In the context of newly registered FDI capital decelerating at the end of 2022, 2023 could be a more challenging year for FDI enterprises in Vietnam due to the risk of a global recession. However, the ongoing trend of shifting production from China to Vietnam will be the growth driver.
According to SSI Securities Company, Vietnam is among the countries that attract large manufacturers such as Lego with investment capital of USD 1 billion, LG with a plan to invest another USD 4 billion in Vietnam with the goal of making Vietnam a future smartphone manufacturing hub, and Foxconn, one of Apple's main suppliers, planning to invest USD 300 million.
Samsung is also looking to increase its investment in Vietnam to USD 20 billion, focusing on artificial intelligence, big data and other fields.
In 2023, Quanta Computer - the world's third largest software outsourcing company - is projected to build a factory in the North, where the company is expected to fulfill orders for Apple MacBooks. Meanwhile, BOE Technology Group Co Ltd (China), a supplier of both Apple Inc and Samsung Electronics Co Ltd, plans to invest a large amount of capital to build two factories in Vietnam with a leased area of 100 hectares in the North.
In addition, investment in Vietnam's industrial zones is considered attractive because the VND depreciates less against the currencies of countries in the region such as Indonesia, Thailand, India and Malaysia and other key markets like Japan.
Vietnam's FDI attraction policies also help attract investors by offering many incentives such as corporate income tax exemption for the first 4 years of operation, 50% corporate income tax reduction for the 5 following years and other business support incentives.
Industrial park land rental prices in Vietnam are still low compared to ASEAN countries, specifically 30~36% lower than Indonesia and Thailand. At the same time, the supporting infrastructure connecting industrial parks is constantly improved.
SSI Research forecasts that in 2023 industrial park land prices in the South will increase at a slower rate of 1~2%, when the supply of real estate in tier-1 cities (HCMC, Binh Duong, Dong Nai, Long An) is limited, and new supply in tier-2 cities (Ba Ria - Vung Tau, Binh Phuoc, Tay Ninh) may increase by 5~6% over the same period.
Hai Phong and Bac Ninh will continue to lead in the supply of industrial land for lease in the North, whereby Tien Thanh Industrial Park (Hai Phong) and Gia Binh 2 (Bac Ninh) with an area of 410 hectares and 250 ha will come into operation in 2023. The average rental price in industrial parks in the North is likely to increase 1~2% during the year.
It is also forecast that net profit of listed industrial park developers is expected to grow by about 12% over the same period. The reason is that the total area of land for lease increases by about 10%/year; and rental rates are expected to increase 3% y/y in industrial parks in the South and 2% y/y in industrial parks in the North by 2023.
In particular, IDICO's 2023 net revenue is expected to reach nearly VND 9,400 billion (up 8.6% over the same period) and its net profit may reach VND 2,700 billion (up 9.3% over the same period). For Kinh Bac, its revenue and net profit are forecast to reach nearly VND 11,000 billion and more than VND 3,400 billion, respectively.
Besides the advantages, its is also warned that there may be some risks that the industrial real estate industry may face in 2023. Accordingly, FDI inflows may slow down due to the impact of the economic downturn, especially in the manufacturing sector, which accounts for more than 65% of total FDI.
The occupancy rate of key industrial park centers such as Binh Duong, Dong Nai and Bac Ninh is already above 85%. The delay in the land clearance progress may lead to limited land supply in the remaining industrial zones, affecting the leasing of large areas and the legal delay of new industrial zones.
Compiled by VietnamCredit