Overview of Industrial Parks in Southern Vietnam
History of Formation
Under the Saigon government, the economy of southern Vietnam was primarily oriented towards serving the needs of the war, as a result, the industrial sector was both underdeveloped and imbalanced. Industrial facilities were generally small in scale and mostly concentrated in major urban areas.
In the electricity sector, the entire southern region at that time had only one hydroelectric power plant (Da Nhim), a few oil-fired thermal power plants, and the rest were mostly independent diesel power generation clusters.
The chemical industry also only had a few manufacturing facilities producing consumer chemical products such as tires, paints, plastics, detergents, MSG, etc. As for the light industry, the situation was not much better: the goods supplied to the market were mainly a few types of textile products, paper, beer, soft drinks, cigarettes, canned milk, instant noodles, etc. As for concentrated industrial parks (IPs), the entire southern region had only one IP, which was Bien Hoa IP (currently known as Bien Hoa IP 1), which was still under incomplete investment at that time. .
Sau năm 1954, ngay từ những ngày đầu chính quyền Sài Gòn đã dựa vào Mỹ xây dựng nền kinh tế thị trường tự do và sau đó bị chi phối bởi chủ nghĩa thực dân mới của Mỹ. In the late 1950s, the Dong Nai industry began to build the Dong Nai Paper Mill and the Tan Mai Paper Mill. By 1963, when the Bien Hoa Industrial Company (SONADEZI) was established, it had built the Bien Hoa industrial zone on an area of 376 hectares, and the Dong Nai industry began to develop according to the concentrated industrial production model. However, the operation of the production facilities in the Bien Hoa Industrial Park before 1975 was completely dependent on imported raw materials and spare parts from capitalist countries. Therefore, when the Bien Hoa Industrial Park was taken over, the situation of factories not using their full capacity or suspending operations occurred frequently. .
As for heavy industry, apart from a few mechanical and metallurgical facilities mainly serving the war effort or only performing simple assembly work (such as the Vicasa, Vikimco factories, which only rolled small-sized construction steel, produced barbed wire, and ballistic nets B.40; Caric, Ba Son mainly serviced warships; Vikyno, Vinapro also only assembled small-capacity agricultural and fishing machinery, etc.), the rest were mostly service workshops for maintenance, repair, and overhaul of machinery and equipment, as well as manufacturing of consumer goods and hardware, but there was not a single mechanical engineering manufacturing facility.
Given this reality, coupled with a series of difficulties in the early post-liberation period (such as shortages of raw materials and supplies for production; many factory owners and technical/managerial staff had fled), even though the factories and enterprises were largely preserved when the revolutionary government took over, the industrial sector still had to be rebuilt almost from scratch.
The period from 1975 to 1980 was the period when the industry in the South had to concentrate its efforts on the task of restoring production. During those years, the North once again devoted human and material resources to support the South. Thousands of management cadres, technical cadres, and skilled workers from factories and enterprises in the North were mobilized to the South, bringing not only experience but also materials, equipment, and essential spare parts; thousands of army cadres and soldiers were transferred to the industrial sector to supplement the existing workforce. Central ministries and sectors all prioritized the South in allocating material quotas, product sales plans, and human resource training… As a result, within a relatively short time, most industrial facilities were restored and production resumed, directly contributing to the development of the country’s industrial sector as a whole.
In the 1980s, amid the country’s economic difficulties due to the impacts of the border war, embargoes, natural disasters, storms, and floods, as well as many policy shortcomings, the industry in the South still maintained its upward momentum, transitioning from the recovery phase to the development phase. The proportion of industry in the southern provinces in the overall industrial structure of the country steadily increased, becoming an important driving force for the country’s industrialization and modernization. The total industrial production value of the entire industry sector gradually increased, from around 25% in 1980 to 33-35% in the period 1989 – 1990..
Thời kỳ này được đánh dấu bằng sự ra đời và phát triển của một số ngành công nghiệp mới như dầu khí, điện tử, thiết bị kỹ thuật điện, sản xuất vật liệu xây dựng…
From the late 1980s, with the goal of exploiting the full industrial development potential of the southern region in order to quickly overcome the imbalance between regions and within each region in terms of economic structure and level of development, the Party and the State paid attention to strengthening the measures to adjust the industrial development structure, by focusing more on the development of industry in the South. Emphasis was placed on investing in large-scale projects, especially in the fields of energy, oil and gas, fertilizers – chemicals, construction materials, and heavy machinery.
Subjectively, although starting from a relatively low point, the industrial sector in the southern provinces had an advantage in that it had earlier access to the market mechanism and was less affected by the subsidy-based way of doing business. Therefore, when the country entered the Doi Moi (Renovation) period, the industry in the South had the conditions to leverage its advantages and began to experience rapid development.
Throughout the 1990s, numerous factories and enterprises were invested in and constructed, and many new industrial parks were established in various provinces and cities. This created a new profile for the industry in the southern provinces. Due to favorable natural and social conditions, as well as an open mechanism and policies, foreign investment in industry in the southern provinces increased significantly during this period. This was also the period when the key economic region in the South was formed, with Ho Chi Minh City and the provinces of Ba Ria – Vung Tau, Dong Nai, and Song Be (now Binh Duong and Binh Phuoc) as the core. In the late 1990s, due to the impact of the regional financial crisis, the growth rate of the industrial sector in general, including the industry in the southern provinces, slowed down, but still maintained a level of over 10% per year.
In 1990, Dong Nai province established the Bien Hoa Industrial Park Development Company (Sonadezi Bien Hoa). This enterprise invested capital, renovated, and upgraded the infrastructure of Bien Hoa Industrial Park 1 (the largest industrial area in Vietnam before 1975 – in a state of disrepair), called for and attracted foreign investment, and laid the foundation for development in the new period. Currently, this is still a thriving industrial park with hundreds of operating enterprises.
In the 21st century, the development of industry has become a widespread movement. The 9th Party Congress set the starting point for accelerating industrialization and modernization of the country. More than half of the 34 southern provinces and cities have identified the number one position of industry in the economic structure in their localities. As a result, the industry in the southern region has continued to develop strongly and achieved many encouraging results. In 2004, among the eight provinces and cities with an industrial production value of 10 trillion VND or more, the South had four (50%), and the proportion of these four provinces and cities in the total national industrial production value reached 59%. Out of 68 industrial parks established by the Prime Minister’s decision (excluding the Chu Lai open economic zone and the Dung Quat economic zone), 55 are located in the southern provinces. Furthermore, out of 42 industrial parks currently under infrastructure construction, the southern provinces also account for 26.
Regarding industrial products, enterprises in the southern region currently have an advantage in several industries such as oil and gas (nearly 100%), electricity (around 60%), textiles and garments (around 70%), leather and footwear (75%), nitrogenous fertilizers (70%), seafood processing (over 70%), etc. Southern enterprises have always led the way in technology innovation, market access, new product development, building modern business practices, implementing industrial promotion activities, and developing industrial parks (including small industrial zones and clusters).
Reference article: Overview of the Northern Industrial Park in Vietnam
2. Current Development Status
The Southern region includes 17 provinces and cities, among which the Ho Chi Minh City area and the surrounding provinces are the most dynamic economic regions nationwide.
The industrial land supply in the 5 key provinces, including Ho Chi Minh City, Binh Duong, Dong Nai, Long An, and Ba Ria – Vung Tau, exceeds 25,000 hectares. The average rental rate for industrial land is $135 USD per square meter per lease term. Among these, Ho Chi Minh City leads the others with a rate of $198 USD per square meter per lease term, which is double the rates in Binh Duong and Ba Ria – Vung Tau.
The occupancy rate of industrial land in the South reaches 98%. Despite being affected by social distancing measures in 2021, the demand for industrial land leasing has still increased significantly. Typical examples are the land lease deals of Coca-Cola at the Phu An Thanh Industrial Park and Lego at the VSIP Industrial Park.
In the process of integration, southern enterprises have also proven their pioneering role. With such a development momentum, it can be predicted that in the coming years, the industry in the southern provinces will still maintain a leading position in the entire industry. In fact, among the 5 provinces and cities with the most active industrial parks, 4 are in the South: Dong Nai, Binh Duong, Ho Chi Minh City, and Long An. Dong Nai is currently the province with the largest number of operating industrial parks in the country, with 31 industrial parks. The largest industrial parks include: Phuoc Dong – Tay Ninh Industrial Park (2,190ha), Becamex – Binh Phuoc Industrial Park (1,993ha), and Hiep Phuoc – Ho Chi Minh City Industrial Park (1,686ha). Ho Chi Minh (1.686ha).
Specifically, the total leased industrial park area in the market reached 28,000 hectares, an increase of 0.6% quarter-on-quarter and 5.2% year-on-year. The rental rate reached $167 per square meter per lease cycle, up 1% quarter-on-quarter and 8.5% year-on-year. The average occupancy rate was 81.8%, stable quarter-on-quarter but down 2.8 percentage points year-on-year.
According to Cushman Wakefield, after about 2-3 years without new industrial park land supply in the Southern Key Economic Region (SKER), the third quarter of 2023 witnessed new supply from Long An province (Nam Tan Tap Industrial Park developed by Saigontel company), contributing around 171 hectares to the market.
Long An and Ba Ria – Vung Tau have the highest net absorption rates, accounting for around 59% and 28% respectively. The market performance is relatively good thanks to the recovery of the industrial manufacturing sector.
According to Cushman Wakefield, it is expected that there will be ample new industrial park land supply entering the market. From now until 2026, the future supply is estimated to be around 5,700 hectares, mainly coming from the provinces adjacent to Ho Chi Minh City such as Binh Duong, Dong Nai, Long An, and Ba Ria – Vung Tau. Given the high demand for land leasing, the land rental rates are forecast to continue the upward trend.
For the factory/warehouse market, according to Cushman Wakefield, the market supply reached 5.4 million square meters, up 0.6% quarter-on-quarter and 12.9% year-on-year. The average rental rate stood at $4.7 per square meter per month, stable quarter-on-quarter and year-on-year. The occupancy rate was 73.2%, up 2.4% quarter-on-quarter but down 12.2% year-on-year.
In general, the Southern region has several objective advantages in terms of natural conditions such as geography, climate, resources, raw material supply, and labor. It has a system of deep-water ports and the country’s largest international airports, which is favorable for transportation. With the synchronized development of maritime, railway, road, and air transportation networks, Ho Chi Minh City and the surrounding provinces are the most dynamic economic region in the country, contributing to the development of the South and becoming a preferred destination for new manufacturers entering Vietnam. As a long-established industrial center, the South concentrates a large number of traditional industries, such as rubber and plastics, as well as the textile and garment sectors.
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