6 major things about investing in industrial parks in Viet Nam

In 2023, Vietnam emerged as one of the most dynamic markets in the industrial real estate sector. The country not only garnered attention from domestic investors but also stood out as a promising destination for international investors. The following article will provide all the essential information that investors need to know when venturing into the industrial real estate market in Vietnam.

Du Long Industrial Park in Ninh Thuan Province has been a standout destination for foreign investors in 2023
Du Long Industrial Park in Ninh Thuan Province has been a standout destination for foreign investors in 2023

1. Current situations of Viet Nam investing in industrial parks

As of December 2023, Viet Nam has established over 620 industrial parks (IPs). Notably, in 2023 alone, 397 new IPs were introduced, covering a total industrial land area of approximately 122,900 hectares, as reported by the Economics and Forecast Magazine. These newly established zones have attracted around 1,075 FDI projects, with a total newly registered capital of USD 36.6 billion, increasing the total number of FDI projects in the country to 3,188.

The trend in Viet Nam’s IP development is increasingly focusing on green industrial zones, particularly in the Northern and Central regions. The investment sectors within these projects are also shifting towards renewable energy and high-tech manufacturing. For more detailed information, readers are encouraged to refer to the article “The Development of Industrial Parks in Viet Nam.”

Bac Ninh, despite being the province with the smallest area, currently boasts the highest number of active industrial parks (Image: Tien Son Industrial Park, Bac Ninh)
Bac Ninh, despite being the province with the smallest area, currently boasts the highest number of active industrial parks (Image: Tien Son Industrial Park, Bac Ninh)

2. 5 Benefits of Investing Industrial Parks in Viet Nam

Investing in industrial parks in Vietnam offers businesses significant advantages compared to other countries worldwide. The top five benefits that enterprises gain when investing in industrial parks in Vietnam include:

  • Competitive land lease prices: Viet Nam offers numerous incentives in the industrial sector to attract international investors. As a result, the land lease prices in Vietnam’s industrial parks are more competitive than those in neighboring countries.
  • Open investment policies: Viet Nam is opening its doors to foreign investment, and the government has implemented open investment policies to facilitate and create opportunities for investors by:
  • Establishing an attractive investment environment: FDI is a major driver of national economic development. An appealing investment environment is crucial to attract substantial FDI.
  • Ensuring basic rights for investors: Investors are guaranteed several rights, including protection against expropriation, guarantees for losses in case of nationalization or destruction due to war, and the right to freely transfer (send) foreign currency abroad.
  • Investment protection and priorities for foreign investors: Foreign investors enjoy encouraging policies and special conditions from the government.
  • Government investment subsidies: The Vietnam government is willing to provide investment subsidies along with loans to facilitate investors in developing their businesses in Vietnam.
  • Attractive Investment Incentives: Vietnam is implementing very practical incentive policies to attract investment in the industrial real estate sector, such as exemptions or reductions in land lease fees, corporate income tax reductions, VAT exemptions, etc.
  • Abundant Labor Force: Vietnam has a labor force participation rate of 68.9% (52.4 million people), with 26.2% being highly skilled labor. This rate is rapidly increasing year by year, indicating that the Vietnam market can provide a plentiful supply of high-quality labor.
  • Rapidly Growing Developing Country: Vietnam’s growth rate in 2023 was over 5.05% compared to the previous year, demonstrating a potential market with rapid growth, offering investors hope for the development of their businesses.
The Vietnam government has implemented very practical incentive policies aimed at encouraging the development of industrial zones (Image: Deep C Industrial Zone, Hai Phong)
The Vietnam government has implemented very practical incentive policies aimed at encouraging the development of industrial zones (Image: Deep C Industrial Zone, Hai Phong)

3. Rules on investing in Vietnam industrial park

Some regulations on investing in industrial parks in Vietnam include provisions on eligible investment participants and permissible investment activities, as follows:

  • Eligible participants in industrial park investment: Enterprises and companies, investors and asset management companies, government agencies and local authorities, non-governmental organizations, and international organizations.
  • Permissible investment activities in industrial parks: Investment activities conducted within industrial parks include leasing or purchasing factories, offices, warehouses, and yards to support manufacturing and business operations. However, it’s crucial to note that certain activities are strictly prohibited within industrial parks, including debt collection services, drug-related activities, trading in certain chemicals and minerals, prostitution, human trafficking, cloning, and the use of explosives.

4. 5 steps investing industrial parks in Vietn Nam

The investment process in industrial parks (IPs) in Vietn Nam involves five basic steps as follows:

Step 1: Preparation of Documentation

Prepare the necessary documents for investment in IPs as stipulated in Clause 2, Article 2 of Circular 09/2021/TT-BTNMT, which includes:

  • Application for land and property transaction registration (Form 09/ĐK).
  • Lease or sublease contract.
  • The original Certificate of Land Use Rights.

Step 2: Establishment of a Legal Entity

  • Sign a preliminary land lease contract: Investors complete the signing of a preliminary land lease contract and perform a deposit transaction. The deposit typically accounts for 10% of the lease amount, and if all legal documents are fully prepared, the deposit can be 20%.
  • Apply for the Investment Registration Certificate (IRC) (up to 35 days): As per Article 35 of Decree 31/2021/NĐ-CP, the government stipulates that the process should take a maximum of 35 days depending on the project’s scale. After receiving the investment policy document, the IP management board needs to receive the application and issue the IRC.
  • Apply for the Enterprise Registration Certificate (ERC) (3-5 days): According to the 2020 Investment Law, foreign investors need to complete the business establishment procedures at the Department of Planning and Investment. The ERC will be issued within 3-5 days from the date the competent authority receives the valid application.

Step 3: Land Handover

  • Sign the land lease contract: After the contract signing is completed, the investor is obliged to complete all related cadastral procedures and documents to be ready for land leasing and handover to the investor.

Step 4: Preparation of Factory Design

  • Submit an Environmental Impact Assessment report (up to 18 days): The Department of Natural Resources and Environment will assess the project’s environmental impact within a maximum of 18 days from receiving a valid application. The report is prepared and controlled based on the regulations in Clause 1, Article 32 of the 2020 Environmental Protection Law.
  • Submit the 1/500 scale urban planning design (15 days): Investors need to submit the planning design, including drawings, models, descriptions, and management according to urban planning, to the Department of Construction.
  • Submit preliminary design documents and fire prevention and fire fighting (FPFF) design for the factory (up to 30 days): As per Article 10 of Decree 136/2020/NĐ-CP, the government has stipulated the PCCC contents that investors need to ensure in the PCCC design. Investors will receive the inspection results within a maximum of 30 days from the submission of the application to the Fire Prevention and Fighting Police Department.

Step 5: Construction of the Factory

  • Submit technical design, construction design, and FPFF design documents (up to 30 days): Investors submit a complete and valid set of documents as regulated, including technical construction design, construction design, and FPFF. The Fire Prevention and Fighting Police Department is obliged to return the inspection results to the investor within a maximum of 30 days of receiving the application.
  • Apply for a Construction Permit: Investors submit 02 sets of applications for the issuance or adjustment of construction permits to the competent construction permit issuance authority. The Department of Construction is obliged to appraise the project within 07 days from the date of receipt of the application.
  • Apply for the Land Use Rights Certificate: As per the 2013 Land Law and Circular 23/2014/TT-BTNMT, the investor needs to submit 01 sets of documents to the Department of Natural Resources and Environment. The department is obliged to issue the Land Use Rights Certificate within no more than 30 days from the date of receiving the application.
Viet Nam has standardized the process for industrial park investment (Image: Investment process of Du Long Industrial Park, Ninh Thuan Province)
Viet Nam has standardized the process for industrial park investment (Image: Investment process of Du Long Industrial Park, Ninh Thuan Province)

5. Price and incentives

Investors need to have a clear understanding of the costs and investment incentives in industrial parks to make necessary adjustments and considerations when utilizing their capital:

5.1. Price

When participating in industrial park investments in Viet Nam, investors are required to cover various expenses, including those to the government and the industrial park, which encompass:

  • For the Government: Non-agricultural land usage taxes.
  • For the industrial park: Management fees, infrastructure investment, wastewater volume, and treatment charges, as well as fees for electricity, water, and other telecommunications utilities.

5.2. Incentives

To promote the development of industrial parks in Viet Nam, the government has implemented numerous practical incentive policies to stimulate the demand for industrial park investments in Viet Nam, including:

  • Income tax: Businesses may receive tax incentives with reduced tax rates of up to 10%, income tax exemptions for the first 4 years, and a 50% reduction in taxes payable for the following 9 years, depending on the type of business.
  • Import tax: Companies may be exempted from or receive reduced import taxes on raw materials, materials, machinery, and production equipment, as well as special regulations for export goods. This policy helps reduce production costs, enhance competitiveness, and attract investments into domestic industries.
  • Value-added tax (VAT): The government provides VAT exemptions for raw materials, and input materials, as well as new machinery and equipment for production. Moreover, exports from industrial parks may also enjoy VAT exemptions or reductions. These policies play a crucial role in attracting investments and fostering industrial development.
  • Land rental/land tax: The government often grants land rental exemptions or reductions to initial investors. For large-scale projects, special measures may be considered to ease financial burdens on businesses. These policies create favorable conditions for enterprises and encourage investments in vital industrial projects.

6. 5 sidenotes when investing in industrial parks

With the basic information provided above, readers can grasp essential factors when engaging in industrial park investments. We have summarized below 5 considerations to help investors make more effective investments in industrial parks:

6.1. Basic information of the industrial park

To choose a suitable industrial park, investors should pay attention to fundamental information such as geographic location, infrastructure, internal facilities, occupancy rates, incentive policies, the reputation of the investor, and the predominant industries within the industrial park:

  • Geographic location: Businesses should select industrial parks with favorable geographic locations that not only save transportation costs but also facilitate trade with neighboring regions. The most ideal industrial parks are those situated near economic centers, seaports, airports, national highways, and expressways.
  • Completed infrastructure: Investors need to choose industrial parks with completed infrastructure and high-quality infrastructure that meets the production needs of businesses.
  • Occupancy Rates: This is an important but often overlooked factor. Investors can refer to the industrial park occupancy rate to find a suitable occupancy rate for their business.
  • Industry activities: Industrial parks will be personalized to fit the list of prioritized industries. Prior research on the companies operating within the industrial park helps investors ensure that their business aligns with the industrial park’s activities and seeks opportunities to establish supply chains within the park.

An ideal industrial park is a place that meets fundamental factors, including completed infrastructure, a suitable geographic location, not excessively high occupancy rates, and available land for new investors. In addition, investors can further consider factors such as incentive policies and preferred industries within the industrial park. For businesses in specialized industries, investors need to ensure that the industrial park’s infrastructure supports their production activities without causing adverse environmental effects.

6.2. Investment procedures

Currently, Vietnam has clear regulations on preparing documents and procedures for investment steps. However, each province and industrial park may have its adjustments to suit the investment activities of their region.

Therefore, investors need to thoroughly understand the investment procedures, and the necessary documents to optimize the initial preparation time and prevent unfortunate incidents. Especially if your business belongs to the list of specialized industries, make sure that the industrial park has enough permits to authorize your business to operate.

6.3. Preparing capital before investing

Investing in an industrial park is a form of investment that requires significant capital resources. Investors need to prepare sufficient capital resources to ensure long-term investment activities, including capital for the initial investment preparation phase, construction, and production and business stages.

In addition, the investor will have to pay fees to the industrial park, including management fees, electricity prices, water prices, waste treatment fees, and non-agricultural land use taxes for the government. Therefore, investors need to plan their costs and learn more about the incentives of the state and the specific incentives of the industrial park to minimize input costs.

Du Long IP is open to attracting investment with many incentives for domestic and foreign investors.

6.4. Market risk assessment

During economic downturns, Vietnam’s industrial real estate sector is one of the most positively developing countries. Currently, the Southern region has an occupancy rate of up to 92%, and land rents are predicted to increase by 3-7% in the coming year. Meanwhile, the Central and Northern regions have lower occupancy rates, and costs are more favorable.

Investors need to evaluate and grasp market trends before deciding on an industrial park. Efficient risk management will help businesses avoid potential market challenges.

Thanks to its development potential and rapid growth rate, investing in industrial parks in Vietnam is one of the most attractive areas of investment for both domestic and foreign investors. Readers can follow and reference the latest investment updates on our website https://dulongip.vn/

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