An investor once wanted to create an industrial zone (ZI) on land where there was a small mountain and an empty cave. It had been deserted for decades. Because of the mountain and the cave, the investor had to go through many procedures which were daunting.
In another case, a company wanted to develop an ZI on land where an old blockhouse had stood for decades. Demolishing the blockhouse was no easy task and the company had to obtain the approval of several agencies.
The law on land use planning mentions “rural land use planning” but a new concept, “new rural land use planning”, has recently appeared. It would take several months to follow the procedures because of the word “new”.
These three examples were described recently by lawyer Bui Xuan Thanh of the Vietnam International Arbitration Center (VIAC) during a workshop that discussed legal issues and solutions for developing IOIs.
According to Thanh, when establishing ZIs, investors must obtain the approval of the investment plan from the Prime Minister. Before obtaining approval, the Ministry of Planning and Investment (MPI) will collect the opinions of the ministries and subdivisions on the projects.
The complicated procedures required explain why foreign investors who wish to develop ZOIs in Vietnam decide to take shortcuts via merger and acquisition.
Work related to administrative procedures is carried out by Vietnamese partners. After the site approval and authorization is implemented, foreign investors buy the Vietnamese companies to continue developing the IZ projects.
Kenji Usuda, managing director of Kyouwa, a 100% Japanese-owned company, said the main problem faced by foreign investors when doing business in Vietnam is that they find it difficult to access official information. Along with this, the way to solve the problems is unclear and the response from investors is slow.
Despite the problems, investors can still see opportunities in Vietnam’s well-developed industrial real estate market.
At the beginning of 2020, Vietnam had 335 ZIs, including 260 operational ZIs with an occupancy rate of 75.7%. At the beginning of 2022, Vietnam had 291 of the 395 operational ZIs with an occupancy rate of 70.9%.
Thus, after two years of Covid-19, Vietnam has 60 additional ZIs and 31 of them are operational.
The industrial real estate market has recently seen the presence of new players such as Vingroup, FLC, T&T, Phat Dat and Son Ha. Meanwhile, existing investors such as Hoa Phat, Kinh Bac, VSIP and Amata have expanded their projects.