The Shift Towards Green Industrial Zones in Vietnam
Factories at the Long Thành Industrial Park in Đồng Nai Province. — Photo szl.com.vn
HÀ NỘI — Traditional industrial zones in Vietnam are navigating a significant transformation, increasingly giving way to industrial parks designed with green and sustainable practices at their core. This shift aligns with global trends where eco-friendly solutions are prioritized, making these modern zones more attractive to investors seeking sustainable operations.
The Importance of Green Industrial Zones
The emergence of green industrial zones reflects a broader commitment to cleaner production and minimizing environmental impact. With a significant aim to achieve zero carbon emissions by 2050, constructing these zones is not simply about aesthetics; it’s a strategic move that seeks to attract investments into the growing green industry sector. The focus on sustainability holds the promise of fostering long-term economic resilience while contributing to environmental preservation.
Government Initiatives and Investors’ Interests
Deputy Minister of Planning and Investment Nguyễn Thị Bích Ngọc has emphasized that fostering a transition to a green and circular economy within these industrial areas is essential. This transition not only enhances local competitiveness but also ensures sustainable development on a larger scale. With 403 operational industrial zones currently, the push towards eco-industrial zones has the potential to leverage significant private sector investment for implementing green solutions, securing energy, and bolstering climate change mitigation efforts in Vietnam.
Future Projections for Eco-Industrial Zones
According to a summary report from the Ministry of Planning and Investment, by 2030, 40-50% of localities will formulate strategies to convert existing industrial zones into eco-industrial equivalents. Furthermore, an ambitious plan indicates that 8-10% of local governments will establish new eco-industrial zones beginning with construction planning and targeted investment attraction efforts.
Trends in Investment Locations
The mapping of investment flows reveals an interesting shift. MB Securities JSC (MBS) has noted a significant movement of investment capital towards secondary markets, which are located outside major urban areas. The reasons for this trend include the abundant supply and lower rental costs in these regions, making them increasingly appealing compared to their urban counterparts.
Regional Insights on Foreign Direct Investment (FDI)
In the northern part of Vietnam, recent statistics showcase a notable influx of FDI into secondary markets. Quảng Ninh Province, for instance, attracted over $3.1 billion, placing it third nationally for FDI in 2023. The province’s Jinko Solar Hai Ha photovoltaic cell project—which boasts a $1.5 billion investment—exemplifies this trend of attracting significant foreign capital.
Similarly, Bắc Giang Province reported a $3 billion inflow, aided by the establishment of the Hana Micron Vina 2 semiconductor production project. Interestingly, the share of FDI directed into secondary markets has surged dramatically, climbing from 20% in 2018 to 53% in 2023, emphasizing the attractive conditions these regions offer.
Insights from the Southern Region
Meanwhile, the southern region is witnessing a similar trend. FDI influx into secondary markets increased from 21.6% in 2022 to 23.2% in 2023. Bà Rịa-Vũng Tàu Province successfully attracted over $1 billion in FDI, highlighted by Hyosung Vietnam’s $540 million investment in production projects. Bình Phước Province also reported productivity with over 40 FDI projects and an investment total of $758 million.
Industrial Land and Pricing Trends
As of the end of 2023, Vietnam’s total industrial land area reached approximately 89,200 hectares, marking a 1.5% increase. Notably, the leased industrial land area rose by 5.7% to nearly 51,800 hectares, with an occupancy rate hovering around 57.7%. The industrial parks operational in the country have shown an occupancy rate of approximately 72.4%, illustrating a flourishing sector.
Rental prices vary significantly between regions, with the southern area maintaining stable rates at around $168 per square meter, while northern rentals surged by 10% to $123 per square meter. This disparity reflects the burgeoning demand for industrial land amid constrained supply in urban areas.
Future Opportunities and Challenges
Despite the positive indicators in investment and industrial development, the landscape is not without challenges. Increased competition from other countries, alongside risks such as potential electricity shortages that could hinder production, require careful navigation. Companies that possess substantial clean land resources and stable finances are positioned for sustainable growth amidst these shifting dynamics.
Insights on Future FDI Growth
In 2023, SSI Securities Corporation reported that disbursed FDI capital in Vietnam reached $23.2 billion, a 3.5% increase from the previous year, with a focus on the manufacturing sector. The total committed FDI capital surged by 24.4% to $28.1 billion, a trend that is expected to continue. Industrial parks are anticipated to see heightened demand, particularly in electronics and semiconductor sectors, reflecting the strategic shift of production bases to Vietnam.
Performance of Industrial Real Estate
The industrial real estate sector has also shown resilience. Many companies have reported robust profits in recent years, illustrating the health of the market. For instance, Becamex (BCM) reported a revenue increase of nearly 25% in 2023, reaffirming its strong position within the industry. Similarly, Sonadezi Long Thành (SZL) and Sonadezi Châu Đức (SZC) also showed promising growth, reflecting a healthy industrial real estate market.
As Vietnam looks forward to fortifying its industrial sector, the movement toward eco-industrial parks and the accompanying strategies to attract investment undoubtedly reflect a significant pivot towards sustainability and growth.