Vietnam’s Investment Spotlight - An Overview of Vietnam’s Northern Key Economic Region

Vietnam’s Investment Spotlight - An Overview of Vietnam’s Northern Key Economic Region

Vietnam has four national key economic regions (KER), including the Northern, Central, Southern, and Mekong Delta regions. The four KERs include 24 provinces and cities, accounting for 27.3% of Vietnam’s total area and 27% of the national population. With an average contribution of 72.95% to the national gross domestic product (GDP) during the 2011-2019 period, they are considered the engine of the Vietnamese economy and are home to the majority of foreign-invested and local businesses, as well as high-quality labor in the country.

Northern Key Economic Regions (NKER) – Economic Profile

Situated in a critical geopolitical location, the NKER encompasses Hanoi, Bac Ninh, Hai Duong, Hai Phong, Hung Yen, Quang Ninh, and Vinh Phuc provinces, is considered the center of politics, culture, national defense, and security, as well as an important economic center of Vietnam. By the end of 2018, the region contributed approximately 32% of the national GDP, 32% of the total export turnover, and 26% of the total foreign direct investment (FDI) of Vietnam.

Although most of the regional economic indicators are second to the Southern KER, over the past ten years, this region has experienced a much faster economic growth compared to that of Vietnam and other KERs in the country thanks to its exponential FDI inflow. Particularly, in the 2016-18 period, the average gross regional domestic product (GRDP) growth rate of the NKER was over 9%, the highest in Vietnam. The regional average export growth rate reached 25.6% while its export turnover increased by 57%, from US$49.6 billion in 2016 to US$78.1 billion in 2018. The average growth rate for FDI of the region from 2016-18 rose to 21.8%, 11.5% higher than the national rate. The region’s proximity to China, combined with its well-developed infrastructure, abundant workforce, and attractive incentives gearing toward foreign investors, are among the key drivers that draw FDI in, making the NKER one of the best ‘China plus one’ manufacturing locations for foreign investors looking to diversify their supply chains in Southeast Asia.

According to Vietnam’s Ministry of Planning and Investment, as of 2020, the NKER received a total registered investment capital of US$101 billion with more than 10,000 projects. FDI firms contributed more than 80% of the region’s total export. Key sectors receiving foreign investment are electrical and electronics, automobiles, textile and garment, and supporting industries. The region is home to many big multinational corporations such as Samsung, Foxconn, Canon, Microsoft, Honda, Hyundai, and LG Electronics. Major foreign investors are mainly from South Korea, Japan, the USA, Taiwan, and the EU.

Industrial Real Estate

As of H1/2021, the NKER has approximately 27,000 ha of industrial area, of which 20,567 ha is leasable industrial land. The current occupancy rate is 87%. Large-scale industrial zones attracting significant FDI investments are concentrated in major cities and provinces such as Hanoi, Hai Phong, and Bac Ninh.

Bac Ninh has almost reached its full capacity for industrial land. Hanoi follows closely with 91% occupied industrial land. Hai Duong, Hai Phong, and Vinh Phuc have more available land for domestic and foreign investment. The average cost for industrial land leasing for Hanoi and Bac Ninh, therefore, stood at the higher end compared to other NKER provinces, at about US$129/m2 and US$106/m2 respectively. The average cost for industrial land leasing in the region, as of H1/2021, was about US$100/m2 with an average year-over-year (YoY) price growth of 10.58%. Meanwhile, the average rental price for ready-built factories (RBF) reached US$4.6/m2/month and increases approximately 12.20% YoY. Key Industrial Park Developers in the region include VSIP, Deep C, Viglacera, Kinh Bac City, Hoa Phat, TNI, together with notable RBF/RBW Developers such as BW Industrial, KTG Industrial, Mapletree, LOGOS, KCN VIetnam, SLP.

NKER Industrial Real Estate supply (H1/2021)

Transportation Infrastructure

To improve the country’s competitiveness in attracting FDI, especially those in more advanced, high-tech industries, the Government has invested significantly in developing the transportation infrastructure in KERs. Among the four KERs, the NKER is the area with the most well-developed highway system. With Hanoi being the center of the region, there are nine expressways connecting this capital city to its surrounding provinces. The development of Phap Van–Cau Gie, Hanoi–Hai Phong, Hanoi–Thai Nguyen, Ha Long–Hai Phong, Ha Long–Van Don, and Thang Long expressways are prime examples of the modern and high-quality road infrastructure in the NKEG. Not only has it significantly improved regional connectivity, but also reduced transportation costs and time, and helped promote cross-border trade between Vietnam and other countries.

Besides, the upgrade and expansion of international ports in the NKER have also contributed substantially to the advance of logistics activities of the region and the country. According to the Vietnam Ministry of Planning and Investment, the NKER has 27 logistics centers, accounting for 55% of the total in the country (14 in Bac Ninh, 11 in Hanoi, and two in Hai Phong).

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