Vietnam IZs remain unattractive to foreign investors even with big investment incentives

Some IZs in HCM City located far from arterial traffic routes finding it hard to call for investments. According to latest report by Cushman & Wakefield, a real estate service provider, there are 18 operational IZs in HCM City, covering a total area of 3,625 hectares, 62 percent of which, or 2,260 hectares, is leasable.

According to an Asian investor instead of setting up a factory in Binh Thuan province decided to go to an IZ in Binh Phuoc province which gave very competitive offers.

Most of the IZs in HCM, the rent is believed to be twice as much as the rents in the provinces of Long An, Binh Duong and Dong Nai.

In an effort to raise the IZs’ competitiveness and bring diversified choices to investors, the management boards of some IZs have shifted from leasing industrial land for long term lease to leasing ready-made workshops.

A ready-made workshop with an area of 2,000-3,000 square meters is leased at VND53,200-74,500 per square meter, or $2.5-3.5 per square meter per month.

The Long Hau IZ in Long An province is considered a “pioneer” in the movement, which has been followed by many other IZs in Dong Nai province, which target small and medium enterprises as tenants.

The director of a fashion company which has a factory in Dong Nai province had been invited to set up a garment factory in an IZ in Ba Ria – Vung Tau province. However, after considering profits from investment incentives and losses due to unfavorable traffic conditions, it was realized that production costs would double if the company operates a factory in the province.

The local authorities have establish IZs in remote areas, believing that IZs would help develop local economies. However, that has not happened. In theory, textile and garment factories could be situated in IZs far from HCM City. However, the IZs remain unattractive to investors despite big investment incentives.