Vietnam’s fast-growing economy is making it the standout location for foreign investment. The country’s financial policies favour investments and thus grant new business opportunities; whether regional or international. The country is now part of a strategy to become a new hub of Southeast Asia thanks to its 3 main economic zones and industrial areas in Vietnam: Hai Phong, Binh Duong & Dong Nai.
In this article, we will review the 3 key economic zones in Vietnam and what they bring to the table.
1/Hai Phong
Considered the biggest coastal city in the northern region and one of the nation’s major economic centers, Hai Phong is 1 of the 5 municipalities in Vietnam (Hanoi, HCMC, Can Tho, Da Nang, Hai Phong).
This province has an area of 1,527 square kilometers and a total population of 2.07 million people as of 2021, making it the 7th most populated city in Vietnam.
Hai Phong’s GRDP has been increasing exponentially and continued to do so despite the Covid-19 pandemic. During the 2017-2021 period, it grew an estimated 15.26%, almost doubling its growth from the previous period of 2012-2016. Hai Phong’s growth is organized below.
a) Accessibility of the area
The city has a multitude of advantages. Indeed, it has a complete logistics network including railways, roadways, airways, inland waterways, and maritime. Its proximity to China and its location on the edge of the Red River Delta make the city a major trading hub.
Hai Phong has everything it needs to become a major center for large-scale manufacturing, industrial parks, and economic zones.
The local authorities are also strengthening the city’s infrastructure, with 3.6 billion dollars dedicated to building new roads and bridges. The port of Lach Huyen also benefits from expansion projects as terminals 5 and 6 will be created. This will allow, among other things, to receive larger ships (up to 100,000-ton cargo boats!) and this way improve maritime trade and efficiency between Vietnam, the USA, and Europe.
In addition, the construction of massive highways has been planned, increasing the efficiency of the region’s logistics even further. The Hanoi to Hai Phong and the Hai Phong to Ha expressways are part of this infrastructure development project.
While the Van Don to Mong Cai to Quang Ninh highway will be the largest highway in the country once completed; it will link all major economic centers, industrial zones, and international airports in the North, including Noi Bai (Hanoi) – Cat Bi (Hai Phong) and Van Don (Quang Ninh), by connecting the international border gateway of Mong Cai.
This project will therefore promote cross-border trade between Vietnam, China, and other ASEAN members by significantly reducing transport costs and time.
b) Focus on workers
Hai Phong has an abundant and highly productive workforce. Over the years, the quality of this workforce has improved. This workforce knows how to respond to the demands of companies and, more generally, the labor market.
In the years to come, this trend is expected to continue. Many industrial parks should emerge. Finally, compared to regions of similar size in Vietnam such as Bac Ninh, Bac Giang, or Binh Duong – Dong Nai, Hai Phong is considered to have some of the lowest wages.
c) Regional and national laws that apply in the region
| Corporate income tax | Incentive tax rate of 10% within 15 years (calculated from the first year the enterprise has revenue from new investment projects); and
Tax exemption for 4 years, and reduction of 50% for the next 9 years (calculated from the date of taxable income from the new investment projects); |
| Personal income tax | Reduction of 50% for those who directly work in the economic zone; |
| Import-export tax | Value-added tax, special consumption tax: tax exemption in non-tariff zones. |
For more detailed information, check out our article about tax incentives.
d) Opportunities and industries within the region
The two most profitable sectors in Hai Phong are the manufacturing industry and construction, representing 19.04% of growth in 2021.
To support its economic development, Hai Phong is expected to see the industry and service sectors grow while agriculture should decrease in the medium and long term.
Industry and construction alone account for nearly 53% of the city’s GDP by 2021; services follow closely at 37.35% and grow by 5.13%, while agriculture does not even pass the 4% mark, having only grown by 1.49%.
2/ Binh Duong
Binh Duong, the main economic region of South Vietnam, is currently in the lead for foreign investment. After Ho Chi Minh, it’s the second province in terms of FDI attraction, due to its 30 industrial zones.
Investors’ enthusiasm for the region is the result of a boom in high-tech industries and the development of new industrial parks to be expected in the coming years, as well as an estimated economic growth of 8 to 8.5%
2022 GRDP per capita is expected to reach US$7,478, higher than US$6,650 GRDP per capita in the previous year. The province is also aiming for an 8.9% increase in the Industrial Production Index (IPI) and a 17% increase in international trade this year.
The government is also speculated to acquire over US$2.5 billion from foreign investments as the economy continues to flourish. This will allow an increase in social investment by 10% in 2022, creating 35,000 new jobs in the region.
In the future, Binh Duong also wants to promote the development of industries in the manufacturing and processing sectors as well as focus on environmentally friendly technologies that can integrate with local enterprises and global value chains.
a) Accessibility of the area
The Binh Duong region is planned to have several projects in order to facilitate mobility within the region. The purpose of these projects is to continue the growth of the FDI but also play a key role in the reopening of Vietnam in the post-Covid period.
The improvement and extension of highways such as National Highway 13, HCMC – Thu Dau Mot – Chon Thanh Expressway, Belt Roads 3 & 4, and Song Than Junction are perfect illustrations of the region’s drive to continue its dynamism.
These projects, known as the build-operate-transfer (BOT) and the PPP models, will have an impact on the region’s connectivity to the rest of the country, particularly with Ho Chi Minh City, the Mekong Delta, the South-East region, and the South-Central Highlands.
The region wishes to make these projects operational as soon as possible (2021-2025 period) and therefore has dedicated task forces to ensure timely completion.
In addition to these projects, the region makes use of a nearby international airport and seaport which are about 40 kilometers away.
b) Focus on workers
In terms of workforce, the region has quite a capable workforce. Its attractiveness comes from its ability to reorganize itself after a set amount of time to improve the quality of its workers.
One example of this was the 2018-2020 project to ensure an increasingly qualified workforce in the future (2025).
Within the province 100 vocational schools have enrolled 30,000 students, thus reaching a vocational training rate of 80.5%.
Binh Duong is also ambitious on a national/international scale. It has developed a smart city project to become one of the leading provinces in the country with global competitiveness in attracting, training, and developing scientific and technologically gifted talent.
Furthermore, it has established policies to attract young workers, middle managers, and high-tech workers.
c) Regional and national laws that apply in the region
Binh Duong’s future big investments are oriented toward automobile mechanics, electronic technology, high-tech agriculture, and their supporting industries.
Investors are expected to flock to these industries, since the government is introducing incentives, such as land and water lease exemptions, through existing laws.
What’s more, investing in the province allows companies to benefit from incentives on CIT (corporate income tax) with a preferential passing tax rate of 10% for 15 years and a tax exemption for four years, followed by a 50% reduction in tax payable for the next nine years for certain projects. Additionally, high-tech agricultural projects also benefit from import tax exemptions.
d) Opportunities and industries within the region
The Binh Duong region is home to more than 3400 companies, ranging from 64 different countries, so it undeniably holds a significant stake in the Vietnamese economy.
The biggest company to have invested in the region is LEGO with its new US $1.3 billion carbon-neutral factory.
The authorities have granted an investment certificate to the Danish firm for a project in the VSIP III industrial park. The entire project, which exceeds US $1 billion, ranks among the six largest in the world and the second largest in Asia.
An important part of the largest projects in the Binh Duong region is driven by Singapore, as it accounts for a fifth of the total FDI invested. The nation-state’s presence includes 260 companies, with some very large players that have invested and still operate out of Binh Duong.
Finally, South Korea is a major investor as it represents 800 projects and US $3.4 billion dollars of capital.
3/ Dong Nai
Dong Nai is one of the most attractive economic regions in Vietnam for investors to build their production facilities, as it has been a pioneer in the construction of Industrial Parks (IPs) in the southern part of the country.
In the same vein, it has continuously developed more sustainable plans for IPs. The Dong Nai region supports industries and high-tech manufacturing as well as a comprehensive logistics infrastructure network, all linked to Ho Chi Minh City.
It also has many financial incentives that attract investors. The success factors that have enabled the region’s economic development are consistent economic growth, infrastructure assets, the province’s industrial zones, and a supportive investment policy.
a) Accessibility of the area
Situated between four key economic regions and with a modern multi-axis infrastructure network, Dong Nai is very well located. The province is connected to the South-Central coast, the South-Central highlands, and the Mekong Delta, and is also an essential gateway to the east of Ho Chi Minh City, Vietnam’s main economic center.
In terms of mobility, the province has four means of transport: rail, road, air, and sea, which is rare in Vietnam. In addition to this, it has a very advanced infrastructure for the national, inter-provincial, and inter-district road network.
Main economic routes in the province: National road 1A, National road 20, National road 51, the North-South railway, Ho Chi Minh City – Long Thanh – Dau Giay expressway.
The area is very close to the Tan Son Nhat International Airport, the Cai Mep – Thi Vai port hub, and the Saigon – Cat Lai port hub.
The railway includes eight stations used for passenger and freight transport while the Long Thanh Airport, with its capacity for 100 million passengers and five million tons of cargo per year, plays an undeniable role for Dong Nai in the challenge of becoming a leading logistics, industrial and service center in South East Asia.
The one drawback that comes from this ideal industrial and logistical location is the potential for shipping difficulties due to the high-density traffic of goods that come in and out of the region.
b) Focus on workers
In addition to significant economic development, the province benefits from young, dynamic, and competent human capital. The province has 7 universities, 10 colleges, 13 technical schools, and more than 50 vocational training centers. The region is currently seeking to invest more in healthcare and education.
Many facilities such as restaurants, schools, workers’ housing, and supermarkets, have been built in the Dong Nai region. The aim is to attract as many people to the region for work in order to meet the demand for industrial parks.
c) Regional and national laws that apply in the region
A package of investment incentives has enabled the Dong Nai region to attract investors in high-tech manufacturing and related industries. The goal in these industries is to increase the location’s rate of export products.
For support industries, the region relies on several incentives. For example, there is a tax exemption for 4 years and then a 50% tax reduction for the next 9 years.
Also in the support industries, 50% financial support is offered by the government for pilot projects. Additionally, factories that build housing for their employees are exempted from property taxes as well as corporate taxes.
Funding programs for workforce training, research and development, and technology transfer are provided by the Dong Nai Support Industry Development Programme.
It is all of these investment incentives that have allowed the region to become a hub for materials procurement in this country.
d) Opportunities and industries within the region
With $1.36 billion of FDI invested in the province (including $1.17 billion for industrial parks), Dong Nai ranks among the top 7 regions in the country in 2021 in terms of FDI investment.
And there are many more future developments planned. In fact, in addition to the 10,200 hectares of industrial zones already present, 7573 additional hectares of new zones will be added in the coming years. They will mainly be concentrated in the regions of Long Thanh, Cam My, Nhon Trach, and Trang Bom.
In Dang Nai, there are a plethora of investment opportunities with a wide range of industries, from support industries such as mechanical engineering, plastics, and packaging, to finished goods such as consumer electronics, furniture, and F&B.
Unsurprisingly, many countries are interested in this growing economic area. South Korea is the biggest foreign investor in the region, followed by Taiwan and Japan. Singapore and Thailand have also just recently discovered the potential of the region, and have invested in it.
To summarise, the main points of attraction within the province are its manufacturing abilities, real estate opportunities, and logistical prowess.
Final thoughts
To conclude, Vietnam’s three economic zones are the driving forces in its growth. Their growth is not likely to stop as they are doing everything possible to encourage foreign investment through various policies: financial advantages, labor, accessibility, etc.
However, it is important to keep in mind for investors that each of the zones has its particularities. Before investing, you need to find out which one suits you best for your business development.
SOA brings you its expertise in your projects of implementation in industrial zones in Vietnam. Don’t hesitate to ask any questions you may have to one of our experts at hello@sourceofasia.com.
