Understanding Hai Phong: Vietnam’s Rising Economic Hub

Located about 120 kilometers east of Hanoi, Hai Phong emerges as not just the biggest port city in Northern Vietnam but also a crucial economic center of the country. Ranking as the third-largest city after Ho Chi Minh City and Hanoi, it plays a pivotal role in the nation’s industrial development. With a thriving population of around 2.07 million as of 2021 and an expansive area of 1,527 square kilometers, Hai Phong stands out among Vietnam’s municipalities, which include notable cities like Hanoi, Ho Chi Minh City, Can Tho, and Da Nang.

Strategically located on the edge of the Red River Delta and near the border with China, Hai Phong boasts a highly advantageous position as a major trading hub. This city uniquely supports five modes of transportation: rail, road, air, inland waterways, and maritime, which together amplify its potential for large-scale manufacturing and economic zones across Southeast Asia.

Growth Trajectory: Hai Phong’s Economic Statistics

Recently, Hai Phong has consistently ranked among the top two regions in Vietnam for rapid growth in Gross Regional Domestic Product (GRDP). From 2017 to 2021, it recorded an impressive annual growth rate of 15.26%, nearly doubling the growth seen in 2012-2016 and standing 2.9 times higher than the national average. In 2021, its GRDP reached approximately $13.58 billion, marking a growth rate of 12.38% year-on-year, even in the face of pandemic challenges.

In the initial half of 2022, the city’s growth continued at a commendable rate of 10.04%, demonstrating resilience and potential for further expansion. Industry and construction are vital sectors, enjoying the fastest growth at 19.04% in 2021, with manufacturing playing an essential role in bolstering the economic backbone of Hai Phong.

Sectoral Composition of Economic Growth

The industrial and construction sectors dominate Hai Phong’s economy, contributing a remarkable 52.86% to the GDP, followed by services at 37.35%. Agriculture and related sectors contribute a modest 3.97%. As the city moves towards industrialization, there’s a noticeable shift that favors manufacturing and services over traditional agricultural practices.

Trade Performance

Export activities in Hai Phong are robust, with an estimated total export turnover of $26.51 billion in 2021, reflecting a year-on-year increase of 23.99%. Similarly, the import turnover saw a surge of 25.84%, amounting to about $25.77 billion. These trade figures reveal Hai Phong’s significant integration into global supply chains.

Infrastructure Developments: Supporting Economic Growth

Infrastructure enhancements are a focal point for Hai Phong’s local government. Plans are in place to construct an additional 100 bridges, requiring an investment of $3.6 billion. Notably, Lach Huyen Port, Northern Vietnam’s largest deep-sea port, is set for expansion with the introduction of new terminals, boosting the city’s logistical capabilities.

Significantly, the Hanoi-Hai Phong Expressway, along with the forthcoming Hai Phong-Ha Long Expressway, will play crucial roles in enhancing transportation efficiency across key economic areas. As these projects materialize, they promise to lower transportation costs and stimulate cross-border trade, especially with China and neighboring ASEAN countries.

Attracting Foreign Direct Investment (FDI)

Investment Climate and Performance

As of 2022, Hai Phong stands as Vietnam’s sixth-largest recipient of FDI, with total registered investment capital reaching $24.15 billion. The city is home to 12 operational industrial parks and approximately 420 FDI projects from a diverse range of countries, including Japan, South Korea, and the EU. Major investments include significant projects from LG Display, Bridgestone, and Pegatron, indicating the city’s growing importance as a manufacturing hub.

Notably, FDI projects account for over 60% of industrial production and more than 70% of the city’s export turnover, underscoring their critical role in Hai Phong’s economic ecosystem.

Future FDI Goals and Strategies

Looking forward, Hai Phong aims to attract $2.5 to $3 billion in FDI in 2022. Current efforts are geared toward high-tech industries, logistics, and tourism—the three pillars sustaining economic vitality. With plans to develop 15 more industrial parks covering over 6,418 hectares, the city is poised for continued investment influx.

Government Incentives: The Dinh Vu – Cat Hai Economic Zone

The Dinh Vu – Cat Hai Economic Zone is an essential part of Hai Phong’s economic framework, featuring multiple industrial zones with compelling investment incentives. These include a 10% tax rate for the first 15 years and significant reductions in both personal income and import-export taxes, enhancing the attractiveness for foreign investors.

Hai Phong: A Strategic China+1 Location

As Vietnam continues to solidify its role as an alternative manufacturing base to China, Hai Phong stands as a prime candidate for the China+1 strategy. For instance, Tesa, an industrial adhesive tape manufacturer from Germany, injected $55 million into the city, aligning with the growing trend of diversifying supply chains. Moreover, Hai Phong was recognized for its favorable business environment in a recent Provincial Competitiveness Index assessment.

With ongoing infrastructure improvements, favorable government policies, and a strategic geographical position, Hai Phong is not just transforming into a manufacturing powerhouse but is also establishing itself as a vital node in Southeast Asia’s robust economic network. Staying ahead of future developments will be crucial for stakeholders aiming to leverage the region’s economic growth and diversification opportunities.