Over a month into its fourth and most challenging wave, Vietnam has recorded a total of 7,321 cases. As of the 01st June 2021, the Health Ministry announced 111 Covid-19 patients Tuesday morning, with around half linked to a religious mission in Ho Chi Minh City. The latest community transmission cases have been reported from Ho Chi Minh City, Bac Giang, and Bac Ninh. The rising number of infections in HCMC associated with multiple clusters has prompted the southern metropolis to launch a two-week social distancing period starting on Monday, 31st May 2021.

The social distancing and domestic travel restrictions are posing difficulties for developers trying to lease their land, factories, and warehouses, as investors can’t undertake site visits in other provinces. However, the performance of the industrial sector has proved resilient in the first five months of the year.

Industrial Production

According to Trading Economics, Vietnam's industrial production rose by 11.6% year-on-year (YoY) in May 2021, slowing from 22.2% surge in April. This marked the third straight month growth in industrial output on the back of the ongoing COVID-19 pandemic. Considering the first five.

The efforts of the government and businesses to fight against the COVID-19 pandemic and maintain production is expected to keep industrial production in Ho Chi Minh City on the rise. According to data from Ho Chi Minh City Department of Industry and Trade, industrial production in the city maintained its recovery momentum as the Index of Industrial Production (IIP) of May is expected to rise 1.6 and 5 per cent compared to last month and the same period last year.

Manufacturing PMI

The IHS Markit Vietnam Manufacturing PMI dropped to 53.1 in May 2021 from a near 3-year high of 54.7 in April. This represented the lowest reading since February, amid the latest outbreak of COVID-19 infections in the country. Rates of expansion in output, new orders, and employment all softened, while backlogs of work accumulated to a near-record rise.

FDI

By the 20th May 2021, Vietnam attracted US$13.9 billion total registered FDI. The manufacturing and processing sector attracted US$6.1 (43% of total inflows), with 215 new projects investing US$2.57 billion and 222 existing projects raising capital US$3.1 billion.

The largest manufacturing projects in 5M/2021 were from Jinko Solar and Fukang Technology from Hong Kong and Singapore investing US$498 million and US$270 million in Quang Ninh and Bac Giang, respectively.

Rental Developers and M&As

2021 has also witnessed new M&A activity. Boustead Projects acquired 49% interest in Vietnam’s KTG Industrial Bac Ninh Development in Yen Phong IP for approximately US$6.9 million. ESR, the largest Asia-Pacific-focused logistics real estate platform, and BW Industrial Development JSC (BW), the leading logistics and industrial real estate developer and operator in Vietnam, have entered into a development joint venture to develop 240,000 m2 in My Phuoc 4 Industrial Park near Ho Chi Minh City. The partnership marks ESR’s entry into Vietnam, expanding the group’s Asia-Pacific footprint in the high-growth Southeast Asia region.

Regarding new projects, Logos Property 81,000 m2 project in VSIP Bac Ninh 1 Logistics Park is expected to be live in Q4/2021. New player in the market, KCN Vietnam Group JSC, acquired a significant 250 hectares land bank with an investment of $300 million. They aim to develop premium, sustainable factories and warehouses for rent in Vietnam with a national portfolio spanning across Bac Giang, Hai Phong, Hai Duong, Dong Nai and Long An.

New Industrial Land Supply

Dozens of industrial zone projects in 13 cities and provinces covering have been approved in Q1/2021, promising thousands of hectares of new supply to accommodate investors in the next few years. Bac Ninh has the largest number of projects with five upcoming industrial parks (IPs).

For example, Que Vo III IZ will have an area of 208.54 ha with a total investment of US$120.87 million. Gia Binh II IZ will have an area of 250 ha (developed by Hanaka Group) with the total investment of US$172.17 million. Quang Tri also expects new projects such as Trieu Phu IZ with a total area of nearly 529 ha. In addition, Quang Tri IZ will have an area of 481.2 ha and the total investment of US$90.17 million, which is developed by a joint venture of three investors, including Vietnam-Singapore Industrial Park (VSIP), Amata City Bien Hoa JS. Vinh Phuc also expect several new IPs which are expected to bring a total supply of 500 ha such as Song Lo, Tam Duong 1, and Thai Hoa-Lien Son-Lien Hoa. Furthermore, new projects are expected in Hai Duong, Vinh Long, Quang Nam, Thua Thien-Hue, Nam Dinh, and Nghe An.

In the South, Dong Nai People’s Committee plans to develop three additional industrial parks (IPs) with the total area of 6,475 ha, which are expected to deal with the overload of existing IPs. Notably, three IPs are the 253 ha Long Duc 3, 2,627 ha Bau Can-Tan Hiep in Long Thanh district, and 3,595 ha Xuan Que – Song Nhan in Cam My district. These three IPs in Dong Nai were approved by the prime minister and added to the master plan on developing high-tech IZs through to 2020 with a vision to 2030.

Long An expects a new US$59 million IP project in Duc Hoa District. The Prime Minister granted in-principle approval for the project to build Century Industrial Park IP, which will be positioned in Huu Thanh commune in the southern province of Long An, with Hai Son Co., Ltd. acting as the developer. Covering over 119 ha, the project will be built at a cost of US$$58.9 million, US$17.4 million of which is investor’s equity. Construction time must not exceed 36 months from the date of land allocation, and the project’s operation duration will be 50 years from getting the approved investment proposal.

According to Long An Economic Zones Management Authority, the province will have about 1,500ha of additional cleared land in its IPs to cash in on rising foreign direct investment (FDI) flows into Vietnam in 2021. The sectors most appealing to foreign investors are textiles and garments, footwear, animal feed, poultry, seafood, food processing, beverages, and manufacturing.

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