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Overview of Vietnam's Industrial Parks
- Van Pham LLC
- Sep 10, 2024
- 4 min read
1. Introduction and Overview
Vietnam's industrial parks (IPs) have become the backbone of the nation's economic development, serving as key drivers of industrialization, growth, and foreign investment. As of 2022, Vietnam boasts 563 IPs spread across 61 out of 63 provinces, with 292 of these parks fully operational. The majority of these industrial hubs are strategically concentrated in three key economic regions: the Southeast, the Red River Delta, and the Central Coast. Each operational IP is equipped with dedicated utility infrastructure, including reliable electricity, water supply, and wastewater treatment facilities that meet industry standards. Moreover, these parks offer a range of auxiliary services essential for investors' manufacturing and business operations, such as banking and logistics support.
2. Regional Distribution and Characteristics
The regional distribution of IPs across Vietnam showcases the country's diverse industrial landscape. The Northern Key Economic Region (NKER), encompassing seven provinces including Hanoi and Hai Phong, houses over 18% of Vietnam's IPs. This region has become a prime choice within the China+1 strategy due to its proximity to China. The NKER hosts a variety of manufacturing industries, including major players like Hoa Phat steel corporation, General Electric, and electronics giants such as Samsung, LG, and Foxconn. As of 2023, the average occupancy rate in this region stood at an impressive 86.2%, with average rents reaching US$120/sqm/lease term.
Moving southward, the Northern Central Region, including provinces like Nghe An and Thanh Hoa, is emerging as a tier-2 market witnessing increasing absorption. This region's abundant and cost-effective labor supply has made it particularly attractive to electronics companies such as Luxshare-ICT and Foxconn. Meanwhile, the Central Key Economic Region, covering provinces like Da Nang and Quang Nam, has traditionally been home to industries such as food processing, textiles, and building materials. In recent years, Da Nang has begun to position itself as a hub for high-tech and clean industries, offering opportunities for companies looking to leverage advanced technologies at more affordable costs.
The Southern Key Economic Region, encompassing Ho Chi Minh City and surrounding provinces, stands out as the powerhouse for high-tech and light industries. This region currently hosts the largest number of IPs in Vietnam, accounting for over 28% of the total parks across the country. Notable examples include the Saigon High-tech Park, home to tech giants like Intel and Samsung, as well as consumer industry leaders such as Coca-Cola and Nestle. With an average occupancy rate of 85.8% in 2023 and asking rents of US$166/sqm/lease term, this region remains a premier destination for investors seeking to tap into Vietnam's vibrant market.
3. Foreign Investment and Government Support
Foreign investment in Vietnam's industrial sector has seen significant growth, with China leading in terms of the number of investment projects in the first half of 2024. Other major investing countries include Hong Kong, Taiwan, South Korea, and Singapore. The most prominent investment-attracting provinces have been concentrated in the northern and southern regions, including Bac Ninh, Binh Duong, and Hai Phong, which have developed nearly complete supply chains in both manufacturing and supporting industries.
The Vietnamese government has been actively supporting the development of IPs through various initiatives. A major focus has been on improving transportation infrastructure, with 67% of IPs now developed adjacent to national highways. This connectivity greatly facilitates logistics operations for businesses within the parks. The government is also promoting the use of renewable energy sources, with nearly 50% of IPs having installed rooftop solar power systems in their factories. This shift towards green energy aligns with the growing trend of eco-industrial parks, which are gaining traction in response to Vietnam's commitment to reaching net zero emissions
4. Emerging Trends and Conclusion
According to CBRE Vietnam, sustainable development and green growth are emerging trends in industrial parks in Vietnam. With a commitment to reaching net zero emissions by 2050, the Vietnamese government has developed a number of policies to achieve this goal.
Decree 35/ND-CP on the management of industrial parks and economic zones issued by the Government on May 28, 2022 has made a number of significant changes compared to Decree 82/2018 to create a more streamlined legal corridor for investors to invest in new industrial park projects, specialized industrial parks, high-tech industrial parks, and especially eco-industrial parks and green industrial parks.
Land rental prices have seen a shift towards higher ranges, with a decrease in the lowest price category (<=50 USD/m2/lease term) and an increase in the higher price range (>150-200 USD/m2/lease term). Conversely, rental prices for ready-built factory spaces have shown a slight downward trend in the highest price category, while the majority still fall within the 3-5 USD/m2/month range.
In conclusion, Vietnam's industrial parks continue to play a vital role in the country's economic growth, attracting foreign investment and fostering industrial development. With a focus on sustainability, improved infrastructure, and strategic regional distribution, these parks are well-positioned to support Vietnam's ongoing industrialization and economic advancement. As the country moves forward, the development of eco-industrial parks and the adoption of green technologies are likely to shape the future landscape of Vietnam's industrial sector, ensuring its competitiveness in the global market.
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