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Viet Nam
Industrial Park Situation
Text by Saito Hiroshi
The 3rd: Key Points for Industrial Park Selection
Today, I would like to provide guidance on the methods and precautions for selecting industrial parks when Japanese manufacturers expand into Vietnam.
1. Site Visit
Conducting site visits is the most effective way to obtain information on industrial parks in Vietnam. Site visits are also indispensable in making the final decision. While some industrial parks may provide transportation, it is advisable to arrange a rental car with a driver if that is not the case. There are several things that must be confirmed during the site visit, and I would like to present the key checkpoints to consider.
- Location: Confirm the distance and travel time to the city center, airport, and port, as well as the road conditions. In cases where Japanese managerial staff and Vietnamese administrative staff (interpreters, general affairs, accounting, etc.) reside in different districts, some industrial parks may provide shuttle bus services.
- Infrastructure: Confirm the status of water supply, drainage, electricity, and telecommunications. Some industrial parks may not have installed fire hydrants or completed power line connections, in which case the tenant would have to bear the construction costs.
- Building: Inspect the factory building for any cracks in the walls or columns, ground subsidence, ceiling height, floor load-bearing capacity, loading/unloading space, skylights for natural lighting, and fire protection equipment. Check if the factory has on-site office spaces and restrooms. If not, the tenant would have to bear the construction costs.
- Environment: Check if the factory has a cafeteria for workers. Also confirm if the industrial park is well-maintained without any littering by other tenants. Particular attention should be paid to cigarette butts, as they pose a fire hazard. It’s also important to confirm the availability of accommodations, Japanese restaurants, convenience stores, and supermarkets within the commuting area, as this affects the living environment for expatriate employees.
2. Meeting with the developer (industrial park development company)
I would like to list the checkpoints to be discussed during the meeting with the industrial park representatives during the site inspection:
- Rent and Management Fees: The lease contract is often for a period of 3 years or more. For rental factories, the rent per square meter is predetermined, but in some industrial parks, additional management fees may be charged. If there are offices and restrooms installed within the factory, the rent for those will also be added. The rent is typically paid in a lump sum of 3 months in advance, and a security deposit of 3-6 months’ rent is required at the time of signing the contract. This deposit is refunded without interest upon vacating the premises. However, some industrial parks may not refund the security deposit if the contract is terminated early, so it is recommended to confirm this in advance. Even if the rent for a factory of similar size is lower, the overall costs may be higher due to incomplete facilities or the inability to terminate the contract midway. Additionally, when purchasing land, it is necessary to confirm the remaining duration of the land ownership rights, which is typically up to 50 years.
- Security System: It is important to confirm the security system (security guards, fences, surveillance cameras) in place for the industrial park.
- Customer Service: It is important to confirm the support system in place in case of facility issues (leaks, power outages, etc.). At a locally-owned industrial park, the staff may not be able to provide Japanese support, so the response may be in English or Vietnamese, which could make quick resolution more difficult.
- License Application: Obtaining the Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC) can cost several thousand dollars in application fees. It is important to confirm in advance whether the tenant or the industrial park will cover these license application costs, as it can vary.
3. Summary
First, it is necessary to obtain information on nearly 500 industrial parks in Vietnam in advance in Japan, and confirm the location, land, rental factories/warehouses, vacant lots, price ranges, and contract terms. From this perspective, it is advisable to obtain basic information from websites like PIVASIA before conducting an on-site inspection, narrow down the industrial parks that match your company’s preferred conditions, and then actually visit the site and select a reliable industrial park. However, it is not easy to identify this with just 1-2 visits. Therefore, it is wise to consult with experienced consulting firms or accounting firms that provide support for market entry. PIVASIA also provides market entry support services, including arranging site visits, so it is advisable to inquire by email.
（Email: [email protected]）
齊藤公(Saito Hiroshi)
Business Advisor
G.A. Consultants Vietnam Co., Ltd
After graduating from university, he joined a PHP research institute and served as the head of the New York office. He then worked on the “Nagoya Port Redevelopment Project” at a subsidiary of the Chubu Nippon Broadcasting (CBC) company. He later shifted his base to Asia, where he was involved in the launch of “FM96.3” in Singapore, and the creation of “Hello Vietnam” and “Invest Asia” magazines in Vietnam. He then joined BW Industrial Development JSC, Vietnam’s largest rental factory development company, where he was responsible for attracting Japanese manufacturing companies. Currently, he is active as a consultant for the entry of Japanese companies at “G.A. Consultants”, one of the longest-standing Japanese HR consulting firms in Vietnam.
