Promoting Sustainable IP Development

10:15:42 AM | 10/9/2024

Addressing obstacles and fostering sustainable industrial parks will enable Vinh Phuc province to achieve its goal of becoming a modern industrial province.


Chairman of the Provincial People's Committee Tran Duy Dong and Director of the Industrial Zones Management Board Ha Dinh Nha chair the conference on sustainable development of industrial parks

High rents, low occupancy

According to the Vinh Phuc Provincial Planning for 2021-2030, approved by the Prime Minister in Decision 158/QD-TTg on February 6, 2024, the province will have 28 industrial parks (IPs) covering 4,815 ha by 2030, and 29 IPs spanning 5,489.68 ha by 2050. Additional IPs may be established or revised, potentially increasing the total area to 10,000 ha if conditions are met.

Reporting at the Conference on "Sustainable Development of Vinh Phuc Industrial Parks” organized recently by the Vinh Phuc Provincial People’s Committee, Mr. Ha Dinh Nha, Director of the Vinh Phuc Industrial Zones Management Board, said that Vinh Phuc had 17 IPs established with a total area of 3,142.96 hectares by the end of August 2024, including nine in operation (Kim Hoa, Khai Quang, Binh Xuyen, Ba Thien, Binh Xuyen II-Phase 1, Ba Thien II, Tam Duong II-Zone A, Thai Hoa-Lien Son-Lien Hoa-Section II-Phase 1, and Thang Long Vinh Phuc), three under construction (Son Loi, Tam Duong I- Zone 2, and Song Lo I), and five blueprints (Binh Xuyen II-Phase 2, Nam Binh Xuyen, Phuc Yen, Song Lo I, and Dong Soc).

By the end of August 2024, the province’s IPs housed 493 valid investment projects, including 117 domestic direct investment (DDI) projects with a total investment capital of VND37,784.64 billion (US$1.6 billion) and 376 foreign direct investment (FDI) projects with US$6.74 billion of investment capital. Among them, 413 projects are in operation (334 FDI projects and 79 DDI projects), accounting for 83.8% of all projects.

Notably, the report released by the Vinh Phuc Industrial Zones Management Board showed that the occupancy rate of IPs was 44.62% by the end of August 2024 (70.62% of the land area allocated to developers).

Among nine operational IPs, only seven have wastewater treatment systems in operation while two do not have, namely Tam Duong II-Zone A and Thai Hoa-Lien Son-Lien Hoa-Section II, Phase 1.

Notably, current land rentals applied by Vinh Phuc-based IPs are quite high (average land rents are US$130-150 per square meter, even over US$170 in some projects; factory rentals are US$4-5 per square meter a month). These rates are higher than those in Bac Giang, Hung Yen and Hai Duong provinces.

Nha said, since its re-establishment, Vinh Phuc province has welcomed major FDI projects and strategic investors, including Honda, Toyota and Piaggio. However, in the last decade, there have been few new FDI arrivals, although existing projects have expanded. Unlike other Red River Delta provinces such as Bac Giang, Thai Nguyen, Hai Phong and Bac Ninh, Vinh Phuc has not attracted large leading projects, which is not reflective of its potential. Additionally, key industries have weakened, gradually losing their competitive advantages.

Meanwhile, secondary DDI projects in IPs are mainly small and medium in size and technologically outdated. Some investors have limited capacity and financial strength, leading to slow project progress and business underperformance. Business connection and technology transfer between FDI firms and domestic companies remain weak. Not many domestic companies in the province have deeply joined in supply chains led by FDI enterprises.

Attracting capable infrastructure investors is a must

At the conference, Chairman of the Vinh Phuc Provincial People's Committee Tran Duy Dong emphasized that the policy of "taking industrial development as the foundation and driving force for growth" is a consistent perspective for Vinh Phuc across all administrative terms. He also urged that feedback should clearly identify bottlenecks to be addressed, aligning with the goal of sustainable industrial park development as a key priority in the province's growth strategy.

“The lesson learned to effectively invest in industrial parks is to attract capable, experienced and professional infrastructure investors,” Dong said.

In reality, some infrastructure investors had to increase land rent rates, Dong said, adding that this has affected the investment environment, diminished the competitiveness of both the province and their IPs. Some investors moved to other provinces and countries.

“In reality, IP infrastructure investors must not only manage real estate but also implement effective marketing strategies to attract investors. They need to provide essential services, including environmental management, telecommunications, green space, wastewater treatment and social infrastructure such as housing, hospitals and schools, to fully meet the needs of secondary investors, experts and workers,” he emphasized.

Analyzing the occupancy rate of Vinh Phuc's IPs, which is only 44.62%, lower than the average of nearly 70%, Dong cited a report saying that the planned but uncleared land area of formed IPs is 1,240 ha (including rentable industrial land is 867.68 ha) and the land allocated but unleased to tenants is 437.5 ha (due to insufficient infrastructure).

He asserted: “This is attributed to weak infrastructure and weak capacity of infrastructure investors, among other causes.”

Meanwhile, the available rentable land fund is currently about 70 ha besides factories for lease. “Thus, when investment promotion events arise or investors require land for immediate projects, it becomes challenging for the province to provide available land quickly. This is a significant issue that needs effective solutions to address it,” he noted.

At the conference, Dong assigned specific tasks to relevant agencies and localities to discuss and remove difficulties for sustainable IP development.

In particular, he requested IP infrastructure investors and tenants to strictly comply with the law and actively implement investment projects as registered.

Specifically, IP infrastructure investors must prioritize resources to develop synchronous, modern infrastructure, adhere to project timelines, comply with planning, investment, construction and environmental regulations, and closely coordinate with local authorities and agencies on land compensation and site clearance. They should have solutions to improve their skills in investing in and operating IP infrastructure, pay attention to the care, maintenance and operation of green spaces and infrastructure systems, and ensure reasonable land rentals and factory rentals in IPs.

Tenants in industrial parks should prioritize resources to ensure timely project implementation and comply with legal regulations regarding planning, investment, construction, environmental protection and other relevant standards.

By Nguyet Tham, Vietnam Business Forum