INDUSTRIAL PARK INFRASTRUCTURE DEVELOPMENT REPORT - CURRENT SITUATION AND DEVELOPMENT PROSPECT 2022

In the second quarter of 2022, the country’s GDP growth is estimated to increase 7.7% compared to Q2/2021 according to the calculations of the General Statistics Office of Vietnam. This is the highest Q2 growth rate in 10 years. In the context that the world situation is still complicated with inflation shock in many countries at the beginning of 2022 and Vietnam is in the first stage of growth after the pandemic, this growth finger is really impressive, showing that the economy is getting thriving. In which, more than 39% contributed to the increase from the Industry and Construction.

In the first 6 months of 2022, IIP in Vietnam increases about 9%, of which the manufacturing industry increases the most by about 10%. The total of the IIP and the manufacturing industry in 2022 are lower than the growth rate of the same period in 2021 and only higher than the rate of 2020, almost equal to the rate of the same period in 2018. Despite maintaining the growth rate from appearing the pandemic, the world’s price fluctuations, rare materials, especially the price of materials increases highly due to Russia-Ukcraine war and China’s Zero-covid policy has restrained the growth of product output.

Industrial land for rent is the most popular and oldest developed form of industrial real estate in Industrial Parks in Vietnam. Based on a survey of 258 active industrial parks, we found that 33% of the industrial land banks are leased for less than 50 USD/m2/lease period, and 26% of industrial parks with land leasing prices from 51-70 USD/m2/lease period. Especially in 2021, there have appeared a number of industrial parks with land leasing prices of more than 200 USD/m2/lease period, mainly in the South, although it only accounts for 3%, it also shows that the land rent has increased especially in the Southern Region in the past year.

Nowadays, ready-built factories are very attractive and have an increasing scale of investment capital but mainly towards the projects with a factory scale that is not too large and complicated as well as requires high technology. High-tech ready-built factories are tending to increase in recent years because the State has supporting policies, creating momentum for the development of high-tech industrial parks. However, this ratio is not much, and the fact that currently, high-tech industrial parks in Vietnam have not fully developed yet so they have not attracted many investors. Currently, Vietnam still mainly concentrates on the heavy industry with little high technology requirement so this type of real estate has not increased too fast. The increasing need of investors as well as the focus on the quality of factories of industrial park investors currently contributes to increasing more choices for the investors when referring to the industrial park market in Vietnam.

The new industrial parks in 2022

According to our data, in the first 6 months of 2022, about 27 new industrial parks are added to the country. In which, the Northern region is added the most with 15 parks, the Southern region is 7 parks and in the Central, there are 5 parks. In both quantity and planning areas, the new industrial parks in the North account for the majority, showing that the supply of provinces in the North is ready to take over new investment capital in the next years.

Status of some investment projects for the industrial park

Real estate of newly registered FDI projects in 2021 and the first 6 months of 2022 was very developed. Whereby, we can see that the trend of warehouse rental was raising both sides in a number of projects and registered investment capital. Especially in 2022, this trend is more and more clearly expressed when the number of warehouse rentals in the first quarter of 2022 raised 132% than the fourth quarter of 2021 and raised 193% over the same period of 2021. In the second quarter of 2022, the number of warehouse rental projects also raised 100% over the same period of 2021. The scale of investment capital of warehouse rental projects was also highly raised when the total registered investment of newly registered FDI projects in 6 months of 2022 up to 93% over the same period of 2021. Meanwhile, land lease projects were, on the contrary, both numbers of projects and investment capital scale were trending decreased.

In the first 6 months of 2022, we concluded that the textile industry was the industry that had many newly registered FDI projects. After that was: Electronic, metal, logistic, footwear,v..v. As we can see, textile was the industry that got much FDI capital in all 3 domains. Especially in central and southern, this was the industry that attract the most projects. And in northern, electronic and logistic was still top industry. This is completely matched with industrial park infrastructure in 3 domains. In Southern, a long time ago, textile was very developing because this was the convergence of many big textile projects, moreover, IPs from southern had a good infrastructure and an abundant number of workers. In northern, factories and warehouse for the logistic industry was very focusing on investment. Moreover, Nothern had a lot of IPs that invested in high-tech infrastructure, import of special electronic materials from China had many advantages in terms of geographical location, and traffic infrastructure had been improved so that it can attract FDI inflows in the electronic industry.

Industrial Parks attract most newly registered FDI projects in the first 6 months of 2022

When analyzed about the top 10 IPs, we conclude that from the beginning of the year until now, the Industrial Parks selection trend of FDI investors was still leaning towards the location of IPs that are convenient in terms of geographical location. When 80% of every industry is adjacent to the route and more than 50% of them only less than 30km from the port/airport/highway.

IMPLEMENTATION REPORT OF INDUSTRIAL PROJECTS IN VIETNAM

The emergence of the 4th wave of Covid-19 starting from the end of April has taken a heavy toll on the country’s economy, causing serious damage to all economic sectors. Especially, in the third quarter of 2021, when the number of infections in many provinces and cities increased rapidly, the social distancing policy was applied in most major provinces and cities, Vietnam’s GDP in the third quarter of 2021 decreased 6.17% compared to same period of 2020, this is the lowest quarterly growth rate ever recorded from 2018 so far. In 2021, Vietnam’s GDP increased by 2.58% – the lowest growth rate since 2018.

The total value of foreign direct investment into Vietnam in the 12 months of 2021 reached 31.15 billion USD, increased 9.2% over the same period last year. In which, the value of newly registered capital and adjusted capital increased sharply compared to the same period last year, reaching USD 15.25 billion (up 4.1%) and USD 9.01 billion (increased 40.5%).

Continuing the trend from the beginning of 2021, the number of newly granted projects decreased by about 31.1% over the same period last year, but the total value of newly registered capital increased by more than 4.1%. If in the period of Q1 and Q2, although the number of newly granted projects decreased significantly, the newly registered capital increased sharply (> 16% compared to same period of last year), then in the 12 months, the value of newly granted capital increased only 4.1%. This shows that the trend of foreign investors who have registered to invest in large-scale projects still occurs from the beginning of the year to the end of 2021, but due to the complicated development of the Covid-19 epidemic in the third quarter of 2021 so by the end of the year, large-scale projects tend to increase but not as much as before.

The complicated evolution of the Covid-19 epidemic in Vietnam and around the world, leading to a disruption in the supply chain, continued to negatively affect the import and export activities, however, in the last months of 2021 with the vaccination campaign, loosening distancing measures, production has improved compared to the third quarter of 2021. Accordingly, the value of exportation for the whole year reached 336.25 billion USD (increased 19% over the same period last year), the value of importation reached 332.25 billion USD (up 26.5% over the same period last year). Vietnam has an estimated trade surplus of 4 billion USD in 2021.

The decrease in the number of FDI projects combined with the difficult situation in the implementation of construction projects, the high price of construction materials, was heavily affected by the epidemic with the social distancing policy, especially in Vietnam. The time of Q.3/2021 has caused many enterprises in the field of Industry and construction to be dissolved or temporarily stopped operating. The number of businesses dissolved and suspended in 2021 increased by 18% and 7% respectively compared to 2020). While the number of newly established businesses decreased by 22.4% over the same period last year and the number of businesses returning to operation also decreased by nearly 10%. In 2022, with the policy of “Adapting safely to the epidemic” – both safely fighting the epidemic, developing the economy and promoting production and business, combined with increasing public investment to promote the economy and to attract foreign investment, the operation of enterprises is expected to be better than in 2021, but businesses still need to develop a clear operating and financial plan to prevent the Inflation which may be increased further and raw material prices remained high.

Development Status of Viet Nam Industrial Projects in  2021

New FDI projects are still mainly located in the North and in the South. The projects in the Central region only accounts for a small number of registered projects, mainly projects in the processing and manufacturing sector. If in the South, the project showed signs of increasing in both quantity and value of invested capital in the fourth quarter after the decline in the third quarter, in the north, the third quarter was the peak period in terms of investment projects and has a decrease of about 13% in the fourth quarter compared to the third quarter in terms of the project numbers. In the Central region, the fourth quarter of 2021 is a prosperous time to attract FDI in the region with an increase of 267% compared to the number of projects in the third quarter, higher than that of the first and second quarters. Projects in the Central region are insignificant when compared to the South and North, but with the current rate and frequency of increases, we believe that the Central region will be an attractive destination for investors in the near future when the industrial land fund in the North and the South is dwindling.

In 2021, the number of industrial projects that rent ready-built factories (RBF) accounts for 21% of the total number of newly registered projects, the investment registration value of these projects’ accounts for 5%. The majority are still construction land lease projects.

Within the framework of the Report on the implementation of industrial projects in Vietnam in 2021, we focus on analyzing projects data which have the investment capital of more than 2 million USD (equivalent to 46 billion VND) that are in the process of being prepared for construction (Project preparation, Design, Bidding, Contractor selection. main) and projects under construction based on the following criteria: Type of construction, Locality, Type of project, Type of investment as of the end of December 31, 2021.

The total number of projects is 1386 projects with a total investment capital of approximately 126 billion USD, mainly projects in the project preparation stage, 997 projects, most of which are projects in the preparation for construction, bidding and in the design process with 795 projects with $97 billion in value deployed on more than 23 thousand hectares; selected projects include 202 projects; There are 389 projects under construction. Due to the complicated situation of the epidemic in the past year, it has greatly affected the project implementation, as well as the psychology of investors who are afraid of investing in project construction during the epidemic period, especially during the pandemic. In particular, the high price of construction materials will affect the overall cost, so most of the projects are still in the preparatory stages.