Vietnam Industrial Construction Report 2nd Quarter / 2022
10/08/2022
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INDUSTRIAL PARKS INFRASTRUCTURE DEVELOPMENT IN VIETNAM
SPOTLIGHT ON INVESTMENT ATTRACTION IN 2023
GDP growth in the 2nd Quarter of 2022 reached 7.72%. This is the highest GDP growth rate in every 2nd Quarter of the year since 2018. Since the Covid pandemic broke out strongly in Vietnam, the year of 2022 is the first year that Vietnam’s economy has begun to be open, the growth rate of 7.72% is considered an extremely optimistic sign for the recovery of the economy.
The total value of foreign direct investment capital into Vietnam during 6 months of 2022 reached over 14 billion, down 8.12% over the same period last year due to the decrease in both quantity and value of newly registered capital (decreased by 6.47% and 48.27% respectively). The capacity of attracting newly registered capital has not yet fully recovered after the interruption of anti-epidemic measures that Vietnam has strongly applied in 2021 and the world economy suffer many negative impacts from inflation, the price increase due to political and trade conflicts.
In the 2nd Quarter, the IIP index of the whole industry recorded an increase of 10.8% compared to the same period last year. The IIP index of major industry groups all tended to increase, including the processing-manufacturing industry increased the most +12.3%, the electricity production and distribution industry increased slightly +4.3%, the water supply industry, and the waste and wastewater treatment increased +6.8% and the mining industry increased +5%. The above growth figures show that business activities of enterprises are maintained steadily and are on the recovery path after the coronavirus catapulted the economy into its deepest recession on record.
In the first 6 months of 2022, Vietnam’s total export turnover reached more than 185 billion USD, increased 17.3% compared to the same period in 2021. In which, the foreign economic sector contributed up to 74% of the export market share. FDI enterprises are still the main exporters of the Vietnamese market. Vietnam’s largest export market is the United States, and in the first 6 months of this year, the EU market surpassed China to become Vietnam’s second-largest export market with a growth of 39%. But with the risks from China’s blockade policy, the continuous decline in consumer confidence and the rising unemployment rate in key export countries are existing risks for the export market in the remaining 2 quarters of 2022.
Continuing the period of strong increase in fuel import prices in the 1st Quarter of 2022, according to the General Statistics Office (GSO), the fuel import price index in the 2nd Quarter of 2022 reached the highest level in the past 5 years (up more than 50% over the same period). And according to the forecast of energy prices, in the near future, there is still no sign of decreasing when the war between Russia and Ukraine is still very tense. The increase in fuel import prices has led to a sharp increase in the price of construction materials in the 2nd Quarter of 2022, reaching double digits (10.4%). This is also the highest increase of Q2 from 2018 to now. However, now, Brent and WTI oil prices start to trend down thanks to the increase in production from Libyan oil fields. But the increase in fuel and construction material prices is forecasted to lead to an increase in construction costs, leading to the situation that projects are likely to be delayed and related parties such as the Employer, Contractor, etc. … will also face many risks in terms of finance and project progress.
Newly licensed FDI projects in the 2nd Quarter of 2022 decreased compared to the 1st Quarter of 2021 but there were many large capital projects
In the 2nd Quarter of 2022, the number of newly licensed projects decreased by about 27% compared to the same period in 2021, but registered capital increased by 3.8%. Although the number of projects has decreased, the scale of projects has increased, showing that the trend of attracting large-scale projects is continuing in the Vietnam market. In which, 47% of projects are in the North, while in the Central and South regions, the numbers are 13% and 40% respectively.
HOUSELINK’s report found that the trend of renting ready-built factory (RBF) is increasing both in terms of the number of projects and registered investment capital. Especially in 2022, this trend is shown more clearly when the number of RBF projects in the 1st Quarter of 2022 increased by 132% compared to the 4th Quarter of 2021 and increased by 193% compared to the same period in 2021. In 2nd Quarter of 2022, the number of RBF projects also increased by 100% compared to the same period in 2021. The scale of investment capital of RBF projects also increased significantly when the total registered investment capital of newly licensed RBF projects also increased in the first 6 months of 2022 increased by 93% compared to the same period in 2021. Meanwhile, for land lease projects, we see the opposite trend, the number of projects and the scale of investment capital both tend to have a downward direction.
Electrical equipment, logistic and electronics are the top 3 industries attracting the most investment capital in the first 6 months of 2022. In which, the electrical equipment industry stands out thanks to projects to produce silicon solar cells used in solar power technology. This is also a new manufacturing industry that has appeared in Vietnam recently but is attracting a lot of attention and in the future, we consider this sector will be developed more because renewable energy is a forming trend and growing very fast in Vietnam.
Yen Binh Industrial Park, Nhon Trach V Industrial Park, Vietn Han Industrial Park, Vsip Hai Phong Industrial Park are in the top 10 industrial parks that attracted FDI newly registered investment capital of Viet Nam (in 2nd Quarter of 2022).
Overview of Vietnam’s industrial construction in 2nd Quarter of 2022
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Projects under the preparation and design phases account for the largest share in quantity and total investment capital value among total industrial projects. Although it is still affected by high fuel and material prices and China continues to blockade some provinces because of the Covid-19 epidemic affects construction progress, many projects are still in the preparation phase. But compared to the 1st Quarter of 2022, at the end of the second quarter of 2022, the number of projects which are under the construction phase had increased by 32%. This is a good signal for the industrial construction market as projects are being accelerated. Each region has different priorities for future development and attracts different types of investment capital. While the northern provinces have many projects in the field of logistics centers, textiles, and electronics. In the Central region, there are still mainly agriculture & feed, and energy projects. In the South, agriculture and feed, logistic center and food and beverage are the top industries attracting investment. Agriculture-feed projects are still a prominent industry, especially in the Central and Southern regions.
At the end of June 2022, many expansion projects are being implemented and will continue to be the trend in the industrial construction segment in the near future. However, compared to the end of March, the rate of new construction projects entering the construction phase has increased by 42%. New investors and Vietnam authorities are taking very positive actions to accelerate the implementation of projects. HOUSELINK data shows that at the end of June 2022, the number of projects under construction in the North continues to account for the majority with a total investment of about $8.8 billion. The project in the South is less than the North in terms of both investment capital value and number of projects, but the difference is not too large. In the Central region, the number of projects under construction is the smallest, but the total investment of these projects is the largest due to the gathering of many energy projects.
TOP 10 NEWLY REGISTERED INDUSTRIAL PROJECTS IN Q2/2022 BY VALUE OF REGISTERED INVESTMENT CAPITAL
The emergence of the 4th wave of Covid-19 starting from the end of April has taken a heavy toll on the country’s economy, causing serious damage to all economic sectors. Especially, in the third quarter of 2021, when the number of infections in many provinces and cities increased rapidly, the social distancing policy was applied in most major provinces and cities, Vietnam’s GDP in the third quarter of 2021 decreased 6.17% compared to same period of 2020, this is the lowest quarterly growth rate ever recorded from 2018 so far. In 2021, Vietnam’s GDP increased by 2.58% – the lowest growth rate since 2018.
The total value of foreign direct investment into Vietnam in the 12 months of 2021 reached 31.15 billion USD, increased 9.2% over the same period last year. In which, the value of newly registered capital and adjusted capital increased sharply compared to the same period last year, reaching USD 15.25 billion (up 4.1%) and USD 9.01 billion (increased 40.5%).
Continuing the trend from the beginning of 2021, the number of newly granted projects decreased by about 31.1% over the same period last year, but the total value of newly registered capital increased by more than 4.1%. If in the period of Q1 and Q2, although the number of newly granted projects decreased significantly, the newly registered capital increased sharply (> 16% compared to same period of last year), then in the 12 months, the value of newly granted capital increased only 4.1%. This shows that the trend of foreign investors who have registered to invest in large-scale projects still occurs from the beginning of the year to the end of 2021, but due to the complicated development of the Covid-19 epidemic in the third quarter of 2021 so by the end of the year, large-scale projects tend to increase but not as much as before.
The complicated evolution of the Covid-19 epidemic in Vietnam and around the world, leading to a disruption in the supply chain, continued to negatively affect the import and export activities, however, in the last months of 2021 with the vaccination campaign, loosening distancing measures, production has improved compared to the third quarter of 2021. Accordingly, the value of exportation for the whole year reached 336.25 billion USD (increased 19% over the same period last year), the value of importation reached 332.25 billion USD (up 26.5% over the same period last year). Vietnam has an estimated trade surplus of 4 billion USD in 2021.
The decrease in the number of FDI projects combined with the difficult situation in the implementation of construction projects, the high price of construction materials, was heavily affected by the epidemic with the social distancing policy, especially in Vietnam. The time of Q.3/2021 has caused many enterprises in the field of Industry and construction to be dissolved or temporarily stopped operating. The number of businesses dissolved and suspended in 2021 increased by 18% and 7% respectively compared to 2020). While the number of newly established businesses decreased by 22.4% over the same period last year and the number of businesses returning to operation also decreased by nearly 10%. In 2022, with the policy of “Adapting safely to the epidemic” – both safely fighting the epidemic, developing the economy and promoting production and business, combined with increasing public investment to promote the economy and to attract foreign investment, the operation of enterprises is expected to be better than in 2021, but businesses still need to develop a clear operating and financial plan to prevent the Inflation which may be increased further and raw material prices remained high.
New FDI projects are still mainly located in the North and in the South. The projects in the Central region only accounts for a small number of registered projects, mainly projects in the processing and manufacturing sector. If in the South, the project showed signs of increasing in both quantity and value of invested capital in the fourth quarter after the decline in the third quarter, in the north, the third quarter was the peak period in terms of investment projects and has a decrease of about 13% in the fourth quarter compared to the third quarter in terms of the project numbers. In the Central region, the fourth quarter of 2021 is a prosperous time to attract FDI in the region with an increase of 267% compared to the number of projects in the third quarter, higher than that of the first and second quarters. Projects in the Central region are insignificant when compared to the South and North, but with the current rate and frequency of increases, we believe that the Central region will be an attractive destination for investors in the near future when the industrial land fund in the North and the South is dwindling.
In 2021, the number of industrial projects that rent ready-built factories (RBF) accounts for 21% of the total number of newly registered projects, the investment registration value of these projects’ accounts for 5%. The majority are still construction land lease projects.
Within the framework of the Report on the implementation of industrial projects in Vietnam in 2021, HOUSELINK focuses on analyzing projects data which have the investment capital of more than 2 million USD (equivalent to 46 billion VND) that are in the process of being prepared for construction (Project preparation, Design, Bidding, Contractor selection. main) and projects under construction based on the following criteria: Type of construction, Locality, Type of project, Type of investment as of the end of December 31, 2021.
The total number of projects is 1386 projects with a total investment capital of approximately 126 billion USD, mainly projects in the project preparation stage, 997 projects, most of which are projects in the preparation for construction, bidding and in the design process with 795 projects with $97 billion in value deployed on more than 23 thousand hectares; selected projects include 202 projects; There are 389 projects under construction. Due to the complicated situation of the epidemic in the past year, it has greatly affected the project implementation, as well as the psychology of investors who are afraid of investing in project construction during the epidemic period, especially during the pandemic. In particular, the high price of construction materials will affect the overall cost, so most of the projects are still in the preparatory stages.
Following the trend from the beginning of 2021, the number of newly registered projects decreased by about 36.8% over the same period last year, but the total value of newly registered capital increased by more than 16%. This shows that the trend of foreign investors invest in large-scale projects is continuing in the first 8 months of 2021.
In the first 8 months of 2021, the number of newly registered industrial projects which have plan to rent factory accounted for 22% of the total number of projects, the registered investment capital of these projects accounted for 11%. The majority are still land lease projects for construction, however, according to our observations, the rental and acquisition of factories continues to be a trend with expanded production scale. Factory leasing projects are mainly in the North market with overwhelming numbers both in terms of the number of projects and the value of registered investment capital.
Projects under preparation and design phase account for the largest amount both in number and total investment capital among industrial projects. Due to the complicated situation of the epidemic in the past 8 months, it has greatly affected the project implementation, as well as the psychology of investors who are afraid of investing in project construction during the epidemic, especially the problem of high price of construction materials will affect the overall cost, so most of the projects are still in the preparation and design phase.
HOUSELINK data shows that at the end of August 2021, the expansion project is quite small compared to the new construction projects. However, the number of expansion projects of 435 is much higher than the number of new construction projects (387). This shows that more and more investors tend to expand production, but the scale is not too large. In addition, new construction projects are smaller in number, but the investment capital scale reaches a great number. It can be seen that the trend of new investment in large-scale projects is still going on in the Vietnam market.
At the end of August 2021, there are 193 projects are expanding the existing production scale, with a total investment capital reached nearly 6 billion USD and 3,81 thousand hectares of land area. New construction includes 135 projects, with total investment capital and land area of 5,4 billion USD and about 4 thousand ha accordingly).
In all three regions, most of the resources are focused on the construction of projects in the energy sector. In addition, in the North and Central region, the projects in the field of electronics are also very focused to be invested. Meanwhile, in the South, the pharmaceutical sector is behind the energy sector.
Lunar New Year holiday occurred in February, combined with anoutbreak of COVID-19 in numerous provinces and municipal cities, which have a significant impact on investment – production – business activities nationwide.
The total value of foreign direct investment reached US $ 5.46 billion in the first two months of 2021, down 15.6% from the same period last year. In which, value of newly registered capital and value of capital contribution and share purchase witnessed a sharp decline year-on-year.
However, foreign investors continue to expand the existing investment scale. 115 projects licensed in previous years registered to adjust their investment capital with an increase of 151.8% in capital.
Based on the data of industrial projects with a total investment of more than 2 million USD (equivalent to 46 billion VND) in the form of foreign direct investment (FDI) and domestic direct investment (DDI) on the platform. HOUSELINK; We synthesize, analyze data and make reports on projects under construction activities in February 2021; as well as projects that are undergoing preparatory steps (project preparation, design, contractor selection) to prepare for construction in 2021.
While electronics is a priority for businesses in the North, the South is the destination for many textile and garment enterprises. The advantage of location and climate helps the central provinces to attract a series of large-scale energy projects.
Despite complicated pandemic worldwide, Vietnam’s index of industrial production and value of import-export goods increased sharply over the same period last year.
A series of projects developing industrial parks and industrial clusters are proposed and approved for investment policy in the first quarter of 2021. The boom in industrial infrastructure development shows the potentials to attract manufacturing investors in general, and development prospects of the industrial construction segment in the upcoming periods.
Logistics has been the field receiving large amounts of investment capital, especially FDI in the first quarter of 2021 – to confirm the development trend of this field in the coming time.
A series of solar cell investors are shifting large-scale production to Vietnam.
Raw steel price increased sharply from the end of March 2021, with an increase of approximately 30-40% compared to the end of 2020; and is forecasted to keep increasing until Q3.2021. This puts great pressure on various construction contractors, as steel is one of the main input materials for construction activities.
Although in Q1.2021 the proportion of projects leasing factories for production was equivalent to Q4.2021 their registered investment value occupied in a quarterly total investment of newly registered industrial projects increased sharply (18% in Q1.2021 over 8% in Q4.2020).
Each region has different priorities for future development. While the Northern provinces have numerous projects in electrical – electronic businesses, energy is the investment priority in the Central region, or logistic centers are investment trends in the South.
Based on the data of industrial projects with a total investment of more than 2 million USD (equivalent to 46 billion VND) in the form of foreign direct investment (FDI) and domestic direct investment (DDI) on the platform. HOUSELINK; We synthesize, analyze data and make reports on projects under construction activities in Quarter 1/ 2021; as well as projects that are undergoing preparatory steps (project preparation, design, contractor selection) to prepare for construction in 2021.
New US President Joe Biden officially took office on January 21, 2021. The victory of the new Democratic President is expected to heal America and better control the COVID-19 pandemic. In addition, the US-China foreign policy is expected to be softer under the New President, although the policy line is expected to remain the same.
The XIII National Party Congress took place from January 25, 2021 to February 1, 2021. Comrade Nguyen Phu Trong continued to vote for the position of General Secretary. With a stable political system, Vietnam is expected to continue implementing many socio-economic development policies.
The trade war between the world’s two largest economies paved the way for global supply chain shifts. A series of large manufacturing groups in the world with factories and production lines in China are looking for new destinations to avoid tariff barriers when exporting to the US, while reducing their dependence on China.
Vietnam is one of the economies on the list of potential choices of the “giants” in the electronics and textiles industry with stable politics, favorable mechanisms to promote cooperation and foreign investment. In addition, in the context of the disease epidemic in 2020, Vietnam will be given more chance due to its good disease control, and the economy is not frozen by the epidemic.
The value of foreign direct investment in January 2021 clearly demonstrated the impact of the COVID-19 epidemic on outside investment activities. In which, January 2021 witnessed a strong decrease in investment value, newly registered capital as well as the number of newly registered projects.
Although the entry restriction policy is enforced, Vietnam remains an attractive destination for foreign investors, especially electronics manufacturers: average investment value of the projects increased 59% over the same period last year.
Based on industrial projects data in the form of foreign direct investment (FDI) and domestic direct investment (DDI) on the HOUSELINK platform; We synthesize, analyze data and make reports on projects under construction activities in January 2021; as well as projects that are undergoing preparatory steps (project preparation, design, contractor selection) to prepare for construction in 2021.
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