Opportunities in Danang’s 6 Industrial Parks, 3 More In Works

Danang’s industrial parks have become a hotspot for foreign investors, both for starting a business and shifting manufacturing from China.

Vietnam’s economy has flourished over the past decade, thanks to its friendly-investment policies, cheap labor, and low operating expenses. As a result, foreign investors are inclined towards shifting their manufacturing to Vietnam, instead of China. To cater to the infrastructural demand of investors, the government has established 6 industrial parks in Danang’s vicinity and plans to open 3 more.

Recent economic developments and prospects

Reports from the World Bank in August 2022 indicated both upward trends and possible challenges. 

  • The two-year-long COVID-19 turmoil has made the global economy unstable. Global recovery has been shadowed by new economic shocks. According to current projections, the global economy will grow by 2.9% in 2022. These various shocks are affecting Vietnam’s major trading partners, with the United States and European nations expected to grow by 2.5% and China by 4.3% by the end of 2022. 
  • The economy of Vietnam is on the mend after two years of battling with the COVID crisis. In the first quarter of 2022, 44% of firms reported better sales than prior to the pandemic.
  • In the first half of 2022, both labor market conditions and household incomes improved. Employment returned to pre-pandemic levels and the labor force now makes up 68.5% of the population.
  • A sharp rise in the price of energy and intermediate goods contributed greatly to the current account deficit of USD 1.5 billion or 1.7% of quarterly GDP in the first quarter of 2022.
  • While the economy remains positive, heightened risks require authorities to take proactive measures. In spite of a challenging global economy, Vietnam’s economy remains optimistic. Due to low base effects, GDP has grown by 7.5% in 2022 and is expected to rise by 6.7% in 2023.

Key Factors that are attracting investors to Vietnam

  • Young population: Vietnam’s startup and entrepreneurial scene has gained traction thanks to its target demographic: 70% of the population is under 30 years of age. Moreover, the young generation is also driven and skilled.
  • Growing middle class: Over the last three decades, Vietnam has successfully transformed itself from one of the poorest countries in the world into an economic powerhouse. The transformation was aided by the country’s growing middle class.
  • Investment-friendly policies: According to the World Bank, the Vietnamese government has lowered the barrier for starting a business in Vietnam. The government is leaving no stone unturned to encourage foreign investments.

Reasons to establish a business in Danang

One of our recent articles discussed the biggest advantages of doing business in this beautiful city. Here is a summary of the five features of Danang that you can make use of.

  • East-west Economic Corridor (EWEC)

Danang serves as the eastern gateway to the EWEC network in the Greater Mekong Subregion (Vietnam, Laos, Cambodia, Thailand, and Myanmar), developed by the Asia Development Bank. The construction of roads between Laos and Thailand and connecting Mekong and Danang is now complete. As Danang’s development continues, the EWEC will play a crucial role in promoting regional cooperation and attracting investment.

  • New Strategic Economic Hub

Danang in central Vietnam has been designated as one of five strategic economic hubs in the region, along with Quang Nam, Binh Dinh, Quang Ngai, and Thua Thien-Hue. By becoming a strategic economic hub, Danang can leverage the geographical potential and the increasing economic activity of the highlands and central regions.

  • Improved Infrastructure

A major transportation hub, Danang is equipped with international airports, a  commercial port, railways, and roads. Its infrastructure is undergoing rapid development. It has direct international shipping routes to Singapore, America, Hong Kong, Taiwan, Japan, and South Korea. With the affordance to host 12 million visitors per year, Danang International Airport is one of Vietnam’s largest and most developed airports.

  • Abundant Trained Workforce

There are nearly half a million potential workers in Danang, and they are young, dynamic, and well-trained, having attended universities and vocational schools. Approximately 24 colleges and universities are located in Danang, and more than 50 vocational training schools with over 140,000 students enrolled. Even in terms of educational development indexes, Danang ranks at the top. 

  • Technology and Telecommunication Center

A number of companies in Danang specialize in software and the Internet, making it one of the leading technology and telecommunications centers in Vietnam. Over the past few years, Danang’s software technology companies have collaborated with top Japanese and Indian companies to train local engineers, technicians, and programmers.

Overview of Vietnam’s industrial zones (IZs) and industrial parks (IPs)

An Industrial Zone is a government-designated area where products and services are produced for industrial purposes. Companies in such zones can leverage various financial incentives provided by the government.

IZs vary greatly in terms of location, organization, incentives, and so forth. Hence, investors should conduct extensive research to pick the most suitable IZ for their business.

As of May 2021, there were 394 industrial parks in the nation, totaling 121,900 hectares of natural land.

Out of the total 394 IPs, there are 286 industrial parks with an occupancy rate of 71.8%. These parks have also generated 3.78 million jobs. Moreover, there were 25 new industrial parks established in the first half of 2021, compared to just 6 in H1 2020.

RELATED: Vietnam’s Industrial Parks Ready to See Significant FDI Inflow

why invest in Danang's industrial parks

Why Invest in Danang’s Industrial Park

The advantages of Danang’s industrial park include reduced transport costs and increased time efficiency for foreign investors.

Danang’s industrial park is conveniently connected to many urban areas, making transportation and distribution highly efficient. Industrial park projects in Danang have received strong support from the government and private sectors in terms of policies and facilities.

Danang performed extremely well in industrial production and trade in 2019 and the value of the industry hit approximately VND 17.9 thousand billion – an increase of VND 300 billion in less than 12 months.

Not only that, but the industrial index was also recorded with an increase of 4.25% attributing to industries including electricity production and distribution, processing-manufacturing, waste treatment, and water supply.

In the same year, trade activities in Danang have also advanced immensely with total retail sales of goods and services reaching almost VND 100 thousand billion. This total retail sales of goods and services figures are 13.6% higher than the one recorded in 2018.

Danang gears up for three more industrial parks

Danang City’s People’s Committee has requested the Prime Minister’s sanction to construct three new industrial parks at the expense of USD 652 million. 

With an area of more than 400 hectares and an estimated investment capital of nearly USD 287,000, the Hoa Ninh Industrial Park is one of the three new industrial park projects.

In Hoa Vang district, the second project proposed is the Hoa Nhon Industrial Park, which covers more than 360 hectares. An investment of more than USD 287,000 will be contributed towards this project.

With 120 hectares of land and a total investment capital of over USD 92,000, the Hoa Cam Industrial Park – phase 2 is the third project in the Hoa Cam Industrial Park project series.

Moving toward ecological development

The Hoa Khanh Industrial Park in Danang’s Lien Chieu District is one of three industrial parks to pioneer participation in Vietnam’s ‘Eco-Industrial Park Initiative for Sustainable Industrial Zones‘.

For the period 2021 – 2030, the municipal government adopted the ‘Building Danang into an Environmentally-Friendly City’ project on April 2, 2021. The project aims to create at least one eco-industrial park in Danang by 2025 and three by 2030.

As part of the Authority’s plan to achieve this objective, the following tasks will be addressed in the near future: 

  • Making a list of both full-time and part-time environmental protection officers; 
  • Organizing training courses on waste and energy audits, and updating industrial park regulations on environmental protection; 
  • Identifying symbiotic models for enterprises’ waste releases;
  • Examining the obstacles and difficulties associated with forming at least one symbiosis model in the Hoa Khanh Industrial Park by 2023; 
  • Establishing a handbook for green financial management; 
  • Arranging seminars to introduce preferential capital sources to enterprises and help them improve their production lines.

Commitments by authorities

At the Danang 2022 Investment Forum, Danang City’s provincial secretary Nguyen Van Quang made several promises regarding the investment attraction of the city’s high-tech and industrial parks. 

Plans are in place for Danang to receive more infrastructure development (e.g. freight departments and more ports), create a more accommodating business environment (with improved administrative procedures and customs incentives), and build a formidable high-skilled workforce. 

As the heart of Vietnam’s Central Key Economic Zone (CKEZ), the city is determined to keep up its crucial part in the national economy as an investment and innovation hub.

How to Set up a Company in Vietnam

Foreign investors starting a business in Vietnam should first set up a company in the country.

A foreign-owned company in Vietnam is the most common form as it allows maximum foreign ownership of 100%.

For a successful company establishment, you are required to obtain two certificates, which are the enterprise registration and investment registration certificate.

RELATED: Things to Consider Prior to Operating a Manufacturing Plant in Vietnam

Enterprise Registration Certificate

This certificate, known by its acronym ERC, is a document consisting of information of the registered enterprise. An ERC is available in either a hard copy or a soft copy.

Investment Registration Certificate

An investment registration certificate, or IRC, is a soft copy document that contains all the information of the registered investment project. This certificate is compulsory for foreign investors when they own 51% or more of the investment project’s charter capital.

Process of Company Registration in Vietnam

  • The business owner must submit a complete and valid set of company registration documents to Cekindo
  • Cekindo checks and confirms all documents are thorough and accurate in 3 business days and submit the document to relevant authorities on the owner’s behalf
  • A written notification will be sent to the founder of the application. The reasons for application refusal will be stated
  • Based on the type of business category, owners may have to fulfill other requirements under Vietnam’s Enterprise Law and Investment Law

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Tim Ta is the Head of the Business Consulting Department of Incorp Vietnam. He is a seasoned professional with more than 6 years of consulting experience in Vietnam for market entry, incorporation, and real estate investment.