Vietnam’s industrial zones have been attracting attention from foreign investors.

General Director of JLL Vietnam Stephen Wyatt said the Comprehensive andProgressive for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free TradeAgreement (EVFTA) demonstrate the Vietnamese Government’s willingness to integratemore deeply into the global economy. This will bring various opportunities forinvestors as tariff lines on goods will be abolished and this will serve as apush for Vietnam to improve its business environment.

In the last 20 years, Vietnam has switched from beingan agriculture-based economy to one of the brightest manufacturing hotspots inthe Southeast Asia, and it is establishing itself as an industrial powerhousein the region. There was only 335 hectares of land dedicated to industrialparks in 1986, and now the figure has risen to 80,000 hectares.

The JLL recorded a strong growth in the number of foreign investors whoare seeking investment in Vietnamese industrial realty market. They are typicallyengaged in three market entry strategies.

Direct land use acquisition from industrial park operators is a traditional wayto own industrial assets, as many operators sublease it to various tenants forremaining tenure. The investors can also purchase directly from the Government.A notable example is Amata Corporation, an industrial estate provider fromThailand, who obtained the land use from the Government and set up Amata CityBien Hoa, a 342-hectare lease area industrial park located in Dong Nai provincein 1994.

Meanwhile, many investors choose to form strategic jointventure with renowned local partners who have access to land bank and canassist them on licensing process. A good example of this strategy is a jointventure in 1996 between Becamex IDC Corp of Vietnam and Singaporean-basedSembcorp Development Ltd. They have developed nine Vietnam-Singapore IndustrialPark projects across the country, with a total land fund of more than 8,600 hectares,providing infrastructure for nearly 900 enterprises who registered 14 billionUSD in investment.

Most recently, BW Industrial Development, a joint venture between globalprivate equity fund Warburg Pincus and Becamex IDC Corp, was launched. With over200 hectares of industrial land, BW Industrial is the largest “for-rent”industrial and logistics development in Vietnam.

Another typical market entry strategy for investors is either direct land use acquisitionor sale and leaseback of operating industrial assets with stable income. In2018, Mapletree Logistics Trust spent 725.1 billion VND (31.3 million USD)snapping up a warehouse of Unilever International Company Limited. Uponcompleting the deal, the asset would be leased to Unilever Vietnam for 10 yearswith annual rent escalations.

Although Vietnam is an attractive destination of the Southeast Asia’s industry,investors may face challenges while looking for investment opportunities in thecountry.

Strong demand together with business expansion of manufacturers from Chinadrove the average and price in the second quarter in 2019 to a new level of 95USD per square metre per lease term, a year-on-year increase of 15.8 percent.

Besides, the JLL also pointed out that it is not easy to find a trustworthypartner who owns land fund in strategic locations, has deep insight into localmarket and long-term cooperation commitment.

Other challenges include shortage of infrastructure due to sluggish landclearance, compensation, and lack of capital, high costs of administrativeprocedures, and less efficient customs procedures as compared to other regionalcountries.

Therefore, Vietnam should work more to reform infrastructure network andadministrative procedures, as well as pay due attention to high-quality humanresources training and encouragement of advanced technologies to lure moreforeign investments, Stephen stressed.

He said industrial property will continue to lure interest from foreigninvestors in the second half of the year. The rapid growth of the middle-incomepopulation, development of e-commerce that results in strong demand forlogistics facilities, coupled with the insufficiency of high-tech assets andmodern warehouses, will support the potential of the industrial propertymarket.-VNA