Foreign companies looking to relocate factories in Vietnam

At this stage in the US-China trade wars, Vietnam is one of the key economic winners from the ongoing fallout.

Many companies are shifting their factories to Vietnam, underlining the potential for the strong development of industrial real estate, as reported in Viet Nam News. Savills Vietnam, a property agent, has released its white paper on Vietnam’s industrial real estate for the first half of 2019.

The list of possible buyers of industrial land includes many factories from China operating mainly in the fields of electronics, textiles, footwear and spare parts production, such as Hanwha, Yokowo, Shuafu, Goertek, Foxcom, Lenovo, Nintendo, Sharp, Kyocera and Oasis, according to the report.

“Although occupancy in key provinces grew year on year, available land coupled with an array of upcoming projects has seen foreign companies significantly increasing investment in Vietnam,” John Campbell, senior consultant at Savills Vietnam Industrial Services said.

“Manufacturers are showing interest in the Central Regions while developers are actively converting agricultural land to industrial usage, guaranteeing additional supply.”

The industrial sector is growing strongly with a tenfold increase in foreign direct investment (FDI) over the last decade. Good land supply is facilitating incoming manufacturing projects and the rise of rental options with ready-built factories (RBF) and built-to-suit (BTS) solutions. Vietnam must be more selective with projects to move up the value chain, improve competitiveness and ensure sustainable growth, the White Paper noted.

Low labour costs and government incentives, particularly preferential tax rates, will continue to be critical drivers of FDI. However, to maintain the transition to higher-value industries, Vietnam must focus on the quality rather than the number of investments.

By enabling the latest production technologies and increasing workforce training, the government is actively easing qualms around viability, labour shortages and rising costs for a more transparent business environment.

According to Savills Vietnam, the US-China trade war, additional investment and new free trade agreements have all had a positive effect on Vietnam’s industrial sector.

In the first quarter of this year, about 326 industrial zones were established, with a total area of 95,500 ha. Of this number, 251 industrial zones are under operation with an area of 60,900ha, accounting for 74 per cent of the total, while 75 industrial parks are under construction, compensation and site clearance on a total area of 29,300 ha, according to Savills Vietnam.

SOURCE: Viet Nam News – Asia News Network