An industrial zone is a concentrated area of large enterprises specializing in the production of industrial goods and industrial production services. It has a defined geographical boundary with no residents, and is established under the decision of the Vice Prime Minister of the country.
In recent years, the government constantly offers preferential policies to encourage investment in industrial zones. Therefore, it is an ideal place for international and national investors who want to develop businesses in Vietnam.
However, deciding to invest in industrial zones is quite complicated. Investors should not only pay attention to the factory rental prices, but other important factors to be fit for the future development of the business.
The following article will help investors understand general information about industrial zones in Vietnam, as well as the procedures and noteworthy points when they are investing in the industrial zone:
Things to know about industrial zones
In terms of Space: industrial zones are defined with specific boundaries by barrier systems. Every activity taken within the industrial zones is not only adjusted by the existing laws but also particular legal regulations, committing many preferential policies. Every engineering infrastructure in the industrial zones is built to serve industrial production activity and industrial services business.
In terms of Operation functions: the main production fields of enterprises in the industrial zones are industrial production and services for industrial production. Additionally, each industrial zone will be planned with its industries and goals to bring synchronization and specialization to the production of the enterprises.
About Establishment planning: industrial zones are not established spontaneously. They are founded according to the planning basis which has been approved by the government.
The government will set an enabling environment for investment with a synchronous infrastructure system, comprehensive system of mechanisms and policies.
Orientations to develop industrial zones: industrial zones completely can be extended once they have met the requirement of approved planning for the development of industrial zones.
Noteworthy points when choosing industrial zones
The clarity of legal documents: the first noteworthy point that investors need to consider when making the decision is the permits that the owner of the industrial zone owns or the legal documents that the owner of the industrial zone has completed.
If the investor’s business sector is not on the license of the industrial zone, the enterprise will likely not be able to carry out investment procedures.
Moreover, environmental permits, regulations on noise and waste of industrial zones are also considerable for investors to avoid later environmental problems when facing the control authorities of the country.
Investment procedures in industrial zones
In general, the investment procedures in industrial zones are the same. However, in some special areas with specific development orientations, industrial zones may require investors to provide additional related documents. Therefore, learning the required legal documents before investing in an industrial zone is a prerequisite.
For large economic organizations around the world, the land rental price might not be a big problem, as it accounts for a small proportion of the capital structure. Still, it is a noticeable problem for small and medium investors. An industrial zone with a long-term rental policy and a stable price will be the best option for these investors.
The rental costs that the investors should pay attention to are land rent, factory rent, management fees, power and water supply charges, wastewater processing costs, etc.
However, an industrial zone with a complete infrastructure system usually has a rental fee close to the outside rental price, so investors can consider choosing newly built industrial zones planning to complete specific infrastructure systems in the future.
Infrastructure: in addition to the low rental costs, transportation infrastructure is another considerable element for investors.
The transportation infrastructure of an industrial zone includes a residential area, national highway or expressway, railway, the nearest airport, and port. An industrial zone with a completed transportation infrastructure will save enterprises a lot of money for logistics and import/export activities.
Infrastructure in an industrial zone includes the main truck system, internal transport system, power-water system, uninterruptible power supply system, security system, and wastewater processing system, etc.
Professional support service:
One of the concerns that investors have when they enter the Vietnamese market is the national elaborate and complicated procedure. Choosing industrial zones with support services related to preparing and managing lease contracts, licenses, administrative compliance procedures – human resources, accounting, and more, will help businesses save time and money, thereby staying more focused on their business activities.
Along with the mentioned points above, it is a good idea for investors to consider other elements before choosing an industrial zone, such as:
Prioritized business industries that attract investment in each industrial zone: to create industrial zones with high concentration and specialization, as well as capacity to attract investment in certain fields, each industrial zone has one or some preferred industries. For example, Cat Lai II Industrial Park prefers the modern industry (eco-friendly industry); Tan Tao Industrial Park gives priority to 3 fields: mechanics – electronics, agricultural products processing, food, cosmetic and pharmaceutical industry.
The number of enterprises with the same industry or country has invested in that industrial zone: the presence of enterprises from the same country in the industrial zone will provide investors useful experience from their forerunners, as well as cooperation and information exchange to create a strong community.
Planning for development of the local industrial zones: choosing a complete industrial zone and a newly built one will have particular advantages, and disadvantages that are needed to be considered by the investors.