High-quality FDI projects boost real estate market recovery
Vietnam’s policy of opting for high-quality FDI projects has started yielding good results despite the severe impacts of Covid-19 on the global economy, Deputy Construction Minister Nguyen Van Sinh said.
Sinh made the comments during the recent presentation of the ministry’s January-March report on the real estate market. He said Vietnam remains an attractive and safe investment destination for multinationals, especially in industrial properties.
The strong return of foreign direct investment (FDI) to the real estate market in the first quarter of 2022 has been a positive factor in supporting its recovery in the post-pandemic period.
|Thang Long Industrial Park in Hanoi. Photo: Pham Hung|
The January-March period saw strong FDI inflows into industrial parks. At the end of February, Framas Group, a German company specializing in the manufacture of injection molding machines, signed a 10-year contract for the rental of a 20,000 square meter ready-made factory at KTG Industrial Nhon Trach 2 , Dong Nai province.
The authorities of the southern province of Binh Duong in mid-March granted an investment license to LEGO (Denmark) for the construction of a toy factory worth 1.3 billion dollars, while that BW Industrial Development acquired Bac Tien’s 74,000 square meter DEEP C Industrial Park. Phong Industrial Park, Quang Ninh Province.
The return of foreign investors helped lift the occupancy rate of industrial parks in the North to 80% during the first quarter of 2022, with land rents of around $109 per square meter, up 9.2% on a year.
In the south, the occupancy rate is around 85% with rents of 120 dollars per square meter, up 9%.
Insiders said the government’s decision to reopen the economy was key to maintaining a strong inflow of FDI into economic sectors.
Data from the Ministry of Construction revealed that total FDI commitments to Vietnam reached nearly $9 billion in the first three months, in which the real estate market ranked second among sectors behind construction. manufacturing and processing with 2.7 billion dollars, representing 30.3% of the total capital and more. 213% over one year.
Challenges and Opportunities
Since the start of 2021, the shift in investment flows from China to Vietnam amid the impacts of Covid-19, coupled with a series of free trade agreements (FTAs) in place, has led to strong demand. of industrial properties.
In this context, new industrial parks are being built in the provinces/cities to meet the growing demand from domestic and foreign investors.
In Hanoi, the Municipal People’s Committee signed a decision to build two to five new industrial parks in the period 2021-2025, including those in Soc Son, Dong Anh, Bac Thuong Tin, Phu Nghia and Phung Hiep.
Bac Ninh authorities also lobbied for the construction of Que Vo II and Gia Binh industrial parks. In Quang Tri province, projects on Quang Tri and Trieu Phu IPs are being accelerated while Long Duc 3 and Bau Can IPs are expected to be completed soon in Dong Nai province.
Although Vietnam’s industrial parks are attracting strong interest, there are still concerns about the existing IP model, which needs further modifications to better adapt to the current situation.
Former director of the Foreign Investment Agency under the Ministry of Planning and Investment, Phan Huu Thang, said the majority of areas for lease are for production, rather than logistics and other support facilities.
“Cumbersome administrative procedures continue to be an obstacle for investors, for whom greater efforts are needed to ensure a more transparent and convenient environment to attract more investment capital to Vietnam,” said Thang, referring to the fierce competition of countries in the region for global FDI.
Meanwhile, an insufficient infrastructure system could also influence investors’ investment decisions. A report by the Ministry of Planning and Investment (MPI) noted that 16% of foreign-invested companies have transferred orders to other countries and 18% are considering this option.
“Vietnam should promote a new model of industrial park focusing on modern and environmentally friendly technology,” the MPI report notes.
“It is essential for Vietnam to avoid developing industrial parks solely for the purpose of utilizing land resources,” the ministry said.
“The reopening of the economy has boosted foreign investor confidence and opened up new opportunities for the real estate market in 2022, including industrial properties. The government’s strong support for investors and the adaptability of local businesses could also drive the growth of the market in the coming times,” said John Campbell, Vice Director of Savills Vietnam.