Foreign-invested enterprises behind industrial land “fever”
Vietnam expects a new FDI wave
Dat Viet reported that workshop rent in Long An province in Mekong Delta area had increased by 20 percent over the last few months. The newspaper quoted the director of a plastics manufacturer as saying that investors were hunting for land plots in the province.
These include foreign investors who often initially seek workshops and premises to lease to set up their factories, but later decide to re-lease the workshops at higher rents.
Vietnam is witnessing a strong wave of foreign investment in industrial property in anticipation of new FDI being redirected to Vietnam.
Tran Duc Vinh, director of Tran Anh Long An Real Estate, confirmed that some Chinese enterprises, which are seeking tenants to re-lease workshops, have pushed the prices up.
“This is a trick played by FIEs which try to cause a spell of land price fever to get big profits. Meanwhile, the average real estate price in Long An remains stable,” Vinh said.
Nikkei news service reported that the director of the Chinese Business Association, Vicky Tong, said that 27 Chinese groups of businesses spoke with the association in 2018 to learn about the possibility of relocating production bases and expanding production in Vietnam. Most of the businesses were toy and plastics manufacturers.
Many M&A deals were made in industrial property in 2018, with most buyers foreign investors. Analysts believe that industrial property will continue to be the hottest segment of the real estate market in 2019.
Dinh Trong Thinh from the Finance Academy said that Vietnam’s industrial real estate is being encouraged by the inflow of foreign investors from China to Vietnam, and the effects of free trade agreements.
A report found that in 2016-2020, investment in IZ infrastructure could be up to VND21 trillion, of which VND16.6 trillion would be from the state budget.
The 2016 report showed that the revenue of IZs and EZs in the year reached $145 billion, while export turnover was $88 billion, or 51 percent of total export turnover.
According to Thinh, once foreign investors control IZs, they may place priority for investors from their home countries. This would help create a production system that helps reduce costs, but it also means that Vietnamese enterprises will not have opportunities there.
Some claim that IZ developers may exploit the policies to buy and re-sell land plots for profits.
“In this case, benefits would go to foreign investors, while the state’s money would become unrecoverable,” Thinh said.
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