The Vietnamese manufacturing sector had accelerated growth and increased investor confidence in February. Savills experts believe that Viet Nam’s border reopening will strengthen the confidence of international investors and is promising for the industrial sector.
Manufacturing PMI & Industrial Production Pick Up
On 15 March 2022, the Vietnamese government released Resolution No. 32/NQ-CP. This resolution, which is already effective, allows citizens of 13 countries, such as Germany, South Korea, Japan, and France to travel to Viet Nam for 15 days without a visa. This is great news for the country’s industrial sector.
John Campbell, Associate Director, Head of Industrial Services at Savills Viet Nam said: “Viet Nam’s economy is forecast to grow beyond expectation in 2022 as domestic demand rebounds and foreign direct investment (FDI) inflows remain stable. Fortunately, business conditions have improved over the past five months following the disruption caused by the Delta wave in 2021.”
The Vietnamese manufacturing sector was in recovery mode in February with accelerated growth and improved investor confidence. According to IHS Markit, Viet Nam’s Manufacturing PMI reached 54.3 in February, increasing from 53.7 in January.
“February was a great month as factory activity not only increased for the fifth consecutive month, but it also had the steepest growth we have seen since April 2021. Output and new orders had the best performance in ten months, and we saw remarkable growth in export orders too. Manufacturing employment levels increased for the third consecutive month; however, job creation remains modest as many workers have still not returned from their hometowns after the Covid outbreak last year,” John added.
Viet Nam’s industrial production rose by 8.4% year-on-year (YoY) in February, compared to a 2.8% YoY increase in January. Manufacturing output also improved from 2.8% in January to 10% in February.
In terms of FDI in 2022, Bac Ninh leads investments. It is followed closely by Thai Nguyen, which has attracted US$924 million of FDI, accounting for 18.5% of Viet Nam’s year-to-date FDI. This is largely thanks to a notable investment by Samsung Electro-Mechanics Viet Nam Co., Ltd which was granted a license to add US$920 million to its project. The company’s investment at Yen Binh Industrial Park now stands at nearly VND 52 trillion (US$2.27 billion).
Deals Exceed US$1 Billion in 3M/2022
According to John, Viet Nam’s border reopening is important in strengthening the confidence of international businesses and investors and is promising for the industrial sector. In 2022, prominent businesses have already invested in factories and expanded production in Viet Nam.
In March, Savills supported Fuchs Group, a leading German lubricants player, in leasing a 20,000 m2 long-term land lease at Phu My 3 Specialized Industrial Park in Ba Ria – Vung Tau Province.
Commenting on the acquisition, John said: “This 55-year lease emphasises the growth of Ba Ria Vung Tau’s industrial sector and the need for multinational tenants to consider alternative locations. Not only does the area offer competitive rents and infrastructure suited for medium to heavy industry, but it also provides access to a growing seaport cluster.”
In February, Savills brokered a factory lease between framas, a renowned injection moulding business from Germany, and KTG Industrial. The company leased a 20,000 m2 ready-built facility at KTG Industrial Nhon Trach 2, Dong Nai Province. The ten-year lease represents the continued strength of the Vietnamese economy and the industrial real estate sector.
In terms of industrial park developments, the market has been active with investment deals worth billions of dollars. For example, at the end of December 2021, Gaw NP Industrial broke ground on a ready-built factory (RBF) project at the 16-ha GNP Yen Binh 2 Industrial Center. At the end of February, KCN Vietnam held a groundbreaking ceremony for a 13.4-ha premium industrial facility in Phu An Thanh Industrial Park, Long An Province.
Commenting on the deals that have already taken place this year, John said: “The market has sprung into action since the start of the year. For example, LOGOS Vietnam Logistics Venture made its fourth acquisition in Viet Nam. In February, LOGOS and Manulife Investment Management established a joint venture partnership to acquire a 116,000-m2, modern built-to-suit logistics factory valued at more than US$80 million. CapitaLand Development signed a memorandum of understanding (MOU) to invest US$1 billion in Bac Giang, and will develop its first industrial park, logistics park, and township in Viet Nam. BW Industrial Development JSC acquired 74,000 m2 of land in Bac Tien Phong Industrial Zone, developed by DEEP C Industrial Zones.”
John added that coupled with an encouraging reopening plan, the Government’s avowed support for foreign investors and the sheer resilience and adaptability of local enterprises are promising. It paints a reassuring picture that not only will the country recover but is likely to come back stronger than ever.