INDUSTRIAL PROPERTY COULD BECOME NEXT KEY FDI MAGNET

Experts at last week’s Vietnam Industrial Property Forum 2024, co-organised by Vietnam Investment Review and the Vietnam Industrial Real Estate Association in Ho Chi Minh City, confirmed that stable foreign investment growth is providing a strong foundation for the industrial property sector.

Vu Van Chung, deputy general director of the Foreign Investment Agency under the Ministry of Planning and Investment (MPI), highlighted Vietnam’s competitive advantages in attracting investment, which help foreign investors set long-term goals.

“Vietnam’s economy maintains robust growth and participates in 16 free trade agreements, offering vast opportunities for investors,” Chung said.

He also pointed out that Vietnam’s large market of over 100 million people, combined with a substantial labour force where 57-59 per cent are of working age, provides a solid foundation for investment. “Many investors see Vietnam as an attractive market, presenting a significant opportunity for the industrial real estate sector to grow explosively,” Chung said.

He noted that the current trend is shifting from merely attracting foreign investment to fostering cooperative development. The government has tasked the MPI with reviewing existing preferential policies to focus on key industries and areas to draw in investors.

“Once these policies are approved, they will further attract foreign investment and promote the development of the industrial real estate market to better meet foreign investors’ needs,” he said.

Despite the global supply chain restructuring and complex economic conditions, Vietnam remains a standout destination for medium- and long-term foreign direct investment (FDI).

Data from the MPI shows continued improvement in Vietnam’s business environment. In 2023, registered FDI capital reached over $39.4 billion, an on-year 34.5 per cent increase, with disbursed capital hitting a record $23.2 billion. In the first seven months of this year alone, newly registered capital surpassed $18 billion, up 10.9 per cent on-year.

The rise in large-scale projects in sectors such as semiconductors, energy, component manufacturing, electronics, and high value-added products is particularly notable. Recently, Vietnam has emerged as a key player in the semiconductor supply chain, attracting interest from major corporations like Amkor, Nvidia, and Hana Micron.

Hardy Diec, COO of KCN Vietnam, highlighted that while FDI inflows into Vietnam have shown promising results, industrial real estate developers must not become complacent.

“Competition from neighbouring countries is increasing, and the demands and standards of foreign investors are continuously rising,” Diec said. “Continuously improving and offering innovative solutions, along with enhancing consulting services, are crucial to not only attracting FDI but also maintaining it sustainably.”

Truong An Duong, general manager of North Vietnam and Residential at Frasers Property Vietnam, observed that Vietnam’s foreign investment has predominantly focused on the manufacturing sector, which accounts for 60 to 70 per cent of investments. This trend drives demand for industrial real estate and associated amenities.

“Vietnam is also rapidly advancing in infrastructure investment, including roads, airports, and energy. The government’s and provinces’ active promotion of foreign investment also enhances competitiveness,” Duong said.

Duong noted that new-generation FDI in Vietnam is increasingly concentrated in high-tech industries, electronics, semiconductors, automobile manufacturing, and renewable energy. However, Vietnam faces stiff competition from countries like Thailand, Malaysia, the Philippines, and Indonesia, which have also developed policies to entice foreign investment in these industries.

“Vietnam will face intense competition as other countries also work to entice investment in these sectors,” Duong said.

Trang Le, head of Research and Consulting at JLL Vietnam, reflected on Vietnam’s industrial development over the past decade, noting significant progress.

“In 2023, FDI attraction in Vietnam increased by 34 per cent, far outpacing the global FDI growth rate of just 3 per cent. This highlights Vietnam as a bright spot amidst a global slowdown,” Trang said.

By the end of May 2024, Vietnam had established around 430 industrial parks (IPs) and export processing zones, covering approximately 89,200 hectares. Of these, around 300 IPs are operational, with the remainder under development. By the end of 2023, these zones had attracted over 11,200 foreign ventures and 10,600 domestic projects.

Meanwhile, Vietnam is making strides towards green foreign investment by implementing a national strategy on green growth and other policies. Major foreign investors like Lego, Heineken, and Pandora are increasingly focusing on green production in Vietnam, building carbon-neutral factories and using renewable energy.

As a result, eco-IPs are becoming a priority for foreign investors aiming for sustainable development, economic benefits, and corporate social responsibility, particularly in line with environmental, social, and governance criteria. To prepare for this influx of green capital, the MPI plans that by 2030, 40-50 per cent of localities will convert existing IPs into eco-parks, with 8-10 per cent planning new eco-IPs from the outset.

Michael Piro, co-CEO of Indochina Capital, the investor behind the Core5 project chain, noted that green capital flows are increasingly influencing Vietnam’s investment market.

“Significant capital is being allocated to green development. Vietnam may not only attract investment but also green capital,” Piro said. “There are billions of US dollars waiting to enter the Vietnamese market, and green real estate products, especially in the industrial segment, are poised for a boom,” he said.

Piro pointed out that green real estate commands a premium, with selling and rental prices 20 per cent higher than conventional products. “Green initiatives are creating added value for businesses’ products. Market participants should embrace green transformation – it is beneficial for businesses,” he added.

Source: VIR