_img

More Articles Like This

- Advertisement -spot_img