Doing Business

The Rise of Industrial Zones and Industrial Parks in Vietnam.

Trường Lăng

July 17, 2023

Doing Business

The Rise of Industrial Zones and Industrial Parks in Vietnam.

Trường Lăng

July 17, 2023

Industrial zones (IZs) and industrial parks (IPs) are areas designated by the government for industrial production, where investors can access high-quality infrastructure, services, and incentives. In recent years, Vietnam has witnessed a remarkable surge in the establishment of industrial zones and parks, serving as magnets for both domestic and foreign investments. 

In this blog post, we will delve into Vietnam’s industrial potential behind this exponential growth, shedding light on the strategic advantages and government support. Join us as we uncover the driving forces behind this phenomenon and uncover the immense potential that awaits you in Vietnam’s thriving industrial sector.

The current situation of IZs and IPs in Vietnam (2023 updated)

According to the Vietnam Association of Realtors (VARS), in 2023, Vietnam has planned 563 IPs in 61 out of 63 provinces. Out of these, 397 IPs have been established and 292 IPs are operational with a total natural land area of over 87,100 hectares, and an industrial land area of over 58,700 hectares. Another 106 IPs are under construction with a total natural land area of around 35,700 hectares, and an industrial land area of around 23,800 hectares.

IZs nationwide have a high occupancy rate of over 80%, with the southern provinces reaching about 85%. Some IPs in major cities and provinces namely Hanoi, Ho Chi Minh City, Dong Nai, Bac Ninh, Bac Giang and Binh Duong are nearly full. Among those provinces, Binh Duong has the highest occupancy rate in the country with 29 operational IZs that are over 95% occupied.

In January of 2023, the average rent rose by 10% to 100 – 120 USD/m2/lease cycle from the previous period of 2022 and is expected to keep rising, especially in the south where supply is limited.

In the first months of 2023, more than 10,000 domestic projects and nearly 11,000 valid foreign direct investment projects have invested over 340 billion USD in IPs and economic zones.

Government incentives in establishing new IPs and IZs in Vietnam (2023 updated)

Designed by Viettonkin

In the coming years, Vietnam plans to promote the development of key industries, including electronics, artificial intelligence, robot manufacturing, automobiles, supporting industries, biotechnology, biomedical electronics, software production, digital products, clean energy, renewable energy.

In addition, Vietnam focuses on developing large-scale industrial production in coastal economic zones, focusing on heavy industrial production and deep processing while forming value chains, and ensuring security, quality, and regulations on traceability, among others. 

Thus, by 2030, Vietnam will raise the proportion of industrial sectors in GDP to over 40% and the proportion of processing and manufacturing industry in GDP will reach over 25%, creating jobs for 5 – 6 million workers in 2025 and 7- 8 million workers by 2030.

Following this strategy, in the next 10 years, the IP’s land area is expected to increase by 115,000 hectares, reaching 205,800 hectares with 558 IPs, an increase of 177 IPs compared to 2020.

Unleasing Vietnam’s Industrial Potential – The rise in IPs and IZs

Enhancing the high-quality FDI projects in manufacturing and processing sectors

The growth of IZs benefits the manufacturers and processors (including FDI ones) in this sector. They can choose from a variety of IZs that are in proximity with the sea port, raw material sources, as well as other advantages within the area. The new IZs can also offer favorable conditions and incentives for their new tenants. Additionally, the local authorities may have their own policies to support the new businesses that rent land or shed in the new IZs.

At government level, the growth of IZs are essential for the Vietnamese government to execute their plan and strategy for developing the manufacturing and processing sector leading up to 2025. It helps to develop the infrastructure, attract investment (domestic and foreign), and enhance the living standards of local communities around the IZs.

In addition, IPs and IZs are one of the main drivers of Vietnam’s export-oriented growth. A typical example is IZs in Ho Chi Minh City, which exports 7 billion USD worth of goods every year and employs more than 281,000 workers. The products exported from IPs and IZs are mainly manufactured goods, such as electronics, garments, footwear, and machinery, which highly value-add and diversify Vietnam’s export markets.

Enhancing the competitiveness and innovation of the domestic industries

According to the United Nations Industrial Development Organization (UNIDO), IZs and IPs can enhance the competitiveness and innovation of domestic industries by attracting foreign direct investment (FDI) and enabling technology transfer, as well as facilitating linkages and cooperation among enterprises.

Attracting foreign direct investment and technology transfer

IPs and IZs are the main destinations for FDI inflows into Vietnam, accounting for about 70% of the total registered FDI capital in 2021 (GSO). FDI enterprises in IPs and IZs bring advanced technologies, management skills, and market access, which can help improve the productivity, quality, and efficiency of the domestic industries. FDI enterprises can also stimulate technology spillovers to local suppliers and customers through backward and forward linkages.

Facilitating linkages and cooperation among enterprises

IPs and IZs provide opportunities for enterprises to exchange materials, energy, water, by-products, or services with each other, creating industrial symbiosis and cooperation. This can help reduce operating costs, increase resource efficiency, and create value-added products. Other than that, IPs and IZs can also foster innovation networks among enterprises, research institutes, universities, and government agencies, enhancing knowledge creation and diffusion.

IPs and IZs have contributed to Vietnam’s remarkable improvement in its competitiveness and innovation indicators in the past decade. According to the World Economic Forum’s Global Competitiveness Report 2021, Vietnam ranked 42nd out of 141 countries in terms of overall competitiveness, up from 65th in 2010. Vietnam also ranked 42nd out of 131 countries in terms of global innovation index in 2021, up from 71st in 2010. IPs and IZs are expected to continue to play a vital role in supporting Vietnam’s industrial development goals.

Creating jobs and improving living standards

According to the Ministry of Planning and Investment (MPI), IPs and IZs have created jobs for more than 4 million laborers over the past 30 years, as well as provided them with training, education, and social welfare. For example, in 2022, Samsung employed 160,000 workers, which is 0.3% of Vietnam’s total workforce.

Creating jobs

IPs and IZs provide employment opportunities for a large number of workers, especially in rural areas where poverty rates are higher. For instance, after 14 years since its arrival in the country, Samsung has invested 9.3 billion USD in Bac Ninh, which is almost half of its total investment in Vietnam. This investment has helped transform Bac Ninh from a poor province to a leading industrial producer and the second-largest exporter in the country (after Ho Chi Minh City). 

Besides, IPs and IZs have attracted workers from other provinces, creating a dynamic labor market and reducing regional disparities. According to the General Statistics Office of Vietnam (GSO), in 2021, industrial zones and parks employed about 3.8 million workers, equivalent to 7.6% of the total labor force. 

Improving living standards

IPs and IZs offer training, education, and social welfare for workers, which can improve their productivity, quality, and income level. In addition, the establishment of IPs and IZs also contribute to the development of local communities by providing infrastructure, utilities, and services, namely schools, hospitals, markets, entertainment facilities, among others. At the same time, towards the goals of COP26, new IPs and IZs promote environmental sustainability by implementing eco-industrial park (EIP) initiatives, which aim to reduce pollution, waste, and emissions.

Final Thoughts

The increasing number of industrial zones and parks in Vietnam presents a compelling opportunity for investors seeking to tap into the country’s dynamic and rapidly expanding industrial sector. With strategic advantages and robust government support, Vietnam offers an ideal environment for business and investment. 

Don’t miss out on the chance to be part of this remarkable growth story. Take action now and explore the possibilities of doing business and investing in Vietnam. Reach out to our team or attend our upcoming webinar “Unlocking Business Opportunities in Vietnam” to gain valuable insights and guidance on navigating the Vietnamese market. 

Together, let’s seize the opportunities that await and forge successful ventures in Vietnam’s thriving industrial landscape!

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