IP development in Vietnam in recent times has simply been the building of road, water and electricity networks.
Long An, a neighbouring province of Ho Chi Minh City, is making a concerted effort to attract manufacturers and investors to its industrial parks (IPs). According to Mr Nguyen Van Tinh, Investment Manager of the Management Board of Long An IPs, to provide advantages for investors the provincial people’s committee has a regulation directing authorities in Long An, including the Tax Department, the Police Department, the management boards of industrial parks and the Department of Planning and Investment to work towards quickly granting licences to investors. The average time is to be between five and seven days. Investors investing in IPs only need to hand in their paperwork and receive the result at the “one-stop-shop” at the Management Board of Long An IPs.
Long An at present has 12 IPs operating out of the 14 that have been granted licences by the government. The total area of rentable land is 2,100 ha, but only 1,000 ha has actually been rented by manufacturers. In the development plan to 2020, Long An will have 23 IPs on a total of 9,750 ha.
Its low occupancy rate is not exceptional. According to figures from the Ministry of Planning and Investment, there are 162 industrial parks on a total area of 38,804 ha in Vietnam. Worryingly, average occupancy stands at just 48 per cent.
It is acknowledged, however, that Vietnam’s IPs contribute significantly to investment attraction and GDP. IPs have attracted 3,600 foreign invested projects with total registered capital of $46.9 billion, accounting for 30 per cent of projects and 25 per cent of capital. IPs have also attracted 3,200 domestic projects with total registered capital of VND254,000 billion ($13.36 billion). There are some 1.34 million workers employed at IPs. In 2009, enterprises in IPs recorded income of $12.2 billion and VND68,000 billion ($3.579 billion), of which export income was $12.3 billion and VND2,600 billion ($136 million).
However, with the current levels of vacancies there are concerns over whether IPs in Vietnam follow a model that does not meet investor requirements. According to Mr Marc Townsend, General Director of CBRE Vietnam, after the recent world economic crisis, Southeast Asia is where many investors have returned and many have chosen Vietnam as the location of their investment. However, the weakest point for Vietnam is it infrastructure. “Investors don’t care about the price of rented land but care about all the expenses they must pay for their entire production activities,” he said. “If Vietnam develops infrastructure both inside and outside of IPs it will attract higher levels of foreign investment capital.”
IP development in Vietnam in recent times has simply been the building of road, water and electricity networks. Then the land is divided into plots for rent. So the land rental price in IPs includes only the price of the land. IP developers do not exploit the added value of the land by building additional infrastructure. From mid 2008 to the end of 2009, after the global economic crisis, many workshops were being rented at cheap prices, lower than their build price. At present, in Ho Chi Minh City, many workshops, storage depots and production facilities in Districts 4 and 7 and at the Song Than Industrial Zone have rental prices of just $2-$5 per square metre. Most of these are without other services such as offices, logistics, hotels and housing.
According to Mr Townsend, foreign investors only want to invest on land with added value. They want to find IPs where factories and offices have been built, not IPs with only four surrounding walls. “Vietnam should develop integrated IPs of medium scale that have production areas for light industry, trade centres, offices, logistics services, hotels and houses,” he said. “In the future it is necessary to have a model that includes an integrated logistics area with services for customs procedures, retail goods workshops, distribution centres, cold storage and a supply chain network including labelling, packaging, quality management, customs procedures and transport. Price levels will be calculated based on the week and the month, not by the year as happens now.”
According to Mr Pham Minh Hiep, Deputy General Director of IDICO, to attract investors into IPs, infrastructure developers need to build electricity, transport and waste water treatment systems. It is also necessary to have policies that guarantee human resources at IPs and to provide workers with convenient and useful services.
Meanwhile, Mr Le Van Dung, Deputy Manager of the Management Board of the Dung Quat Economic Zone in central Quang Ngai province said that “it’s impossible to apply promotional programs used for IPs in this region to other regions because everywhere is different. Regions must identify their strong points and then appeal to investors. For example, although Dung Quat is far from major centres, it is near a deep-water port and has the conditions for large manufacturing chains to be formed. So Dung Quat is a good location where enterprises can choose to establish a factory.”
In attracting investors to IPs, Mr Kien Trung, Managing Director of the Vietnam Industrial Parks Promotion Centre (VietIP Centre) said that IPs in Vietnam need to promote and market their image and capacity to local and foreign investors. Only a few IPs have built up a solid reputation, such as VSIP, Becamex, and Sonadezi.
In May the Exhibition and Conference for Industrial Parks in Vietnam was held in Ho Chi Minh City. The annual event provides a platform for IP developers in Vietnam to meet with manufacturers and investors from all over the world. The Vietnam Industrial Parks Promotion Centre and the Real Estate Association for Industrial Parks are also present in Ho Chi Minh City. According to Mr Trung, VietIP Center provides support in promoting, consulting and mediating in investments in IPs and provides documents to investors.
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