Trade: Imports and Exports

By the end of 2022, phones and their parts had the highest export turnover of US$58 billion, equal to a 16% share of the export turnover and rising by 1% YoY. Turnover for this segment increased from US$34 billion in 2016. Other high value-added goods such as electronics, computers and their parts reached US$56 billion, up from US$19 billion in 2016; the segment had a 15% share of the export turnover and rose by 10% YoY. Low value-added industry exports such as textiles had a 10% share while footwear had a 4% share, reflecting a value shift in Viet Nam’s key export products.

John Campbell, Associate Director and Head of Industrial Services, Savills Viet Nam, comments: “From 2016 to 2022, the turnover of electronics and computer exports rose by 193% and the turnover of phone exports increased by 68%. This reflects Viet Nam’s move up the value chain as an export-oriented economy for high value-added products.”

Manufacturing Investments

Manufacturing and processing investment of US$ 8.4 billion had a 63% share of total FDI inflows in H1/2023. The 379 new projects had newly registered capital of Ú$5.4 billion, and of the 345 existing projects, 225 had increased capital totalling US$2.1 billion. 

Singapore was the top contributor with a 25% share of total new manufacturing FDI, valued at US$1.4 billion. China came second with a 23% share, and Hong Kong was third foreign with a 12% share. 

Northern Viet Nam had the greatest share with US$3.4 billion or 63% of newly registered manufacturing FDI. Southern Vietnam followed with US$1.4 billion or a 27% share. Northern Viet Nam had the most new manufacturing FDI projects at 238; the South had 122, and Central Viet Nam had 12 new projects in the first half of 2023. 

Bac Giang attracted the most newly registered manufacturing FDI at US$1.06 billion, equivalent to a 20% share. Binh Phuoc followed with an 11% share valued at US$577 million, and Bac Ninh was third with a 9% share valued at US$486 million. 

The three largest manufacturing investments in H1/2023 in the North Economic Zone (NEZ) include a US$621 million investment by Fulian Precision Technologies (Singapore) in Bac Giang, a US$280 million investment by Goerteck (Hong Kong) Co. ltd in Bac Ninh, and a US$165 million investment by Boltun Corp & QST International Corp in Quang Ninh.

In the Southern Economic Zone (SEZ), the most significant manufacturing investments in H1/2023 comprise a US$500 million investment by Shandong Haohua Tire Co. Ltd (China) in Binh Phuoc, a US$ 185 million investment by Suntory Pepsico Viet Nam (Netherlands) in Long An, and a US$163 million investment by Pandora Production Holdings A/S (Denmark) in Binh Duong.

Manufacturing PMI & Index of Industrial Production 

According to Trading Economics, Viet Nam’s Manufacturing Purchasing Managers’ Index (PMI) increased to 50.5 points in August 2023 from 48.7 in July. This represents the first growth above the 50-point threshold since February 2023 as output, new orders, and foreign sales all returned to expansion. Also, purchasing rose for the first time in six months and was the most pronounced since September 2022.

Viet Nam’s industrial production rose by 2.6% YoY in August 2023, increasing from a 2.3% rise a month earlier, representing the fourth straight month of growth in industrial output and the steepest pace in the sequence. Production grew further by 3.5%, up from 2.9% in July. 

Industrial Supply & Performance

In 2023, there are 397 established industrial parks across Viet Nam with a total land area of 122,900 ha. Of these, 292 are operational with a total land area of over 87,100 ha. Another 106 industrial parks are under construction with a total land area of 35,700 ha. 

Industrial parks nationwide have a high occupancy rate of over 80%, with the key northern provinces reaching 83% and key southern provinces reaching 91%. 

The Northern Economic Zone (NEZ) has a total leasable area of 12,000 ha with 68 industrial parks. The land price increased by 30% YoY and averaged US$138/m2/one-off term. Tenants in the NEZ comprise enterprises in electronics & computers, automotive, machinery & equipment and solar-related manufacturing. Notable occupiers include Samsung, LG Electronics, Canon, Hyundai, Honda and Vinfast.

The NEZ has a highly developed road network, which enhances connectivity between Ha Noi and pivotal industrial provinces such as Bac Ninh, Hung Yen, Bac Giang, Hai Duong, Hai Phong, and Quang Ninh. The region has three primary ports, Hai Phong Port, Lach Huyen Deep Sea Port, and Cat Lai Port, which underpin industrial competitiveness with links to international markets, particularly South Korea, China, and Taiwan.

The Southern Economic Zone (SEZ) has 122 industrial parks with a total leasable area of 24,883 ha. The land price rose by 15% YoY and averaged US$174/m2/one-off term. Tenants in the SEZ include those producing rubber and plastics products, food and beverages, building materials, and textiles and apparel. Notable occupiers include LEGO,  Suntory PepsiCo, Intel, Unilever, Coca-Cola and Kumho Tires. 

The SEZ awaits the upcoming Ring Road 3 (expected completion in 2026) and Ring Road 4 (expected completion in 2028), in addition to the Ben Luc – Long Thanh Expressway (expected completion in 2025). On 31 August 2023, three main bidding packages at Long Thanh International Airport in Dong Nai and Terminal 3 of Tan Son Nhat International Airport in HCMC broke ground. Long Thanh International Airport will have three phases comprising 5,580 ha and a total investment of US$14 billion. All phases of the mega project are estimated to be fully complete by 2050. Terminal 3 of Tan Son Nhat International Airport is estimated to cost approximately US$451 million and is estimated to go live in H2/2025. 

Brighter Outlook

Upticks in manufacturing PMI and industrial production show promise, and growing enquiries and site visits from multinational manufacturing, logistics and e-commerce tenants give hope to developers.

Despite the global headwinds, Viet Nam is expected to resume rapid economic growth over the mid-term as exports rebound. Viet Nam will continue to benefit from the shift in global manufacturing supply chains toward competitive SEA manufacturing hubs.

“Viet Nam shows steady and stable growth. It has strong fundamentals with its dynamic labour force and competitive labour costs, export-oriented economy, appealing business environment, and comprehensive FTAs. Viet Nam has entered 15 FTAs and is negotiating three more, significantly more than its regional counterparts, which is impressive considering ASEAN is one of the most globally integrated regions,” John Campbell states.

Explore Industrial Property Investment Opportunities 

Shaping Trends

The Mekong Delta is a rising industrial area. In September 2023, renowned developer VSIP broke ground at its first project in Can Tho. The 900-ha project will be an integrated industrial, high-tech, and service centre and residential area. Phase 1 will span 293.7 ha, with an investment capital of more than US$152 million. VSIP also invested in building a US$7.4 million road to connect the project to National Highway 80 in preparation for construction. According to the 2021 to 2030 development with a vision to 2050, the Mekong Delta will have six expressways spanning 1,166 km creating greater convenience for logistics and transportation. 

Meanwhile, solar panel manufacturers are moving to the North with three of the top five manufacturing projects in the NEZ in 2022 related to solar production. Trina Solar was the largest investor with a US$275 million project in Yen Binh IP, Thai Nguyen Province. Investors are largely from China, Hong Kong, and Singapore. 

The industrial property landscape is changing with more institutional players. As manufacturing and logistics mature, products are increasingly diverse such as ready-built factories, warehouses, multilevel facilities, hybrid facilities, temperature-controlled buildings, and built-to-suits. In just five years, occupiers have greater choices and are no longer tied to 50-year land leases as was the norm. This drives heavy competition between investors with more ready-built stock launching in key provinces. To attract the best companies, IP and ready-built developers should focus on value-added services and incentives beyond price and rents such as market entry services, HR and legal support, management services, sustainable initiatives and working with professional industrial real estate agencies.

View more Industrial Market: Demand for Tier 2 Provinces

However, challenges remain for Viet Nam:

• The quality throughput of all transport infrastructure in Viet Nam remains lower than regional peers. Although transportation infrastructure is expanding rapidly, development falls short of national economic and social growth. Rapid growth in urban population and freight transportation are the primary drivers of infrastructure needs, whilst the capacity of the port and seaports hasn’t reached its potential.
• As Viet Nam’s focus turns to attracting high value-added industries and boosting productivity to match regional peers, the demand for skilled labour increases.
• New, strict firefighting regulations came into place at the end of 2022, which have hindered industrial developers, manufacturers, and logistics companies. Significant foreign investors have been struggling to obtain the correct certifications and several projects have been delayed.The Government should continue its investment in infrastructure and upskilling Viet Nam’s labour force to improve productivity and efficiency. Fostering supporting industries, strengthening supply chains, simplifying investment and land use procedures, and embracing digitalisation are all key areas for Viet Nam’s industrial sector.

CONCLUSION

Industrial Insider by Savills Industrial Services delivers metrics and insights on industrial performance in Viet Nam. The publication covers macroeconomic drivers, industrial performance indicators, and industrial trends shaping the industry to create a comprehensive picture of Viet Nam industrial market. Download Savills Industrial Insider or contact Savills Industrial Services in Ha Noi or Ho Chi Minh City.