Bac Giang: An Emerging Investment Destination

Surrounded by major economic hubs, ports, national highways, and an international border, Bac Giang province in northeastern Vietnam is situated at the crossroads of major trade routes. It is located adjacent to the key economic triangle Hanoi – Hai Phong – Quang Ninh, 110 km from the Huu Nghi Border Gate with China, 100 km from the Hai Phong seaport, and 40 km from Hanoi’s Noi Bai International Airport (HAN).

With its growing gross regional domestic product (GRDP), income per capita, trade, and favorable location, the province has started to emerge as an attractive investment destination.

Economic growth

In 2019, among Vietnam’s 63 provinces, Bac Giang was in the top two of GRDP growth rate reaching the highest ever at 16.2 percent to US$4.7 billion. The average GRDP per capita also increased by 13.9 percent, to US$2,260 the same year. Despite the impact of the COVID-19 pandemic, the province still grew 7.4 percent in the first quarter of 2020.

Sector growth

In 2019, the industry-construction grew by 26.4 percent, with the industry and construction sectors growing by 32.2 percent and 11.2 percent respectively. While the services sector reduced by 2.1 percent, agriculture, forestry, and fishery declined by 3.3 percent.

Taking note of the decline in the agriculture sector, the provincial government is trying to create favorable conditions for investment in high-tech agriculture and rural areas, focusing on organic and clean agricultural production. They are also trying to promote branding, packaging, and product labeling in the sector for value addition.

The tourism sector registered an increase in tourists to 2 million in 2019, double the yearly target. Moving forward, the government has emphasized the need to upgrade infrastructure, especially digital infrastructure, to promote tourism.

Economic structure

The industry-construction sector accounted for the majority of the province’s economy at 57.6 percent, while the services sector accounted for 26.6 percent in 2019.

As growth continued to decline in the agriculture, forestry and fishery sector, the share in economy reduced by 3.3 percent compared to 2018 to 15.8 percent. Nonetheless, agriculture still holds a competitive edge in Bac Giang. The province is home to the largest lychee areas and other tropical fruits.

Trade

In 2019, total trade volume was estimated at US$16.9 billion. Export revenue was valued at US$ 8.6 billion, an increase of 10.3 percent compared to 2018.

Investments

To date, Bac Giang has attracted 518 FDI projects valued at US$6.27 billion. The province currently ranks 16 out of 63 regions in terms of attracting FDI. In 2019, it ranked eighth nationwide in luring new FDI projects.

2019-2020 investments

In 2019, the province attracted 107 domestic and 76 foreign-invested projects, with registered capital amounting to US$1.3 billion and US$830.7 million respectively.

Additionally, in the first four months of 2020, Bac Giang attracted 12 new FDI projects, worth more than US$178 million, and expanded registered capital of 38 projects, worth more than US$139 million. These are promising performances given the adverse context of the COVID-19 pandemic.

Almost all FDI projects operate in industry sectors such as garments and textiles, electronic parts, and solar panels.

Regional competition

Bac Giang ranks as the 40th most competitive province in the country amongst 63 provinces as per the Provincial Competitive Index 2019. Meanwhile, according to the Provincial Administrative Performance Index 2019 (PAPI), which measures provincial governance performance, Bac Giang’s reached 81.84 points, up 3.7 points on-year, and the satisfaction index of people, enterprises and organizations on administrative agencies reached 89.18 percent, ranking ninth in Vietnam.

On the flip side, Bac Giang ranks poorly in audit as investors find the audit process lacking in transparency and fairness.

Working to address the issue, Bac Giang’s People Committee has promised to increase transparency and efficiency in audit and other administrative activities by learning from the successful experiences of other localities. The province aims to jump to the top 15 rankings in the PCI for 2020.

Infrastructure

Bac Giang ranked in the top five of the Infrastructure Index, also part of the PCI, and is one of the major industrial hubs in Vietnam. The region has seven industrial parks, namely, Dinh Tram, Quang Chau, Song Khe – Noi Hoang, Van Trung, Viet – Han (Vietnam – South Korea), Hoa Phu, and the newly-opened Van Trung 2 spread over 1,627 hectares.

In addition, the region is also home to 36 industrial clusters spread over 682 hectares. Currently, Bac Giang has asked the central government for permission to establish two new industrial zones with a total area of 1,380 hectares.

The region is well connected with its neighboring provinces through major highways such as 1A, 31, 37, 279, 17, 398, and the Hanoi-Bac Giang Expressway which handles the increased traffic between the capital Hanoi and Bac Ninh and Bac Giang provinces.

In terms of rail connectivity, Bac Giang is part of two major railway networks, Kep – Halong and Hanoi – Dong Dang, with the latter extending up to the Vietnam-China border. Apart from the road and rail network, the inland water navigation also presents opportunities. The waterway is continuing to improve, connecting infrastructure via a network of three major rivers, Thuong, Cau, and Luc Nam, which can accommodate vessels of 40 metric tons (MT) to 500 MT. In addition, the Hai Phong Port, the leading seaport for northern Vietnam is about 100 km from the province.

Preferential investment policies

As industrial land is increasingly occupated, Bac Giang has implemented four criteria to select investment projects, which are: effective land use, less labor-intensive projects, advanced and modern tech projects, high-value addition, and contribution to the state budget.

Going forward, the provincial government has also decided to focus on high-tech projects, such as electronics, machinery, and consumer goods, which are capable of joining global value chains and have high export potential.
With more industrial parks under development, the government is devising investor-friendly policies, in the hope of attracting high-tech investments. In addition, the government has also started to invest in the declining agriculture sector to develop high-tech agricultural farms and set priorities for investment in clean and renewable energy to meet rising electricity demand.

Provincial incentives

The provincial government has numerous preferential policies based on locations and industry type. Depending on the sector and investment destination, investors are eligible to receive land rent exemption for up to 15 years. 

The government also provides tax incentives for certain imports and exports, As per the PCI, among businesses operating in the province, 42.59 percent said they would likely expand their firm operations due to the favorable business environment in Bac Giang.

Bac Giang – an opportunity for investors

Bac Giang has already improved much of the business conditions related to foreign investments and is in the process of reforming them further to ease investor concerns. For example, the province is working to further improve infrastructure, increase audit transparency, and promote business-administration and local government dialogues.

Due to its favorable location, connectivity, and investor-friendly policies, Bac Giang province bodes well and presents opportunities for first-time investors.

Note: This article was first published in February 2018, and has been updated to include the latest developments.
This article was first published by Vietnam Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to info@dezshira.com for more support.