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

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

Vietnam’s Southern Key Economic Region has long been a leading industrial hub in Vietnam. With a strategic location, mature investment environment, and an expanding consumer market, the region accounts for the highest share of FDI in Vietnam, being the most attractive destination to start a business in the country.

Vietnam has four national key economic regions (KERs), 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 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.

Southern Key Economic Region (SKER) - Economic Profile

Located at the gateway of many international shipping and trade routes, the Southern KER is the most developed and exciting location to do business in Vietnam. The region is made up of eight provinces, including Ho Chi Minh City, Dong Nai, Binh Duong, Ba Ria–Vung Tau, Binh Phuoc, Tay Ninh, Long An, and Tien Giang, with the total GDP surpassing US$111 billion, equaling 45.42% of the GDP of Vietnam in 2018. It also recorded the highest FDI among the four KERs. By the end of 2018, the SKER had over 15,295 active investment projects and a total FDI registered capital of US$153,27 billion, accounting for 48.1% of the total FDI registered capital in Vietnam. Ho Chi Minh City, Binh Duong, Dong Nai, and Ba Ria–Vung Tau respectively ranked first, third, fourth, and fifth in the country in terms of FDI attraction.

Known for its dynamic and diverse business environment, supportive ecosystem, mature talent pool, as well as a large and continuously growing consumer market, the SKER is the most attractive destination for investment in Vietnam. Key sectors include electronics, software, IT, telecommunication, hi-tech agriculture production, processing, and textile & garment.

Recognizing the critical role of the SKER in the national economy, the Vietnamese Government has come up with specific plans to further develop the regional infrastructure, continue improving its business environment, and facilitate investment in the region. According to Resolution 128/NQ-CP, issued 11 September 2020, prioritized sectors in the SKER are electrical & electronic manufacturing and assembling, processing, digital economy, banking & finance, as well as real estate. The Government also offers attractive incentives to lure large-scale and hi-tech projects with an aim of building up the regional value chains.

Industrial Real Estate

As of July 2021, the KER has 148 operating industrial parks (IPs), with a total IP and industrial leasable area of over 47,000 ha, more than double the total area of the Northern and Central KERs. However, since most of the FDI projects coming into Vietnam are located here, the overall occupancy rate in the region is rather high, at 87%. The average rental price also comes at a premium compared to other regions, especially the Central and the Mekong Delta regions, with US$115/m2 for industrial land leasing and US$4.7/m2/month for ready-built factories (RBFs).

The SKER is home to some of the largest IPs in Vietnam. At present, the region has two major export processing zones (Tan Thuan and Linh Trung), two high-tech parks (Sai Gon High-tech Park and Quang Trung Software Park), and dozens of notable IPs. Major IP developers in the region are VSIP, Sonadezi, Saigon VRG, Tin Nghia, IDICO. Meanwhile, investors looking for RBFs and warehouses can find out more about Daiwa House, KTG Industrial, JSC, BW Industrial, KIZUNA, depending on their business characteristics and preferred location.

As the economic, logistics, and now a start-up and technology center of Vietnam, Ho Chi Minh City leads the FDI attraction in the country. Due to high demand, the supply of industrial land in the city has almost reached its limit. Its average industrial land lease price is also the highest in Vietnam, at US$161/m2. Binh Duong and Dong Nai follow closely with over 90% of industrial land occupied. For over a decade, Long An has been steadily building up its reputation as an attractive place for FDI, and with the constant increase in FDI inflow in recent years, has become a new investment spotlight of the SKER. The latecomers including Ba Ria – Vung Tau, Binh Phuoc, and Tay Ninh, are catching up quickly in recent years.

SKER Industrial Real Estate supply (H1/2021)

Transportation Infrastructure

Overall, the transportation infrastructure of cities and provinces in the SKER has been well-developed. In addition, urbanization and infrastructure improvements take place relatively rapidly here.

As the logistics center of entire Southern Vietnam, Ho Chi Minh City has well-developed infrastructure supporting industrial production, regions-connecting, as well as international trading. Tan Son Nhat Airport located in the city is the largest airport in Vietnam with a capacity to serve 38.5 million passengers per year. Sai Gon Port, a system of terminals situated along the Sai Gon River and the Dong Nai River, serves as the major sea gateways of the South. Besides the National Road system, the Ho Chi Minh–Long Thanh–Dau Giay expressway and Ho Chi Minh–Trung Luong expressway connecting the city to other provinces in the South have helped facilitate transportation across the region in recent years.

Other provinces also have their own advantages in terms of transportation to attract FDI. Tay Ninh possesses two international border crossings. Ba Ria-Vung Tau can leverage its strategic location to facilitate maritime transport. Long Thanh International Airport in Dong Nai province, once completed, will be the new largest airport and a key transport hub in Southern Vietnam, making all cities and provinces of Southern Vietnam more attractive in the investors’ eyes.

However, there is still much room for improvement for transportation infrastructure in SKER as the current system has yet to adequately accommodate the regional traffic demand. Incomplete inter-regional roads and waterways connecting seaports, airports, and international border crossings have been the main cause of traffic congestion across the region. Meanwhile, the underdeveloped connecting road system has been recognized as one of the main barriers preventing Binh Phuoc and Tay Ninh from attracting investment despite their large and available industrial land.

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