Investing in Vietnam’s Dong Thap Province: 3 Key Drivers
Vietnam’s Dong Thap province’s improving business-friendly environment supported by strong economic growth, good governance, well laid out infrastructure, and clear policies have made it a magnet for businesses and investors.
In 2020, Dong Thap’s regional GDP grew to US$ 3.7 billion with an annual average GDP growth of 6.4 percent over the past five years. Per-capita GDP averaged US$2,370 over the same period. The minimum wage in the province is VND 3,040,000 (US$131) per month, which is relatively lower compared to other regions in the country.
However, given the rising demand in the labor market evidenced by increased investment and production, the minimum wage is likely to increase in the medium-term. However, for 2021 given the economic impact of COVID-19, the National Wage Commission has decided not to increase the minimum wage.
The province also shares a border with Cambodia and is expected to host border trade infrastructure development projects from 2020-2022. These projects are part of an MoU signed by the Vietnamese and Cambodian governments in August 2020 aimed at increasing bilateral trade.
Ranking high in the PCI
Dong Thap achieved the highest score in the Mekong Delta region and ranked second in Vietnam as per the Provincial Competitive Index (PCI) 2019 report. Since 2014, the province has consistently ranked in the top three. Located in the Mekong Delta region this Southern province has emerged as a rising hub for investment, production, and growth.
Vietnam Briefing examines three key drivers that make Dong Thap an attractive destination for investors. Nevertheless, business entities must do their due diligence and look at Dong Thap’s strengths and weaknesses and tailor their business requirements if investing in the province.
Dong Thap’s agri-business transformation
The agricultural sector has historically been the economic structure on which Dong Thap’s prosperity rests. The province has over 30,000 hectares of fruit production with a rising proportion of these farms reaching VietGAP standards. VietGAP or Vietnam Good Agricultural Practices are a set of product quality standards that certify the application of certain production methods capable of producing export-quality, clean, and safe products.
Mango and other citrus fruits are also key outputs from the region.
Floriculture is concentrated around the province’s Sa Dec city. Recent data suggests that floriculture production rose 9.5 percent last year to reach US$64 million. The Mekong Delta, in which the province is based is also a major rice production hub in the country. Dong Thap is Vietnam’s third-largest rice-producing province with production accounting for 5.6 percent of national output.
In recent years, policymakers have attempted to steer the agricultural economy of the province towards sustainable, commodity-based production models. The shift in production methodology is aimed at decreasing production costs, increasing technology adoption in agriculture, and significantly improving production efficiency, crop yield, and product quality. Under this strategy, farmers are also being directed towards adopting global standards of production such as VietGAP and GlobalGAP for fruit production.
Foreign investment is a key element of Dong Thap’s agricultural transformation. In order to aid technology adoption, access to technology, and global markets is vital. Agriculture currently hosts 14 of a total of 22 FDI projects in the region. These projects are collectively valued at US$172 million in committed capital. Firms from the US, Australia, Japan, Singapore, Thailand, and China are key players in commodity-based, tech-intensive agricultural production.
Ease of doing business and regulatory environment
Dong Thap’s consistently high ranking in the PCI reflects improvements in the policy and investment climate of the province.
Comparative PCI data for 2018 and 2019 shows that in 2019, Dong Thap’s investment climate displayed signs of higher transparency, increased efficiency in business support services, lower informal charges, and low levels of policy bias. The province also came second in the national Provincial Governance and Public Administration (PAPI) which reflects improvements in administrative procedures and lower local transaction costs for businesses.
According to Nguyen Van Duong, the chairman of Dong Thap People’s Committee, local management agencies have been steered towards engaging with businesses to resolve challenges, lower time costs in business compliance procedures, and significantly improve service delivery.
Local government officials have also been implementing the ‘four stops on one working day’ model, which is aimed at streamlining business setup and registration processes in the province.
Currently, the average time for business set-up and registration is 1.27 days. Some government engagements and programs are specifically targeted at startups. In 2019, 525 new startup ventures were registered in the province with a total registered capital of US$149 million.
Opportunities in the Mekong Delta Region
Being in the Mekong Delta, Dong Thap benefits from several opportunities introduced by the government and resulting foreign investment. In recent years, the Mekong Delta has emerged as a rising investment destination most notably for Asian investors from Malaysia, South Korea, and Taiwan. In 2019, the region attracted 1,707 foreign direct investment projects with total registered capital amounting to US$23 billion.
In order to attract FDI, the government has focused on improving logistics efficiency through infrastructure investments. For instance, earlier this year, the government approved a US$2 billion infrastructure investment plan for the Mekong Delta region, aimed at improving intra-provincial connectivity through coastal road networks. A key project included in the plan is an expressway network that connects Ca Mau, Bac Lieu, and Can Tho provinces by 2025.
Numerous foreign firms have participated in infrastructure growth in sectors such as transport, construction, and energy. For instance, Singapore-based Delta Offshore Energy’s 3200 megawatt LNG power plant is set to be the largest FDI project in the Mekong Delta by 2027. At the Vietnam Energy Summit 2020, policymakers signaled a focus on the Politburo’s Resolution No.55-NQ/TW which prioritizes renewable energy infrastructure investment through private sector engagement.
In addition, the region hosts an expanding consumer base; 17.2 million people with 8.4 percent annual growth in monthly per-capita income. This makes it conducive for investments in consumer-facing services such as retail, healthcare, tourism, and education.