The need to lease a factory in Vietnam has become a burgeoning trend among foreign investors seeking strategic advantages and economic opportunities. Since Vietnam has emerged as a global economic player, its industrial real estate market presents lucrative prospects for investors.
This article will delve into the factors driving this trend, the market value of Vietnam’s industrial sector, considerations before renting a factory, potential industry areas, and the process for foreign investors to set up factories in Vietnam.
Why is Factory Rent in Vietnam Attractive to Foreign Investors?
The country’s allure for foreign investors in factory leasing stems from several compelling factors, increasing the need to lease a factory in Vietnam:
- Location benefits: Located at the crossroads of global trade routes, Vietnam has easy access to major markets that help create efficient distribution networks. In Southeast Asia, it is geographically well-placed and acts as a gateway to the vibrant ASEAN region and other parts of the world.
- Full legal support benefits: The government provides complete legal support, which ensures the business environment by removing unnecessary red tape for foreign investors. Legal reforms and initiatives such as the Investment Law and Enterprise Law aim to enhance transparency, investor protection, and ease of doing business.
- Large workforce with affordable labor costs: The country has a large workforce known for its efficiency and competitive wages, making it an ideal destination for manufacturing units. Besides being young and energetic, Vietnamese people possess different skills that are required in various industries.
What is Vietnam Industrial’s Market Value?
Vietnam’s industrial real estate market is experiencing a boom in foreign investments such that this sector has emerged among the leading recipients of FDI (foreign direct investments). Statistics reveal a substantial influx of FDI into the real estate sector, propelled by attractive prices and robust demand from foreign investors. Middle- and high-end apartments garner significant attention, reflecting investor confidence in Vietnam’s real estate landscape.
According to the Ministry of Planning and Investment’s data, real estate received about US$1.27 billion in foreign direct investment (FDI) in January 2024, accounting for 53.9% of the total registered capital. This is an enormous increase over last year and shows that more people are interested in Vietnam as a place to invest their money.
According to the Vietnam Institute of Real Estate Studies survey, foreigners also have a strong demand for property in this country. The survey found that attractive prices were the leading reason for foreign investors’ interest in Vietnamese real estate.
What Should Investors Know Before Renting a Factory in Vietnam?
Before renting a factory in Vietnam, investors must consider these factors:
- Procedures & Legal paperwork: Compliance with legal requirements is imperative. Investors must follow certain procedures, such as getting an Investment Registration Certificate (IRC) and an Enterprise Registration Certificate (ERC) to ensure regulatory compliance. Additionally, understanding the timeframe of a maximum of 50 years for leasing terms and obligations is essential for smooth operations.
- Location Accessibility: Strategic location selection near urban centers or industrial parks ensures efficient logistics and cost-effective operations. Proximity to transportation networks, ports, and major cities influences site selection and enhances market accessibility.
- Operating & Maintenance Costs: Awareness of operational and maintenance expenses is vital for financial planning. Clear delineation of responsibilities in lease agreements, including taxes, insurance, and maintenance costs, ensures prudent cost management and avoids potential disputes.
What Are The Leading Potential Industry Areas of Vietnam?
Vietnam offers promising industry areas for investment, including:
- Hai Phong:
- Hai Phong is situated in the northern coastal region, which has been recognized as one of the main economic centers in Vietnam. The city occupies 1,527 square kilometers and has a population of around 2.07 million, making it the biggest coastal city in the northern region. It boasts rapid economic development coupled with a strong industrial base supported by a trained workforce who are highly skilled and productive in their respective fields.
- The city’s strategic location and comprehensive logistics network make it a major trading hub, facilitating efficient transportation and distribution. In addition, infrastructure development initiatives also contribute greatly to connectivity and trade facilitation by building roads and expanding ports.
- Binh Duong:
- Binh Duong, the main economic region of South Vietnam, is currently a leading destination for foreign investment. Thanks to its 30 industrial zones and focus on high-tech industries, it ranks second in foreign direct investment (FDI) attraction after Ho Chi Minh City.
- The province’s economic indicators demonstrate its robust growth trajectory. Binh Duong is poised for continued economic expansion with an expected GRDP per capita of US$7,478 and targeted increases in the Industrial Production Index (IPI) and international trade.
- Dong Nai:
- Dong Nai is one of Vietnam’s attractive economic regions for investors due to its pioneering industrial park development and comprehensive logistics infrastructure. Punctuated between key economic regions, Dong Nai is a vital gateway to Ho Chi Minh City and other major economic centers.
- Dong Nai benefits from significant investment incentives and a supportive investment policy framework. Tax incentives, financial support for pilot projects, and funding programs for workforce training and technology transfer contribute to its attractiveness as a hub for materials procurement and industrial investment.
Photo: Unsplash.com
How Can Foreign Investors Set Up a Factory in Vietnam?
Setting up a factory in Vietnam involves several steps:
- Determine your business’s legal structure: Foreign investors have options regarding legal structures; limited liability companies (LLCs), joint stock companies (JSCs), Partnerships with Vietnamese individuals/companies, and branch offices are all available. Investors must understand each structure’s legal requirements and tax implications to make informed decisions.
- Choose a location for factory setup: Investors can opt to lease facilities from licensed infrastructure leasing companies or rent land in industrial parks, export processing zones, or high-tech zones. Proximity to markets, transportation networks, and skilled labor influence location selection.
- Apply for necessary certificates: Investors must obtain an Investment Registration Certificate (IRC) and an Enterprise Registration Certificate (ERC) to set up a factory in Vietnam. Businesses need these certificates for regulatory compliance and legal operations in Vietnam.
- Register for sub-licenses: Depending on the nature of the project, investors may need to apply for additional sub-licenses, such as construction permits and fire protection certificates. Compliance with regulatory requirements ensures smooth project implementation and operation.
Get Support to Investing in Vietnam’s Factory with Savills
Photo Courtesy: Industrial Savills Vietnam Company
The need to lease a factory in Vietnam presents lucrative opportunities for foreign investors seeking to capitalize on the country’s burgeoning industrial sector. Savills, a leading industrial real estate agency in Vietnam, offers comprehensive support and expertise to investors navigating the complexities of factory leasing in Vietnam.
With a deep understanding of the local market, industry trends, and regulatory landscape, Savills provides tailored solutions to meet the needs of investors seeking to establish and expand their manufacturing operations in Vietnam.
For personalized assistance and expert guidance in leasing a factory in Vietnam, visit Savills Vietnam today.
Published by: Nelly Chavez
