Trending Towards Green Industrial Parks: A Shift in Vietnam’s Economic Landscape

In an age where sustainability is becoming a top priority for businesses worldwide, Vietnam is making significant strides in transforming traditional industrial zones into eco-friendly spaces. Experts argue that the shift towards green industrial parks is crucial, offering not just environmental benefits but also an enhanced competitive edge to attract investments.

The Rise of Green Industrial Zones

The evolution of industrial zones in Vietnam is marked by a comprehensive focus on sustainability. Green industrial parks are designed with an emphasis on cleaner production practices and minimizing environmental impacts, aiming to achieve zero carbon emissions by 2050. This global trend reflects a growing awareness of the importance of sustainable practices in industrial operations.

Deputy Minister of Planning and Investment, Nguyễn Thị Bích Ngọc, highlighted that transitioning to a green and circular economy is pivotal for enhancing competitiveness within these zones. The move aligns with not only local but also global sustainability objectives, ensuring that Vietnam remains a key player in the eco-industrial sector.

Mobilizing Private Sector Resources

Vietnam boasts 403 operational industrial zones, and the push for eco-industrial development aims to mobilize significant resources from the private sector. This initiative is expected to implement innovative green solutions, strengthen energy security, and contribute substantially to Vietnam’s efforts against climate change. By embracing green growth and circular economy practices, the Vietnamese government demonstrates a strong commitment to sustainable development.

The Ministry of Planning and Investment’s report on three decades of industrial development indicates that by 2030, 40-50% of localities plan to transform existing zones into eco-industrial parks. Additionally, around 8-10% aim to establish new ones, setting the stage for a vast overhaul that emphasizes sustainable practices from conceptual planning through implementation.

Investment Trends Shifting Toward Secondary Markets

Interestingly, a trend has emerged where investment capital is shifting towards secondary markets located away from major cities. Observations by MB Securities JSC (MBS) indicate that these areas provide substantial opportunities due to lower rental prices and abundant land supply.

Despite the modern challenges facing industrial zones, including competition from countries like India and Indonesia, Vietnam retains competitive advantages. Attractive labor costs, coupled with favorable trade agreements, position the country well as it seeks to draw in foreign direct investment (FDI), particularly in high-tech sectors.

Regional Insights: The North and South

In northern Vietnam, there has been a notable influx of FDI into secondary markets. Quảng Ninh Province successfully attracted over $3.1 billion in FDI in 2023, with significant projects like the $1.5 billion Jinko Solar Hai Ha photovoltaic cell project making headlines. Similarly, Bắc Giang Province saw an impressive $3 billion in FDI, fueled by burgeoning semiconductor production.

The southern region is witnessing a parallel trend. For instance, Bà Rịa-Vũng Tàu attracted over $1 billion, while Bình Phước reported a dramatic increase in FDI projects. The enthusiasm for industrial land in secondary markets is reflected in the current low occupancy rates and rental prices, further enticing investment near urban centers.

Current State of Industrial Land and Rental Trends

As of the end of 2023, Vietnam’s total industrial land area reached 89,200 hectares, a slight increment from the previous year. The total leased area stood at nearly 51,800 hectares with an occupancy rate approximating 57.7%. Operational industrial zones saw a higher occupancy rate of around 72.4%, indicating steady demand in certain regions.

In terms of rental costs, stability in the southern region recorded prices at $168 per square meter. In contrast, the northern region observed a 10% increase, leading to rates of $123. MBS remains optimistic about the industrial park sector’s future, pointing to stable macroeconomic conditions and improved relations with key economies as influencing factors.

Challenges on the Horizon

Though the outlook appears promising, businesses must adapt to new challenges, such as increased global competition and the risk of energy shortages. Companies with ample land and healthy financials are well-positioned for long-term growth in this competitive landscape.

Moreover, SSI Securities Corporation reported disbursed FDI capital in Vietnam reached $23.2 billion last year, primarily within the manufacturing sector. The commitment to investment remains high, bolstered by interest in manufacturing and renewable energy sectors, indicating a bright horizon for Vietnam’s industrial zones.

Exciting Developments in 2024 and Beyond

Looking ahead, industrial parks in Vietnam are expected to capitalize on the demand for land rental, primarily driven by the electronics and semiconductor industries in the north. Meanwhile, the south may experience a technical recovery, notably with businesses involved in textiles and logistics, contributing to the economic vitality of the region.

The solidity of the business environment is reflected in the substantial profits reported by major industrial real estate companies in 2023. For example, Becamex (BCM) reported a budget of approximately VNĐ8.2 trillion, showcasing impressive growth. Other notable mentions include Sonadezi Long Thành (SZL) and Sonadezi Châu Đức (SZC), both reflecting an upward trajectory in their financial performance.

The evolving landscape of industrial zones in Vietnam, with a clear tilt towards sustainability, signifies an exciting chapter in the country’s economic development, presenting opportunities for investors while fostering environmental stewardship.