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Viet Nam
Industrial Park Situation
Text by Saito Hiroshi
The 1st: Types of Industrial Parks
In Vietnam, it is common to operate within government-approved industrial parks for manufacturing. According to the latest announcement from the Ministry of Planning and Investment of Vietnam, there are about 488 industrial parks in the country. Among these are Japanese industrial parks operated by Japanese trading companies, as well as non-Japanese industrial parks that have Japanese staff who can provide various support in Japanese. In this article, we would like to provide guidance on the key points for selecting industrial parks for Japanese companies entering the market, as well as the necessary procedures and precautions before starting manufacturing operations.
Types of Industrial Parks
Industrial parks can be broadly divided into the following three types:
- Land subdivision: In this model, the industrial park developer subdivides the land and sells it to tenants, who then construct their factories on the purchased land. However, even if the land is purchased, the ownership rights are limited to a maximum of 50 years, so it is important to check the remaining years of ownership.
- Rental: The industrial park developer constructs standard rental factories and leases them to tenants. The rental contract period is usually three years or more. This model is popular because it can reduce initial investment and makes withdrawal easy in case of unexpected circumstances, thus reducing risks for small and medium-sized enterprises. However, it is necessary to check if the specifications, such as ceiling height and floor load capacity, meet your company’s requirements. Internationally, rental factories are referred to as RBF (Ready Built Factory) in English.
- BTS (Build to Suit): In short, a customized rental factory. The industrial park developer constructs a factory on their land at their own expense based on the tenant’s requirements and charges the construction cost to the tenant as part of the monthly rental fee under a scheme that usually involves a 5-year or 10-year contract.
This scheme is recommended if standard rental factory specifications are not suitable but you want to avoid the initial investment of purchasing land and constructing your own facility.
The appropriate type depends on the size of the factory and the budget, but it is generally said that for factories with a size of 5,000 square meters or more, it is more efficient to purchase land and construct your own factory.
Many Japanese manufacturing companies have expanded their operations in Vietnam.
Industrial park development companies in Vietnam can be broadly categorized into three types:
- Local capital: Industrial parks with Vietnamese capital account for the majority in terms of numbers. Although land and rental costs are low, there are often issues with infrastructure and language support, making them less recommended.
- Japanese capital: Industrial parks invested by major Japanese trading companies such as Sumitomo Corporation and Sojitz have Japanese staff and well-developed infrastructure, but land and rental costs are set higher.
- Non-Japanese foreign capital: There are industrial parks developed by foreign investors from Europe or Singapore. These parks do not have infrastructure issues and some even have Japanese staff. Compared to Japanese-invested parks, land and rental costs are generally set lower.
Basically, the application for necessary licenses when expanding operations (company establishment, investment permits, etc.) is often handled by the industrial park development companies. However, in local capital industrial parks, they often only provide support in Vietnamese or English, making the process very challenging. Additionally, issues arising after expansion (for example, leaks in the factory or broken equipment like shutters) are also typically handled by Vietnamese staff, so quick responses cannot be expected.
As mentioned earlier, the first step is to consider whether to purchase land or rent, and then decide whether to choose Japanese capital or non-Japanese foreign capital.
Selection based on industry and location.
Even in manufacturing, the criteria for selecting an industrial park vary depending on the industry and location.
- High-tech industry: In high-tech parks such as Danang High-Tech Park, Saigon High-Tech Park, etc., companies that meet high-tech criteria can enjoy preferential tax incentives.
- Heavy industry: In southern Ho Chi Minh City, areas like Long An Province have weak ground conditions, so it’s important to avoid such areas. Additionally, for rental factories, the floor load capacity varies in each industrial park, so it’s crucial to confirm this initially. If the load capacity of a rental factory is insufficient, additional construction work is possible, but it will incur extra costs.
- Supply chain industry: Companies that supply components and materials to manufacturers often choose industrial parks close to their customers’ factories to reduce transportation costs.
- Export processing enterprise: Companies that manufacture products in Vietnam and export them entirely can be exempt from import duties if they obtain an EPE (Export Processing Enterprise) license.
However, obtaining this license involves various conditions and is not easy. If located in an export processing zone certified industrial park, no application is required and import duties are exempted.
In this way, it is crucial to first research the background, services, and other aspects of each industrial park, and then consider the industry sector and location that best suit your company.
(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.
