We support FDI enterprises who seek for setting up factories in Vietnam

We support FDI enterprises who seek for setting up factories in Vietnam

Choosing locations in Vietnam Industrial Zones
Industrial zones are specific areas earmarked by the government for the production of goods and services. Industries are usually concentrated in certain industrial zones, which provide incentives for businesses that set up there. Industrial zones are popular investment locations for FDI into Vietnam. As of 2018, according to Vietnam briefing reports, there are 328 industrial zones countrywide, 249 of which are in operation. By the end of 2018, industrial and economic zones had attracted 7,500 domestic projects worth US$41.75 billion and around 8,000 foreign projects with a total capital over US$145 billion.

While industrial zones are convenient go-to locations for foreign businesses to set up business in Vietnam, investors should take time to narrow down their list of potential places to visit. Below is an overview of the characteristics of Vietnam’s key economic regions.

The North
Vietnam’s key economic regions in the North include the provinces of Hanoi, Hai Phong, Quang Ninh, Hung Yen, Hai Duong, Bac Ninh and Vinh Phuc. These provinces together account for 16.2 percent of Vietnam’s population and 4.7 percent of its landmass.

Vietnam’s Northern key economic regions are the hub for enterprises looking to supplement its existing manufacturing in China with lower labor costs while maintaining a strategic location of close proximity to China.

Advantage

The influx of investment in heavy manufacturing and petrochemicals into the northern regions lead to concentrated talent and infrastructure suited to this business-line. The resulting talent pool can be one of the considerations for investors assessing business locations in this region.Cities such as Hanoi and Hai Phong have ample supplies of qualified workers and institutions that provide for specialized labor.

Disadvantage

Due to the area’s primary focus on heavy manufacturing, investors in heavy manufacturing will find the concentration of infrastructure and talent work to their advantage while investors in other sectors, such as IT, do not benefit from these networks. Land availability is also a growing concern in Northern Vietnam compared to other locations within the country. It is important for investors to explore rent or purchase options before setting up operations in the North.

The Central
Vietnam’s central key economic regions include Da Nang, Thua Thien Hue, Quang Nam, Quang Ngai, and Binh Dinh.The region accounts for 7 percent of the national population

Advantage

Investment environment is less competitive than the fully explored hubs in the north and the south. In recent years, the city of Da Nang emerges as a hub of seafood, food processing, and manufacturing. In addition to production, Da Nang also benefits from a greater degree of urban planning and development due to private partnerships between governmental authorities and investors. This may create downstream benefits for FDI in the region. See more below: Top cities to start your business in Vietnam

Disadvantage

Talent pool in the Central is more limited than in other regions. Workers in technical fields often find greater opportunities in North or South Vietnam and are likely to leave the region. However, many Vietnamese appreciate the quality of life in Da Nang and are likely to relocate if offered an attractive opportunity.

The South
The Southern economic regions encompass the provinces of Binh Duong, Binh Phuc, Long An, Ho Chi Minh City, Tay Ninh, Dong Nai. Vietnam southern regions attract the most FDI projects according to Vietnam Briefing, with 793 projects listed in 2017.

Advantage

The region is economically diversified, suitable for small and medium sized enterprises. Businesses from more niche sectors are likely to find the South a more suitable investing location than other regions. Given the availability of various institutions that provide for the workforce, in recent years Ho Chi Minh city has emerged as a major hub for startups.

Its large population also makes consumption another advantage of the region. Investors seeking to establish brand identity with Vietnamese consumers are likely to find opportunities in the South.

Disadvantage

Vietnam Southern economic regions lack the strategic proximity to China. Thus, investors ith time sensitive production chains would find the Northern region more suitable. Although the talent pool is available and diverse in Southern Vietnam, competition is high between employers.

Narrowing down your list of potential business locations in Vietnam
In considering where to locate operations of a foreign invested enterprise, investors should take into account: industry specialization, labor, infrastructure, and tax incentives.

Industry specialization
Finding an industrial zone specializing in similar or parallel industries is important for foreign investors seeking to utilize the benefits available in the zone. Infrastructure and other facilities are often tailored to the needs of the industries. Investors in these industries are likely to benefit from these specialized facilities and infrastructure networks.

Labor
The clustering of talent is also influenced by the concentration of industries in specific zones. Jobseekers often relocate to industrial izones due to the concentration of employment opportunities. Certain large industrial zones also include institutions to provide a steady stream of talent. Choosing a zone that specializes in the industry will better guarantee the supply of talent in the field. This is especially true of the Central industrial zones, where talent pool is limited and finding skilled labor for niche industries poses a challenge.

Infrastructure
Infrastructure remains a constraint on FDI in Vietnam, which can suffer from lagging access to utilities, inputs, and transport networks necessary for operations. Infrastructure deficits can delay global value chains. Tax incentives and the availability of infrastructure offered by industrial zones provide a solution, assisting companies in a range of operational areas.

Proximity to ports, key road networks, and rail systems offers another significant asset to businesses. Industrial zones are usually located adjacent to a port or attached to an existing port complex. Some zones are directly linked to key roads and railway networks that reduce the time of transporting goods in and out of the country.

Incentives
Preferential tax rates are available to investors located in industrial zones in Vietnam. Other indirect taxes, such as Value Added or Special Consumption Tax, may also be reduced on a good-by-good basis. These tax incentives can help offset the higher wages and rental fees in these areas.