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Thanks to a more and more business-friendly environment, Vietnam is increasingly considered as an ideal destination for investors to implement a factory. 

Moreover, with China’s Covid current situation and the recent commercial tensions with the US, The China+1 strategy makes Vietnam a key destination for manufacturers. In 2021, with 1,738 Foreign Direct Investment (FDI) projects, the country reached USD 15.2 billion in terms of registered capital, a growth of 4.1% compared to 2020. 

Economic zones and Industrial parks play a very important role in this business-friendly environment.

Over the past decades, Vietnam has been actively promoting the development of these special Economic and Industrial Zones allowing companies to benefit from exclusive advantages. Thus, “Industrial Parks”(IPs) are becoming very popular with Foreign Investors Enterprises (FIEs).

IPs are often an excellent solution to benefit from Vietnam’s competitive advantages, but we highly recommend screening the different characteristics of each in order to optimize your implementation strategy. 

Leveraging on our local experience, we are happy to share below some of the key aspects to consider when selecting the appropriate IPs that will meet your objectives.

1. The 3 Key Vietnam Economic Zones

Vietnam has divided its key economic zones into 3 key areas:

  • The North
  • The Centre
  • The South

This Industrial Master Planning (IMP) has been initiated and managed by the State over the past two decades.

industrial parks in vietnam Source: Vietnam Briefing

a) The North            

Northen Key economic zone

Source: Vietnam Briefing

The North Economic Zone or North Key Economic Zone (NKEZ) is composed of seven provinces and major cities such as Hanoi, Hai Phong, Quang Ninh, Vinh Phuc, Bac Ninh, Hai Duong and Hung Yen. 32% of the national GDP originated from this zone.

With its proximity to the world’s second-largest economic power, this area brings numerous manufacturers to adopt a China+1 Strategy and set a footprint in Vietnam.

Initially specialized in agriculture, the North zone is increasingly industrializing, notably with the recent wave of electronics players. The key sectors are electronics, automobiles, shipbuilding, textiles, and supporting industries.

Big companies have been eyeing and taking the first bite of this delicious pie. Companies such as Kraft Vina invested USD 661 million for a kraft packaging factory in Vinh Phuc. Recently, LG Group increased their investments in Hai Phong’s Industrial Park by over USD 2 billion to expand their production capabilities. Or, Amkor Technology selected Bac Ninh for their factory expansion.

b) The Centre

Central key economic zone Source: Vietnam Briefing

The Central Key Economic Zone (CKEZ) is composed of 5 provinces and major cities such as Thua Thien Hue, Da Nang, Quang Nam, Quang Ngai and Binh Dinh.

The zone accounts for  7% of the national population. 

Although less developed than the other KEZ, this province was recently recognized as the best in the country in terms of governance and public administration performance (according to the Public Administration Performance Index, PAPI).

Salaries are often cheaper compared to other KEZ, but you may face recruitment challenges as workers tend to favour opportunities offered by the North or the  South economic hubs.

The centre area is known for its significant maritime economy. This zone is sensitive to the environment and encourages non-polluting industries. For example, plastic processing industries are not welcome in Da Nang. There are also solar energy projects flourishing in the region such as Gio Thanh 1 Solar PV Park, which is planned in Quang Tri, Vietnam, and will be available in December 2022.

In the future, CKEZ will seek to promote sectors such as oil and gas, shipbuilding, logistics, and other high-tech industries…Financial incentives may be higher in the CKEZ but expect more limited infrastructure. 

Some companies have their business activity performing well, such as the world-class web and app development startup Xenia Tech set up in Da Nang. Or, gas industry players BB Group and Quantum Group recently marked some recent massive project arrivals in Quang Tri.

c) The South

implement factory in vietnam - Southern key economic zone

Source: Vietnam Briefing

The South Economic Zone is composed of eight provinces and major cities such as Ho Chi Minh City, Binh Duong, Tay Ninh, Long An, Tien Giang, Binh Phuoc, Dong Nai and Ba Ria Vung Tau. 

Generating 40% of Vietnam’s GDP and representing 42% of the country’s total FDI stock, the Southern KEZ (SKEZ) is the largest economic hub in the country. 

This zone offers a very dynamic and diverse business environment favourable for all types of companies from SMEs to MNCs.

The SKEZ has the best and the most abundant human resources quality that you can find in the country. Nevertheless, bear in mind that the high level of competition in the area can turn the hiring process into a challenging hurdles race. 

The key sectors include electronics, software, IT, telecom, hi-tech agriculture production, and processing. These industries are welcomed and heavily encouraged in the SKEZ.

Services like finance, logistics, tourism, healthcare, and education are more concentrated in Ho Chi Minh City which is the business and financial centre of Vietnam. 

The attraction and potential of the land has been proven over decades. Global IT companies such as Intel and Asus set up their factories in Ho Chi Minh City. Nike also chose Dong Nai in the South Key Economic Zone. Recently, toy industry giant Lego committed to a USD 1 billion project to build the first-ever carbon-neutral factory in Vietnam in Binh Duong.

In brief

Economic Zones are value creation zones highly encouraged by the Government. They usually include IPs but they can also be dedicated to tourism or agriculture. Manufacturing companies that wish to locate in IPs can then benefit from various financial incentives depending on the location of the zone and the company’s activities.

2. The different categories of Industrial Parks

Economic Zones (EZs) are divided into entities. IP is the generic name, there are different types and special economic zones. Each category has a specific purpose.

implement factory in vietnam - economic zone

  • Industrial parks (IPs):

Industrial parks are generally specialised per industry and ecosystem. Organised in dedicated areas, they gather companies involved in the same industry.

(Zones definitions are listed in Annex 1 below)

3. How to secure your implementation?

Due diligence taking into account several aspects will need to be carried out, notably: materials availability, government policy, taxation, proximity to market, labour availability, incentives, infrastructure, local laws, and political stability. 

Each model is different and each situation may lead to a different scenario.

The following aspects will require specific attention:

  • Competitive analysis

Competitive analysis is a key stage in the (re)location process and should not be underestimated.

Items to assess:

  • Political climate
  • Economic environment
  • Regulatory landscape
  • Cost analysis – including utilities, land rentals…
  • Labour – including wages, educational qualifications, and skill levels
  • Taxes – including duties, corporate taxes, personal taxes…

Analysing precisely the characteristics of each zone according to your specific activity will secure a better decision. Labour, regulations, tax arrangements…can vary from one EZ to another. Each (re)location must be personalised.

implement factory in vietnam

  • Sector-specific regulations

It is critical to be aware of laws and regulations before setting up in an industrial park. Although Vietnam has made it easier through Industrial Parks to set up a business, it remains difficult for a company (foreign or not) to navigate across all the administrative paperwork. 

Trade laws, regulatory regimes, and the misallocation of responsibilities between ministries can often appear as a source of incoherence.

  • Labour market considerations  

Covering 330,000 square kilometres, Vietnam is predominantly a rural country (60%).  The labour market considerably varies from one region to another due to important regional disparities. Note that, Vietnam trains talented young people through various institutions. Young talents have essential skills for professional life, which appeals to recruiters. Beyond productivity and cost considerations, understanding your future business environment in terms of HR will simplify the hiring process, integration, and training of new workers. 

  • Labour costs

Country’s minimum wage ranges from USD 140 to USD 202 per month depending on the region. Of course, hubs such as Hanoi, and Ho Chi Minh City have higher minimum wage levels while smaller provinces like Phu Tho and Bac Giang serve lower minimum wages. The average salary varies from USD 500 to USD 2,000 per month for industrial workers and managers depending on location, industry and skill level.

  • Logistics and transport infrastructure

The Vietnamese Government focuses on infrastructure investments, notably in major hubs like Hanoi or Ho Chi Minh City. Despite these efforts, transport infrastructure is unbalanced across the country. In general, the road network hasn’t yet reached its full functional capacity, and the lacking of space and double-lane roads are also the cause of traffic congestion. While seaways are considered an alternative for container transit thanks to the country’s geographical shape, the railway network is still in the process of efficiency improvement. However, keep in mind that, despite 320 ports existing all around the country, most of them aren’t deep-water ones.

  • Customs procedures

Customs is an essential step in the supply chain. To avoid unexpected taxation, we advise you to stay constantly informed on import-export requirements and rates. Also, in order to reduce your delay, paperwork has to be processed efficiently. Benefiting from a priority customs process might be useful as an example.

  • Suppliers

A thorough analysis of local or regional suppliers is critical. Your expansion can be slowed down or accelerated by this aspect.  For example, some complex industries such as aerospace lack suppliers in Vietnam. Some materials may be scarcer than others. Plastic supply is limited in Vietnam …

  • Taxation 

Corporate Income Taxes (CIT)

Vietnam is one of the lowest countries in South East Asia in terms of CIT. The government decreased from 32% to 20% the tax rates between 2000 and 2018.

Tax incentives (TI)

Some financial incentives are industry-specific, for example, high-tech companies like IT, software development, biotech, material tech, and automation are sectors that are highly welcomed in Vietnam. The largest incentives are granted to social impact projects related to education, vocational training, healthcare, environment and culture.

Last, the location  also influences the level of incentives and taxes.

Investing in disadvantaged areas (like areas distant from major hubs) may favour your tax rate. Some provinces with lower infrastructure and skilled workforce attract labour-intensive low-tech industries, with aggressive tax benefits…

After a complete analysis of all those elements, you will be able to select the best  Vietnam economic zone according to your industry.

4. Final thoughts

Vietnam is a fast-growing economy and offers a wide range of opportunities. There are many  reasons to set up in the country for business. 

For Foreign Investor Enterprises,  though  it may seem easier to select a location almost randomly, we strongly advise you to explore and master all the ins and outs that will secure your local foundations in the long term.

Indeed, selecting the appropriate economic zone industrial park, with the relevant infrastructure, must be done rigorously. It is about finding the best balance between your activity, objectives, budget and specificity of the desired location. At Source of Asia, we constantly adjust our services to the specific needs of each of our clients.

We can assist you in setting up your business locally through a large range of services, from market diagnosis, targeting identification and qualification, and assistance with local stakeholders. 

We can also respond to a wide range of unexpected, unusual and urgent requests.

Talk to our experts at SOA. Your trust is our priority. 

Here to get you there!.


Categories of special zones in Industrial Parks.

  • Export Processing Zones (EPZs):

Export Processing Zones are dedicated to the export of goods, the provision of export services and other export activities. In the Vietnamese socialist republic, there are 4 EPZs : 3 in Ho Chi Minh City (Tan Thuan, Linh Trung I et Linh Trung II). The last one is located in Tay Ninh province (Linh Trung III).

However, companies that often export do not need these EPZs to ship their goods. These companies are designated as Export Processing Enterprises (EPE). Industrial Parks have also delineated “Industrial Sub-Zones” dedicated to EPEs to fulfil specificities regarding the supervision, the customs authorities’ control and related functional agencies.

  • Eco-industrial zones (EIZs)

Eco-Industrial Zones are specified zones in which enterprises are required to engage in cleaner production, must effectively use natural resources, and enter into manufacturing cooperation and affiliation to tighten economic, industrial, environmental and social efficiency.

  • Auxiliary Industrial Zones (AIZs)

Auxiliary Industrial Zones are Industrial Parks specialising in manufacturing auxiliary industrial products and rendering related services to increase competitiveness and satisfy the specific needs of manufacturers of these products.