How EVFTA, coronavirus affects Vietnam industrial property?

The coronavirus outbreak will certainly have an effect on the global economy in the coming months. Vietnam, with its proximity and close trade and supply relationships with China, is no exception.

How EVFTA, coronavirus affects Vietnam industrial property?

 A view of VSIP Quang Ngai Industrial Park

The EU-Vietnam Free Trade Agreement and the EU-Vietnam Investment Protection Agreement, which were ratified by the European Parliament last month, and the new coronavirus (Covid-19) will have mixed impacts on Vietnam’ industrial property this year, according to John Campbell, manager of industrial services, Savills Vietnam.

Positive economic and FDI outlook

Amid a global slowdown, 2019 was an exceptional year for Vietnam’s economic growth. In 2019, overall the country’s impressive macroeconomic indicators supported the strong performance of the real estate market, specifically the industrial real estate segment that received investments totaling US$24.56 billion, over 64.6% of total inflow.

Vietnam’s economic outlook in the medium to long-term is mostly positive. Before the outbreak of the Covid-19 epidemic, the World Bank forecast that real GDP growth will remain robust at 6.5% in 2020 and 2021.

2019 marked 10 consecutive years of increasing foreign direct investment (FDI) inflow in the country and by the end of the year, the manufacturing and processing industry attracted the highest. 2020 is also off to a positive start. In the first 20 days of January alone, Vietnam attracted substantial US$5.3 billion in FDI, representing a year-on-year rise of 179.5%, according to the Ministry of Planning and Investment. Of this US$5.3 billion, US$4.5 billion was poured directly into new FDI projects.

Most inflows were funneled in the production of electricity, water and gas sector. The manufacturing and processing sector took the second place, attracting US$856.33 million, or 16% of total inflows in the first month of the year.

Vietnam’s recent FTA’s and superior trade networks will continue to push the country as a key destination for FDI, although it will also make the country more vulnerable to future slowdown in global demand.

EVFTA and its impacts on Vietnam’s industrial sector

The European Parliament officially adopted the EU-Vietnam Free Trade Agreement and the EU-Vietnam Investment Protection Agreement on February 12, raising hope for all of Vietnam’s economic sectors. Only one more step remains before the agreement comes into full effect – the ratification by Vietnam’s National Assembly, which is expected to take place in May this year.

 

“The EVFTA, in particular, enables Vietnam’s economy to move away from exporting low-value products and inputs to higher-value goods in high-tech, electronics, vehicles, and medical devices. Global trade networks will give Vietnam access to a more diversified range of souring partners, allowing for cheaper imports of inputs or intermediate goods, which in turn will boost the competitiveness of Vietnam’s exports. In addition, through more partnerships with foreign companies, Vietnam can reap the benefits of knowledge and technology transfer that comes with such investments,” John Campbell of Savills Vietnam commented.
 
As Vietnam opens its doors to EU manufacturers in industries such as food and beverage, fertilizers, ceramics, and building materials, the tariff elimination will also benefit the country’s key export industries to the EU, including the manufacturing of electronics and smartphones, textiles and garments, and agricultural products.

Since June 2019, more industrial developers in Vietnam are confident that the EVFTA will boost investment in manufacturing and diversify their occupiers’ base. With the agreement being ratified this year, the developers also expect to see a growing interest from European manufacturers in 2020 and 2021.

As demand continues to outpace supply, particularly in key industrial provinces, with occupancy rates reaching 75% in operational industrial parks nationwide, the competition for well-located manufacturing plots near the country’s main cities and ports has increased. This, coupled with an influx of new international manufacturers, gives developers the right opportunity to strategically choose their occupiers and lease it to multinational companies in high-value added industries. The industrial sector is growing strongly with a tenfold increase in FDI over the last decade. Good land supply is facilitating upcoming manufacturing projects with a rise of rental options and many solutions.

Covid-19’s impact on Vietnam industrial sector

Considering the sheer size of China’s economy, the coronavirus outbreak will certainly have an effect on the global economy in Q1 and possibly even Q2/2020. Vietnam, with its proximity and close trade and supply relationships with China, is no exception.  

“Although foreign investment into Vietnam’s industrial market will remain strong in 2020, the Covid 19 has raised concerns regarding labor shortages and disruptions in supply chains in the manufacturing sector for Q1/2020. Labor shortages in China with the extension of the Lunar New Year holiday (in addition to temporary factory closures) due to the Covid 19 pandemic means less production, which in turn can affect the numerous Vietnamese manufacturers with supply chain links to China,” Campbell commented.

According to official data, Vietnam's index of industrial production (IIP) declined 11.8% month-on-month and 5.5% year-on-year in January 2020, following a 6.2% increase in December 2019. This was the first drop in output since January 2017. The index attributes the drop-in output to the relatively ‘early’ Lunar New Year holiday at the end of January, reducing the number of working days. Therefore, it’s difficult to evaluate what proportion of this drop in industrial output is directly linked to the Covid 19.

Binh An

Sharp contraction in Vietnam’s manufacturing output amid COVID-19 disruption

Sharp contraction in Vietnam’s manufacturing output amid COVID-19 disruption

The Vietnam Manufacturing Purchasing Managers' Index (PMI) fell below the 50.0 no-change mark in February, signalling a deterioration in business conditions, a survey of IHS Markit and Nikkei released on Monday showed.  

VN banks offer aids to 44,000 COVID-19 affected customers

VN banks offer aids to 44,000 COVID-19 affected customers

Credit institutions have so far supported more than 44,000 COVID-19 affected customers following directions from the State Bank of Viet Nam (SBV), an official reported on Monday.  

 
 

Other News

.
The credibility of cooperation
The credibility of cooperation
FEATUREicon  15/03/2020 

It may not be hard to discern that through the EU’s defiance towards Italy’s desperate calls for aid and America’s freshly-imposed barriers on its European allies, inter-state cooperation has been lacking in the fight against COVID-19.

Encouraging signs in real estate arena
Encouraging signs in real estate arena
FEATUREicon  13/03/2020 

Despite the COVID-19 outbreak piling pressure on the toughest segments of the real estate market in hospitality, retail, and industrial property, positive signs have also been unearthed.  

The EVFTA’s grand impacts on Vietnam’s industrial sector
The EVFTA’s grand impacts on Vietnam’s industrial sector
FEATUREicon  14/03/2020 

The EU-Vietnam Free Trade Agreement and Investment Protection Agreement raise many hopes for all of Vietnam’s economic sectors. 

Duong opens new chapter for Vietnamese boxing
Duong opens new chapter for Vietnamese boxing
FEATUREicon  14/03/2020 

Vietnam has waited more than three decades to see a Vietnamese fighter qualify for an Olympics and Nguyen Van Duong ended the drought after he secured a Tokyo Olympic slot at the Asia/Oceania Olympic boxing qualifying tournament.

Tailwinds expected via foreign-funded activities
Tailwinds expected via foreign-funded activities
FEATUREicon  13/03/2020 

Exchange-traded fund providers are offering more choices to foreign investors, at a time when portfolio rebalancing and global uncertainties could leave them high and dry.

VN pharma landscape set for shake-up
VN pharma landscape set for shake-up
FEATUREicon  12/03/2020 

Facing significant expansion from multinational corporations, Vietnamese drug giants took a hit in 2019 despite new strategies, signalling an uninspiring outlook for future growth.  

Head in the clouds, Vietnamese engineer reaches for the stars
Head in the clouds, Vietnamese engineer reaches for the stars
FEATUREicon  14/03/2020 

Three mice died and a few hearts sank. It was March, 2015 in Hyderabad, India. When the vital signs went down, Pham Gia Vinh and his team knew the mice would die.

The change of thinking and action in foreign investment cooperation
The change of thinking and action in foreign investment cooperation
FEATUREicon  10/03/2020 

The Politburo has issued Resolution No.50/NQ-TW on August 20, 2019, outlining directions to perfect institutions and policies to improve foreign investment efficiency and cooperation until 2030.

Rules of origin pose questions for sectors jostling for position
Rules of origin pose questions for sectors jostling for position
FEATUREicon  08/03/2020 

Although the free trade agreement between the EU and Vietnam will offer great opportunities for wood investors and exporters, its rules of origin may not provide a big boon to local textile and garment businesses.

Game changer for the energy arena
Game changer for the energy arena
FEATUREicon  07/03/2020 

Vietnam has recently created several favourable policies, including the Politburo’s Resolution No.55-NQ/TW on the orientation of Vietnam’s national energy development strategy to 2030 with a vision towards 2045.

American painter tells colourful stories of Vietnam
American painter tells colourful stories of Vietnam
FEATUREicon  07/03/2020 

After being impressed by the Vietnamese people living in northern Virginia in the US in the early 1990s, Charles Daniel Hambleton, a native of the state, visited Vietnam for the first time.

Your guide to every 2020 V.League 1 club
Your guide to every 2020 V.League 1 club
FEATUREicon  07/03/2020 

The 2020 V.League 1 season is almost upon us and (coronavirus permitting) matches will kick off coming week.

Expat football fans find taste of home with V.League
Expat football fans find taste of home with V.League
FEATUREicon  07/03/2020 

There’s nothing quite like a day out to watch live football. 

Ford expansion’s impact on Vietnam’s vehicle output muted by imports: Fitch Solutions
Ford expansion’s impact on Vietnam’s vehicle output muted by imports: Fitch Solutions
FEATUREicon  04/03/2020 

U.S. automaker Ford Motors’ latest announcement that it intends to expand its Vietnamese plant will provide only a modest boost to the country’s vehicle output over this year and next, according to Fitch Solutions.

Enterprise support around the corner
Enterprise support around the corner
FEATUREicon  03/03/2020 

With the coronavirus epidemic badly damaging business performance and undermining local production, Vietnam will officially launch a major support package to spur on businesses’ performance and ensure economic growth.  

Robust growth predicted for Vietnam’s power sector despite near-term headwinds
Robust growth predicted for Vietnam’s power sector despite near-term headwinds
FEATUREicon  04/03/2020 

Fitch Solutions predicted power consumption in Vietnam to grow by an annual average of 6.5% between 2020 and 2029, which still remains one of the fastest growth rates in Asia.

Ballerina Thu Hue: Ballet helps me discover myself
Ballerina Thu Hue: Ballet helps me discover myself
FEATUREicon  02/03/2020 

Forbes Vietnam magazine has announced the “Top 30 Under 30” list to honour the most influential faces in the country, including artist Thu Hue from the Vietnam National Opera and Ballet Theatre (VNOB) for her impressive contributions in 2019.

EVFTA lends newfound vigour to banking sector
EVFTA lends newfound vigour to banking sector
FEATUREicon  02/03/2020 

The ratified EU-Vietnam Free Trade Agreement is expected to bring a historic change in the Vietnamese banking sector, but also sets sizeable challenges for both foreign and local lenders before they can receive good returns on investment.

JLL names five key trends of Vietnam property market 2020
JLL names five key trends of Vietnam property market 2020
FEATUREicon  02/03/2020 

Vietnam is expected to be one of the most favorite destinations for property investors thanks to its export-driven economy and stronger journey of international integration, professional services firm JLL has said in a recent report.

Post-coronavirus economic policies
Post-coronavirus economic policies
FEATUREicon  02/03/2020 

The coronavirus epidemic has sent many of the economic activities into a tailspin.

 
 
 
Leave your comment on an article

OR QUICK LOGIN