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HO CHI MINH, 13 July 2018 - Over the past 20 years Vietnam has established itself as one of the brightest manufacturing hotspots within South East Asia. In 1986, there was 335 hectares of land dedicated to industrial parks. Fast forward to 2018 and Vietnam now boasts 80,000 hectares. This phenomenal growth can be attributed to 1) Vietnam establishing itself as an export driven economy, 2) dedicated Industrial and Economic Zones, 3) numerous free trade agreements ("FTAs"), 4) strong economic growth and 5) young, plentiful, low cost workforce.
These initiatives have led to significant investment by large foreign companies. The best case study is Samsung who have reportedly invested over $17B in Vietnam. This has provided confidence to a raft of other foreign companies from around the globe to set up operations in the country.
The industrial property market in Vietnam, including industrial land, ready-built factories, warehouses and logistics properties, is in the nascent stage of development. The market is concentrated in three key zones, namely North, Central and South Key Economic Zones. The Southern region was the first hub and home to conventional sectors. The North has attracted more advanced high-tech industries and strategically located close to China. The Central region is the relative new comer.
In 13th July, 2018, JLL release a White paper aims to provide a comprehensive overview of the industrial market, the key advantages of investing and operating in the country, the potential impact of Industrial 4.0 and how E-commerce will play an important role in the development of the logistics sector.
Export Driven Economy
Vietnam is establishing itself as an export driven economy and encourages business in this sector. This is demonstrated by the establishing Industrial and Economic Zones in the North, Central and South regions and the country entering into 18 FTAs that has created a business friendly environment for domestic and foreign companies.
Movement from China
China continues its move away from labour-intensive industries and move up the value chain which has led to companies relocating to other South East Asian counties. Due to its close proximity and geographical location, Vietnam stands to be one of the largest beneficiaries of this migration from
China, this may have a negative impact on the environment which will need close monitoring. Trade Wars between China and the US could have a twofold impact. 1. Expedite the movement of companies from China to Vietnam 2. Trade Wars will increase the price of goods which could slow global consumption reducing output for exporters.
Vietnam is strategically located between China and Singapore with 3,260 km of coastline, providing excellent access to Vietnam's East Sea, one of the major shipping routes in the world. Roughly, 40% of cargo transported from the Indian Ocean to the Pacific crosses the East Sea before arriving in China, Japan, South Korea and the United States.
Evolving Logistics Market
Many commentators predict the logistics market will be the "stand out" performer over the next 5-10 years. The rapid growth of the middle-income population creating more disposable income and a growing obsession with e-commerce will put significant demand on logistics facilities.
According to The Asian Development Bank ("ADB"), Vietnam spends 5.8% of its GDP on infrastructure which is the highest in SEA. In order for Vietnam to enter the next phase of the industrial/logistics cycle and become more competitive with regional counterparts, it is critically important significant expenditure continue in the infrastructure network, including highway networks, deep-sea ports, upgrading of utilities networks, including renewable energy.
One of the challenges for Vietnam over the next few years will be the ability to adapt and embrace the inevitable disruption and changes brought about by technology and automation, now commonly known as Industry 4.0.
Mr. Stephen Wyatt, Country Head of JLL Vietnam commented, "Vietnam is establishing itself as the industrial powerhouse within Southeast Asia and as we have witnessed in other countries around the region, we expect the industrial market will enter a new phase and move up the value chain in the future, moving away from labour intensive to capital intensive".
Mr. Greg Ohan, Deputy CEO of BW Industrial, Vietnams largest 'for-rent' industrial developer commented, that from a real estate developer perspective "BW Industrial focus' is on supporting the sustainable development of Vietnam's industrial upgrade" and by doing so has become a critical player in supporting Vietnam's contribution to the global supply chain. "We will be a key force in the nations industrial and logistics real estate sector driving the development and upgrade of other sectors such as manufacturing and E-Commerce".
For a copy of the report ‘Vietnam | Southeast Asia's New Industrial Powerhouse': click here.
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