September 2019

S P OT L I G H T
Savills Research
Vietnam Industrial
H1/2019
 Vietnam Industrial H1/2019

Overview
The US-China trade war, additional investment and new free trade agreements have all had a positive
effect on Viet Nam’s industrial sector. The Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CPTPP) became official in January while the EU Viet Nam Free Trade Agreement
(EVFTA) was signed in June 2019. This historic and ambitious agreement will eliminate 99% of customs duties
and has raised interest in industrial property.
Regional Comprehensive and Economic Partnership (RCEP) negotiations are underway and are expected to be
finalised at the end of 2019. The agreement will increase cooperation between ASEAN countries and the six
Asia-Pacific states with existing free trade agreements.
By enabling the latest production technologies and increasing workforce training, the government is actively
easing qualms around viability, labour shortages and rising costs for a more transparent business environment.

Overview of Viet Nam’s FTAs, 2019

APEC RCEP
EV
FT
A
EU

EFTA
Hong Kong Russia China Korea

CPTPP Australia Japan New Zealand India

Switzeland
Vietnam - EFTA

ASEAN

Vietnam Singapore Myanmar

Peru Mexico
Iceland

Canada Cambodia
Chile Brunei Malaysia

Liechtenstein

Taiwan papua new guinea USA Indonesia Thailand Philipines Laos

Norway

Source: Asia Business Consulting

2
 Vietnam Industrial H1/2019

U.S.-China
Tension

With 25% tariffs on US$250 billion worth of Chinese imports and the possibility of an additional 10% on goods
worth US$300 billion, the trade war is driving companies to diversify and relocate. Vietnam has a low-cost labor
force, stable government and one of the fastest global growth rates – all appealing features leading to a fertile
investment environment.

China to Viet Nam movers

(Expected)
Company Nationality Status Location in Vietnam Industry

Hanwa Aero Moved Hanoi Aerospace manufacturing

Engine

Yokowo Moved Ha Nam Automotive components

Huafu Fashion Moved Long An Textiles & garments

Goertek Moving Bac Ninh AirPods manufacturing

TCL Moving Binh Duong Electronics - TV manufacturing

Bac Giang,
Foxconn Under consideration Electronics - TV hardware
Quang Ninh

Lenovo Under consideration Bac Ninh Electronics - Computer hardware

Nintendo Under consideration TBD Electronics - Gaming consoles

Sharp Under consideration Binh Duong Electronics - Camera modules

Kyocera Under consideration Hai Phong Electronics - Printers, copiers

Asiscs Under consideration TBD Footwear production

Source: VinaCapital, “Is Vietnam “Too Full” For More FDI?”, 2019

3
 Vietnam Industrial H1/2019

Regional
Population, 2018

China
1,396

Vietnam
94.6
Thailand
69.2

Malaysia
32.4
Indonesia
265.3 (million people)

Source: FocusEconomics

Age structure, 2018

0-14 years 15-24 years 25-54 years 55-64 years > 65 years

100%
11% 11% 6% 7% 6%
9% 9% 8%
80% 11% 12%

46% 42% 41%

60%
48% 46%

40%
17% 16%
16%
12% 14%
20%
23% 25% 27%
17% 17%
0%
China Thailand Vietnam Indonesia Malaysia

Source: CIA World Factbook

4
 Vietnam Industrial H1/2019

GDP growth, 2019 Ease of Doing Business, World Bank 2018

Vietnam is ranked 69th among

Vietnam remains
190 economies for ease of doing
the fastest growing
business
economy in
Southeast Asia in
2019 180

160

140

1. 6.8%
120

100
Vietnam
80

2. 6.2%
60

40
Philippines
20

3. 5.8%
Indonesia
r

ia

ines

ia

tna m

and

ia

re
nm a

Lao

Chin

nes

ays
bod

apo
il
lipp

Tha
Mya

Mal
Indo

Vie
Ca m

Sing
Phil

4. 4.5% Source: World Bank, 2018

Malaysia

5. 3.5%
Manufacturing workers’ salary, 2018

Thailand
924 866 412 237 190

6. 2.4%
Singapore Malaysia China Thailand Vietnam Indonesia

(US$/mth)
Source: ADB, 2019

Source: Trading Economics

5
 Vietnam Industrial H1/2019

Construction costs, 2018

$1,400

$1,200

$1,000

$800

$600

$400

$200

$-
Vietnam China India Indonesia Malaysia
(HCMC) (Beijing & Shanghai) (Bangalore) (Jakarta) (Kuala Lumpur)

Basic Warehouse & Factory ($/m 2) Large WH/Distribution Center ($/m 2) Hi-Tech Factory ($/m 2)

Source: Turner & Townsend, International Construction Market Survey, 2018

PMI, Jul 2019 Industrial Production, Jul 2019

Vietnam 9.6%
Vietnam 52.6

Indonesia 2.6%
Thailand 50.3

Malaysia 3.9%
China 49.9

China 6.3%
Indonesia 49.6

Thailand
Malaysia 47.6
- 5.5%

-6% -4% -2% 0% 2% 4% 6% 8% 10%

40 42 44 46 48 50 52 54

Source: Trading Economics Source: Trading Economics

US imports, Q1/2019
In the first three months of 2019, imports to the US from Vietnam rose 40.2% year-on-year (YoY). The
U.S. continued to be the biggest importer of Vietnamese goods, purchasing:
• US$4.42 billion worth of garments-textiles, up 9.1% YoY;
• US$2 billion in footwear (13.5%);
• US$1.3 billion of machinery, equipment, and spare parts (54%);
• US$1.42 billion of wood and timber products, increasing 34.7 percent.

Vietnam
South Korea
France
India
Italy
Mexico
Japan
UK
Germany
Ireland
Canada
China
-20 -10 0 10 20 30 40 50

Source: U.S. Census Bureau, 2019

6
 Vietnam Industrial H1/2019

Manufacturing PMI
Viet Nam’s Purchasing Managers’ Index (PMI) rose to 52.5 in June, the highest
for H1/2019 and reached the critical 50-point expansion threshold. According Although occupancy in
to Focus-Economics, Q2/2019 was higher than Q1/2019, showing the strength key provinces grew YoY,
of the manufacturing sector despite ongoing U.S.-China trade tensions. The available land coupled
increase was due to new orders, recovery in employment rates, the launch of with an array of
new products and increased customers. upcoming projects has
seen foreign companies
PMI, June 2018 – June 2019
significantly increasing
57 investment in Vietnam.
56 Manufacturers are
55 showing interest in the
54 Central Regions while
53 developers are actively
52
converting agricultural
land to industrial usage,
51
guaranteeing additional
50
supply.
49

48
John Campbell,
8

9
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18

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8

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Industrial Services
Source: Focus-Economics

Index of Industrial Production (IIP)

IIP rose 9.1% YoY in H1/2019; manufacturing and processing increased 11.2%,
leading economic growth.
According to the GSO, essential industrial products with IIP growth were
crude iron and steel (60%); petroleum (58%); paint (15%); aquaculture feed
(14%) and handsets (14%).
High production
IIP, June 2018 – June 2019 growth H1/2019

Coal and refined

16 mining products 70%
14
12 Metal 40%
10
8
Ore
exploitation 18%
6
4
Motor
vehicles 12%
2
0
Textile and
garment 11%
8

9
8

9
18

9
9
8

19
19
8
-1

-1

-1

-1
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Source: Asia Business Consulting

7
 Vietnam Industrial H1/2019

Industrial FDI
In H1/2019, 1,723 new projects registered capital
investment of US$7.41 billion. The manufacturing and
processing sector attracted 605 new projects, accounting
for 71.2% of FDI at US$13.15 billion, up 39.8% YoY.
Hanoi and HCMC were the best performers, obtaining
26.3% and 16.7% of FDI respectively, with Binh Duong H1/2019 Supply
receiving 7.4% and Dong Nai with 6.7 percent. 326 Established IPS
Investments from Hong Kong accounted for 28.7% of 95,500 ha total area
registered FDI with US$5.3 billion, followed by Korea with 65,600 ha industrial land (68.7%)
251 Operational 60,900ha
US$2.73 billion and China with US$2.28 billion. (74% Occupancy)
Industrial parks (IPs) and economic zones (EZs) attracted 75 under construction, site
clearance or compensation
approximately 340 FDI projects with newly registered
capital of US$8.7 billion. (Minister of Planning and 17 Coastal Economic Zones
Investment, 2019) 845,000 ha
3.6 million workers in IPs
FDI H1/2019 and EZs in 1H/2019

16%
5.7% Manufacturing & Processing
Retail, Wholesale & Repair
7.1%
Real Estate
71.2%
Other

Source: Ministry of Planning and Investment, 2019

Transactions, H1/2019

Investment
Project Nationality Industrial Park Province
(US$)

Beerco Limited Tu Liem Industrial Cluster Hanoi 4 bil

Goertek Co., Ltd. Que Vo Industrial Park Bac Ninh 260 mil

ACTR Company Limited Phuoc Dong Industrial Park Tay Ninh 280 mil

Advance Vietnam Tire Co., Ltd Long Giang Industrial Park Tien Giang 214 mil

Royal Pagoda Private Limited VSIP Nghe An Nghe An 200 mil

Meiko Electronics Thach That -Quoc Oai

Vietnam Co., Ltd Industrial Zone Hanoi 200 mil

Universal Alloy Corporation Da Nang Hi-Tech Park Danang 170 mil

(UAC)

TTI, Inc. Saigon Hi-Tech Park (SHTP) HCMC 150 mil

Changshin Vietnam Co. Ltd Tan Phu Industrial Park Dong Nai 100 mil

8
 Vietnam Industrial H1/2019

Rise of rental options

Developer Nationality Total Area (ha) RBF Sites Provinces

HCMC, Binh Duong, Dong Nai,

247 10 Bac Ninh, Hai Duong, Hai Phong

120 8 Dong Nai, Hanoi, Bac Ninh

12.6 2 Dong Nai

6 1 Dong Nai

Sufficient capacity
Despite occupancy in key provinces increasing YoY, numerous future projects allow foreign companies to
increase investment. With interest in the industrial market at an all-time high, developers are actively converting
agricultural land to industrial, ensuring additional supply. The central economic zone has captured the attention
of foreign manufacturers; Nghe An, Hue, Quang Nam and Quang Ngai all offer new projects with competitive
pricing.

Michael Kokalari, Chief Economist at VinaCapital, believes that concerns around labor supply mainly stem from
manufacturers with tight margins in “low-value-added” industries such as garment and furniture. Kokalari stated
that Viet Nam has yet to reach its full potential, adding that:

• With 10% of the workforce in the FDI sector and 40% in the agricultural industry, there is excellent
potential for labor to shift “from the farm to the factory”, fueling industrialisation.

• The manufacturing sector only contributes approximately 20% of Viet Nam’s GDP, falling short of other
‘Asian Tiger’ economies, which peaked at 30% GDP.
Source: VinaCapital, “Is Vietnam “Too Full” For More FDI?” 2019

Outlook
The industrial sector is growing strongly with a tenfold increase in FDI over the last decade. Good land supply is
facilitating incoming manufacturing projects and the rise of rental options with RBF and BTS solutions. Viet Nam
must be more selective with projects to move up the value chain, improve competitiveness and ensure
sustainable growth.

Low labor costs and government incentives, particularly preferential tax rates, will continue to be critical drivers
of FDI. However, to maintain the transition to higher-value industries, Viet Nam must focus on the quality rather
than the number of investments. Recommendations for FDI Strategy for 2020-2030 by the Ministry of Planning
and Investment and International Finance Corporation (IFC) outlined the steps required to increase the quality
of foreign investment:

• Creating a national skills development plan to increase the share of skilled labor;
• Modernizing investment promotion activities and focus of priority sectors;
• Implement supporting policies to support local firms;
• Open service sectors such as education, logistics and financial services;
• Set up a new FDI management agency with higher budget, capacity and authority;
• Review and adjust current investment incentives and policies to ensure FDI quality, and;
• Reduce the negative impact of Industry 4.0.

9
 Vietnam Industrial H1/2019

Performance
Northern Vietnam, H1/2019
Occupied (ha) Vacant area (ha) Rent

4,000 120

100

US$/m2/term
3,000

80
ha

2,000 60

40

1,000

20

- -

Bac Ninh Hai Phong Ha Noi Hung Yen Vinh Phuc Hai Duong

Source: Savills Industrial Services

Southern Vietnam, H1/2019

Occupied (ha) Vacant area (ha) Rent

7,000 200

6,000

150
5,000

4,000
US$/m2/term

100
ha

3,000

2,000
50

1,000

- -

Dong Nai Binh Duong BRVT Long An HCMC Tay Ninh

Source: Savills Industrial Services

10
 Vietnam Industrial H1/2019

Southern Vietnam Overview

HO CHI MINH CITY

H1/2019 FDI US$3.08 billion
2nd highest

2019 Provincial
Competitiveness 65.34 poi nts
Index (PCI) Ra nk: 10th

Total Area(ha) 4,703

Total
Leasable Area(ha)
2,620 Occupancy
(%)

Number of Projects 22 Rent

(US$/m2)

Occupancy 24.3% YoY 0 50 100 150 200

Rent Stable

BINH DUONG PROVINCE

H1/2019 FDI US$1.37 billion

3rd highest

2019 Provincial
Competitiveness
66.09 points
Rank: 6th
Index (PCI)

Total Area (ha) 10,040

Total Leasable Area(ha) 6,296

Occupancy
(%)

Number of Projects 30
Rent
(US$/m2)

Occupancy 27.6% YoY 94 96 98 100 102 104

Rent 54.6% YoY

11
 Vietnam Industrial H1/2019

Southern Vietnam Overview

DONG NAI PROVINCE

H1/2019 FDI US$1.23 billion

4th highest

2019 Provincial
Competitiveness
63.84 points
Rank: 26th
Index (PCI)

Total Area (ha) 9,216

Total Leasable Area(ha) 6,317

2019
Occupancy
(%)
Number of Projects 31
2019 Rent
(US$/m2)

Occupancy 20.8% YoY 91.5 92 92.5 93 93.5

Rent 21.1% YoY

LONG AN PROVINCE

H1/2019 FDI US$268 million

15th highest

2019 Provincial
Competitiveness
68.09 points
Rank: 3rd
Index (PCI)

Total Area (ha) 5,827

Total Leasable Area(ha) 3,523 2019

Occupancy
(%)

Number of Projects 21 2019 Rent

(US$/m2)

Occupancy 3.7% YoY 0 20 40 60 80 100 120

Rent 26.7% YoY

12
 Vietnam Industrial H1/2019

Northern Vietnam Overview

HANOI

H1/2019 FDI US$4.87 billion

1st highest

2019 Provincial
Competitiveness
65.40 points
Rank: 9th
Index (PCI)

Total Area (ha) 3,432

Total Leasable Area(ha) 1,624 Occupancy

(%)

Number of Projects 10
Rent
(US$/m2)

Occupancy 8.5% YoY 0 20 40 60 80 100 120

Rent 8.6% YoY

BAC NINH PROVINCE

H1/2019 FDI US$1.01 billion

5th highest

2019 Provincial
Competitiveness
64.50 points
Rank: 15th
Index (PCI)

Total Area (ha) 5,107

Total Leasable Area(ha) 3,651 Occupancy

(%)

Number of Projects 13 Rent

(US$/m2)

Occupancy 6.3% YoY 84 85 86 87 88

Rent 13% YoY

13
 Vietnam Industrial H1/2019

Northern Vietnam Overview

HUNG YEN PROVINCE

H1/2019 FDI US$299 million

13th highest

2019 Provincial
Competitiveness
60.66 points
Rank: 58th
Index (PCI)

Total Area (ha) 1,704

Total Leasable Area(ha) 1,226 Occupancy

(%)

Number of Projects 8
Rent
(US$/m2)

Occupancy 6.2% YoY 74 76 78 80 82 84 86 88

Rent 6.7% YoY

HAI PHONG PROVINCE

H1/2019 FDI US$536 million

9th highest

2019 Provincial
Competitiveness
64.48 points
Rank: 16th
Index (PCI)

Total Area (ha) 4,658

Total Leasable Area(ha) 2,656 Occupancy

(%)

Number of Projects 11 Rent

(US$/m2)

Occupancy 10% YoY 0 20 40 60 80 100

Rent 4.5% YoY

14
 Vietnam Industrial H1/2019

H1/2019 FDI 2019 PCI Total Total Projects Occupancy Rent

(US$) (Rank/province) Area Leasable
(ha) Area (ha)

Ho Chi Minh 3.08B 65.34 4,703 2,620 22 24.3% stable

City 2nd highest 10th/63 YoY

Binh Duong 1.37B 66.09 10,040 6,296 30 27.6% 54.6%

3rd highest 6th/63 YoY YoY
Southern- Provincial Index

Dong Nai 1.23B 63.84 9,216 6,317 31 20.8% 21.1%

4th highest 26th/63 YoY YoY

Long An 268M 68.09 5,827 3,523 21 3.8% 26.7%

15th highest 3rd/63 YoY YoY

Ba Ria- 680M 64.02 8,924 5,168 11 1.4% 7.8%

Vung Tau 7th highest 21st/63 YoY YoY

Tay Ninh 714M 64.54 3,390 2,619 6 63.6% 31.1%

26th highest 14th/63 YoY YoY

4.87B 65.40 3,432 1,624 10 8.5% 8.6%

Hanoi YoY YoY
1st highest 9th/63

1.01B 64.50
Northern - Provincial Index

Bac Ninh 5,107 3,651 13 6.3% 13%

5 highest
th
15th/63 YoY YoY

Hung Yen 299M 60.66 1,704 1,226 8 6.2% 6.7%

13th highest 58th/63 YoY YoY

Hai Phong 536M 64.48 4,658 2,656 11 10% 4.5%

9th highest 16th/63 YoY YoY

Hai Duong 444M 60.98 1,449 980 8 18.8% 29.4%

10th highest 55th/63 YoY YoY

Vinh Phuc 227M 64.55 1,391 997 6 11.1% 8.8%

16th highest 13th/63 YoY YoY

15
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Savills Research
We’re a dedicated team with an unrivalled reputation for producing well-informed and
accurate analysis, research and commentary across all sectors of the Vietnam property market.

Troy Griffiths John Campbell

Deputy Managing Director Senior Consultant, Industrial Service
+84 (0) 933 276 663 Ho Chi Minh City
+84 (0) 986 718 337
tgriffiths@savills.com.vn jcampbell@savills.com.vn

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