Binh Duong: Ideal Destination for Investors

By Dezan Shira & Associates

Posted: 24th November 2017 08:07

Binh Duong province, at the center of the Southern Key Economic zone and just north of Ho Chi Minh City is fast emerging as a favorite for foreign investors. The province, with its 28 industrial parks spread over 10,000 ha, is second only to Ho Chi Ming City, in terms of FDI attraction. With its renewed focus on high-tech industries, development of new industrial zones, and a gross regional domestic product (GRDP) of 8.5 percent, the region will continue to be a priority for foreign investors.

Economic growth

2016 growth
The province’s GDP grew by 8.5 percent in 2016, higher than the national average of 6.2 percent. The average GDP per capita in the province was US$ 4949.56 (VND108.6million), more than twice the national GDP per capita at US$ 2,215 (VND48.6 million). Currently, industry accounts for 63 percent of the economy, while services and agriculture account for 23.5 percent and 4.3 percent respectively.

The region’s total retail value of commodities and services was more than VND143.31 trillion (US$ 4.41 billion), an increase of 21 percent compared to 2015, while the agro-forestry-fishery production value increased by 4.1 percent in 2016 to VND15.37trillion (US$678 million).
Exports reached US$24.3billion, while import value was recorded at US$20.5billion in 2016.
2017 growth

In the first six months, the province’s total Gross Regional Domestic Product (GRDP), grew by 7.85 percent in comparison to the same period last year. For the first half of the year, export turnover was calculated at over US$ 13 billion, an increase of 16.7 percent over the same period last year, while imports increased by 15.8 percent to US$ 9.8 billion.

Regional competition

According to the Provincial Competitiveness Index 2016, Bing Duong ranks the fourth most competitive province in the country, a staggering jump of 21 places from 2014 rankings. The rankings were led by Da Nang, Quang Ninh, and Dong Thap.

The business community in the region has attributed the jump of 21 places to mainly administrative factors. For example, the percentage of firms facing informal charges related to harassment during administrative procedures dropped significantly from 76 percent in 2014 to 52 percent in 2016, while the percentage of enterprises, not required to make numerous trips to obtain stamps and necessary signatures, increased from 56 percent in 2014 to 70 percent in 2016. There was also a notable increase in the percentage of firms highlighting a positive attitude of provincial government officials towards private business from 36 percent in 2015 to 45 percent last year.

Binh Duong emerged at the top of the infrastructure index in the Provincial Competitiveness Index 2016. Infrastructure surveyed included industrial zones, roads, energy/telecom, and internet connectivity. The region also emerged as the fourth most attractive place for future investors, with Ho Chi Minh City, Da Nang, and Hanoi leading the scores.  

Foreign direct investment

FDI continues to be a significant source of socio-economic development in the region. As of October 2017, Binh Duong province has over 3,000 FDI projects, worth over US$ 29.5 billion from 60 countries. The province is second only to Ho Chi Minh Cityin FDI attraction, accounting for 9.4 percent of the total FDI capital into Vietnam.

FDI contribution accounted for 49 percent of the total social investment, 67 percent of the industrial production value, and more than 82 percent of total export turnover. Some of the major global firms in the region include KIA, Samsung, Nike, Unilever, Bosch, P&G, IBM, Hyundai, AkzoNobel, and Intel.
2017 FDI

The province has already achieved 140 percent of its annual target of foreign investment, in the first nine months of 2017, at US$ 1.97 billion, an increase of 27 percent compared to same period last year. Out of the total invested capital, US$ 1.165 billion was for 148 new projects, while US$ 765 million was added capital for 87 projects. Almost 90 percent of all projects were set up in the industrial zones. Major sectors include electricity, electronics,mechanical engineering, pharmaceuticals, chemicals, and trade.
 
Leading investors
In total, Taiwan leads the group of foreign investors, with investments worth US$ 5.73 billion in 757 projects, accounting for 20.8 percent of the cumulative

FDI. Japan follows closely at US$ 5.2 billion of investment capital in 249 projects, with the Tokyu Binh Duong property project being one of the largest investments at US$ 1.2 billion.

With more than 630 enterprises, Republic of Korea’s investors invested nearly US$ 3 billion in the province, while Singapore invested around US$ 2.67 billion.

Infrastructure

Over the years, emerging economies have recognized the need for better infrastructure to achieve a sustainable growth and attract foreign investors. To move towards an advanced high-income economy, infrastructure is crucial for enhancing connectivity and creating a conducive environment for foreign investors, leading to higher productivity.

Following on similar lines, Binh Duong has consistently invested in its transport infrastructure to increase connectivity with the rest of the country, especially HCM City, the Mekong Delta, the Southeast region and southern Central Highlands. Transport routes include such as Binh Duong Boulevard and Mỹ Phuoc – Tan Vạn, which connects the industrial parks with seaports and airports. The closest international airport and seaport are within a 40 km radius.

Industrial Parks
There are over 28 industrial parks spread over 10,000 ha with an occupancy rate of 71 percent. In addition, there are also 11 industrial clusters covering 802 ha and an occupancy rate of 55 percent.

As per an approved master plan for industrial park development, the provincial government is planning for an additional 34 industrial parks covering 15,000 ha by 2020.

Sustainable development

In the 1990s, Binh Dung province mainly relied on agriculture, which accounted for over 90 percent of the economy. In the last two decades, the province has made a remarkable transformation into an economy with industry and services accounting for 63 percent and 23.5 percent respectively, driven by the growing number of industrial parks and large-scale investments in infrastructure.

With its evolving socio-economic landscape, the provincial government is collaborating with businesses and research institutions to increase value addition in manufacturing, educate and train workers, increase R&D activities, build startup eco-systems, improve transport and ICT infrastructure, enhance living conditions, and attract investments in high-tech manufacturing for a more sustainable development. The government is aiming to develop a Tier 1 city by 2020, aptly named Binh Duong New City.

In 2015, the city collaborated with the Dutch city of Eindhoven for development based on the Triple Helix model of collaboration, which involves a partnership between research institutions, businesses, and the government. This has led to the establishment of a lighting laboratory by Becamex IDC, Eastern International University, and Dutch-based Philips Lighting. Other similar partnerships include Germany’s Bosch and the Vietnamese-German University to develop electronic bikes and between the Vietnam Posts and Telecommunications Group and Thu Dau Mot University for building an ICT lab.

Investment opportunities

The provincial government has recently announced 20 projects requiring investments, which will be prioritized by the government until 2020. Total investments are between VND 14 trillion (US$616 million) to VND16 trillion (US$704 million).

Transport infrastructure leads the list with 15 projects, while education, training, and vocational training were allocated three projects. In addition, the government has prioritized two healthcare infrastructure projects as well.

Some of the investment opportunities include:
The provincial government has increased its focus on high-tech, less-labor intensive and environmentally friendly industries. With the industrial parks under development, the government is devising investor-friendly policies, in the hope of attracting high-tech investments. The government has already improved much of the public administrative procedures related to foreign investments in terms of business establishment and registration procedures and is in the process of reforming them further to ease investor concerns. 

This article was first published on Vietnam Briefing.

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll, and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India, and ASEAN, we are your reliable partner for business expansion in this region and beyond.

For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.

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