THE EXTEND OF INVESTMENT IN VIETNAM’S INDUSTRIAL REAL ESTATE

In the past few years, industrial real estate in Vietnam has recorded considerable prosperities. Pursuant to Real Estate Association's report regarding Real Estate Industry released in February 2021, the industrial real estate has grown substantially in 2020, as a result of the shifting trend of investment capital flows and restructuring of supply chain toward our country. In addition, Vietnam Indusial Whitepaper 2020 reported that the pandemic along with the US tariff regulations on China also lead to the relocation of multinational manufacturing companies from China to Vietnam. Due to the advantages of infrastructure and labor, Vietnam is believed to be a viable destination for investors with a wave of industrial activity migration from China[1]. According to experts, the industrial real estate will remain in a rapid growth cycle in 2021, with high rents and ideal occupancy rates[2].

Demand for industrial real estate in 2021

Despite the complicated developments of the Covid-19 epidemic, industrial areas in Vietnam performed well in the first five months of 2021, particularly, the industrial real estate in Vietnam continues to retain significant advantages. As of May 20, 2021, Vietnam has attracted a total registered FDI capital of USD 13.9 billion. Manufacturing and processing industry attracted USD 6.1 billion (accounting for 43% of total capital). There were 215 new projects totaling USD 2.57 billion in registered capital, and 222 existing projects totaling USD 3.1 billion in increased capital[3]. With the increase in economic - industrial indicators, investors poured capital strongly into the industrial real estate market of Vietnam. Due to the improvement of economic and industrial indicators, investors shall pour considerable capital into Vietnam’s industrial real estate.

In addition, industrial park real estate is a bright light thanks to the advantage of Free Trade Agreements, as well as the prolonged US-China trade war, which forces investors to look for a stable market for their operation. In 2021 and subsequent years, financial flow is expected to be attracted to planned industrial parks[4].

Current status of development and occupancy rate of Industrial Parks

According to statistics of the Ministry of Planning and Investment, as of May 2021, Vietnam has 394 industrial parks (“IPs”) established. In which, there are 351 IPs located outside economic zones, 35 IPs located in coastal economic zones, 8 IPs located in border gate economic zones. Especially, in the first 5 months of 2021, 25 new IPs were established in the whole country. This statistic is particularly outstanding, having increased by more than fourfold over the same period last year[5]. The total leased industrial land area of ​​IPs is about 42.9 thousand hectares, reaching the occupancy rate of IPs of about 53%. Particularly, the IPs that have been put into operation have the occupancy rate of about 71.8%[6]. It is expected that localities across the country will continue to promote the establishment and investment of infrastructure for IPs in the area.

In recent years, as the transportation infrastructure linking the city's center to the surrounding areas has improved, the simpler commuting results in investors’ relocation to the provinces and cities close to the metropolis. At the same time, central city land funds are restricted and unable to fulfill demand for large-scale manufacturing plants and real estate. Extended Hanoi as well as Ho Chi Minh City, has grown in popularity as an investment destination.

With five new IPs, Bac Ninh is the province with the most future projects. In which, Que Vo II IP will receive an additional investment land of 8.54 hectares, while Gia Binh IP will receive investment capital of 172.17 million USD. In the near future, Vinh Phuc is also planning to launch a number of huge IP projects, including Song Lo, Tam Duong 1, Thai Hoa-Lien Son-Lien Hoa with total area up to 500 hectares[7]. In the Central region, new industrial park projects are also expected to be formed in 2021 such as Trieu Phu multi-sector IP project, Quang Tri IP project. In the Southern region, satellite towns such as Binh Duong, Dong Nai, and Long An are the localities to welcome the development of industrial real estate[8]. With the advantage of a large land fund and a connected infrastructure system, real estate in the East of Ho Chi Minh City is becoming an ideal choice for investors in the near future.

Along with that, economic experts also stated that, in order to promote the advantages of industrial parks and attract more investors, the Government needs to focus on developing IP projects which are Eco-industry, High-tech Park, Clean-Tech Park, etc.

Legal policies on investment in high-tech and clean technology industry

Since 2019, the Mistry of Politburo's Resolution No. 50-ND/TW issued by the Central Committee on August 20, 2019, clearly the Politburo's guiding viewpoint on actively attracting and cooperating with foreign investment and prioritizing projects with advanced, high-tech and clean technology. In particular, the strategy is to enhance the percentage of enterprises using advanced technology, modern management, environmental protection, and high technology by 50% by 2025 and 100% by 2030, in comparison with 2018; research and improve institutions and policies for economic zones, industrial parks, high-tech zones, hi-tech agricultural parks, and other similar models.

In order to attain the objectives, on December 29, 2019, the Office of the National Assembly issued the Consolidated Document No. 32/VBHN-VPQH, synthesizing the previous regulations on the Law on High Technology, detailing regulations on hi-tech activities, policies and measures to encourage and promote hi-tech activities. The Law on Investment 2020 additionally fulfills the existing legal structure by establishing further incentive programs and investment assistance for high-tech enterprises.

Pursuant to Decision No. 38/2020/QD-TTg dated December 30, 2020, the Prime Minister issued the List of high technologies prioritized for development investment and the List of high-tech products encouraged for development, effective from February 15, 2021. Along with that, the Prime Minister also issued Decision No. 10/2021/QD-TTg dated March 16, 2021 regarding criteria for identifying high-tech enterprises.

In January 2021, the Prime Minister issued the National Program for High-Tech Development to 2030. Specifically, the objective of the Program is to develop and master 20 high technologies regulated on the list of high technologies prioritized for investment and development. Thus, Vietnam’ enterprises are able to reach advanced technology level in the region, then effectively apply them to production of high-tech products as well as provide high-tech services to others[9].

With a support of a system of investment incentives along with a relatively extensive legal basis, localities across the country are actively focusing on inviting and promoting potential investors who have modern technologies, high intellectual content, environmental friendliness, efficient use of resources and less land use[10]. National hi-tech parks are increasingly invested, continuing to perfect the construction of synchronous and modern infrastructure. According to the report, as of February 2021, the People's Committee of Da Nang city has recorded 07 hi-tech investment projects[11]. Vinh Phuc IP’s Management Board also recorded positive investment indicators of high-tech enterprises in the first months of this year[12].

Challenge and opportunity

In the past few years, many enterprises have focused on the research, application, and capacity building of science and technology. In 2019, high-tech enterprises and enterprise applying high technology accounted for over 13% of the total number of processing and manufacturing industry enterprises. The value of high-tech products and high-tech applications increased from 26% in 2010 to over 40% in 2019. Many large domestic and foreign enterprises have significantly applied high technology into manufacturing technology products for global distribution. Processing, manufacturing, and high-tech industries are growing in importance and are likely to take over in the not-too-distant future[13].

High technology, on the other hand, is still a nascent industry in Vietnam, with no notable in year-end investment reports. Currently, Vietnam's industries are still using old and outdated technologies to produce scientific and technical products, despite the fact that they have been greatly enhanced and developed. In comparison to the global average of industrialized nations, technological innovation is still sluggish[14].

Furthermore, advanced nations with substantial market shares like Europe, the United States, and Japan compete fiercely for domestic high-tech products. These countries discovered and utilized high technology and clean technology in manufacturing long time ago, giving them a competitive advantage in terms of market and pricing compared to Vietnamese products. For example, in the agricultural industry, high technology has supported scientists in developing new and high-quality kinds of rice, however, in the international market, it still suffers losses and weaknesses before the dominance of Chinese hybrid rice[15].

In order to achieve positive results and long-term development, ATIM's lawyers opine that high-tech investors need to research the industry, find suitable partners and a team of consultants with deep understanding, take advantage of opportunities and incentive policies for investment and development proposed by Government of Vietnam.

Nguyen Thi Huynh Nhu (Associate)


[1] Vietnam Industrial Whitepaper 2020/ Q3

[3] vneconomy.vn

[7] vneconomy.vn

[9] moc.gpv.vn (https://moc.gov.vn/vn/tin-tuc/1184/66068/chuong-trinh-quoc-gia-phat-trien-cong-nghe-cao-den-nam-2030.aspx )

[10] danang.gov.vn ( https://danang.gov.vn/chi-tiet?id=42766&_c=100000150,3,9)

[11] danang.gov.vn

[13] Report dated February 17, 2021 of the Institute of Financial Strategy and Policy

[14] skhcn.tiengiang.gov.vn