Ho Chi Minh City loses out to neighbouring provinces

According to the Ministry of Planning and Industry (MPI), foreign direct investment (FDI) into Vietnam now focuses primarily on the manufacturing sector, attracting $6.9 billion of the total FDI of $10.48 billion in the first 10 months. The property sector follows at $1.84 billion.

Investors into manufacturing sector will pay attention to land rentals and tax incentives at the investment location. Ho Chi Minh City is different from other provinces due to high cost of site clearance, and having tax incentives that only apply to the high-tech sector.

Ho Chi Minh City had lost its attractiveness in luring FDI, especially manufacturing sector, due to cutting off investment incentives for investors into industrial parks, said Kunimitsu Yoshikawa, managing director of Japan-based Yoshikawa Financial Consultant Co., Ltd.  

Ho Chi Minh City’s high labour and land rental costs have made it less attractive than other provinces, added Yoshikawa.

Nguyen Tan Phuoc, vice director of Ho Chi Minh City Export Processing and Industrial Zones Authority (Hepza) admits that all industrial parks in Ho Chi Minh City established by infrastructure developers instead of government’s bodies and the high prices of site clearance as well as infrastructure construction lead to high rentals.

Calpis, a beverage producer from Japan, has researched southern provinces for the plant’s location but it will not be in Ho Chi Minh City due to the land leasing price in Ho Chi Minh City was higher than other provinces such as Tay Ninh, said Takashi Igari, Calpis’s market development manager.  

In fact there have been several investors who choose the investment location for their manufacturing plants in other provinces instead of Ho Chi Minh City.

Nidec Tosok Corporation under Japan’s Nidec Corporation commenced its $39.6 plant manufacturing automobile parts in Ben Tre province last month. The first three plants of Nidec Tosok have located in Ho Chi Minh City.  Another Japanese corporation Tamron also decided to locate its $13 million optical production plant in Hanoi instead of Ho Chi Minh City as first research.  

According to Huynh Van Nuoi, director of Ben Tre Industrial Zone Authority, some Japan-based manufacturers in Ho Chi Minh City have come to Ben Tre for expansion research. Among them, Furukawa and Nidec Tosok have located their plants manufacturing automobile parts in the province.

“Land leasing prices in Ben Tre are quite lower than Ho Chi Minh City and its neighbouring provinces. As a result, existing companies in Ho Chi Minh City, Dong Nai or Binh Duong can come to Ben Tre for their investment expansion,” said Nuoi.

Moreover, Ho Chi Minh City doesn’t have advantage of labour in site because the most labour force, especially common workers in Ho Chi Minh City came from other provinces. This is a burden for employers due to higher salary and accommodation costs, according to Phuoc from Hepza.

According to Ho Chi Minh City People’s Committee, the city has 10 industrial parks and three processing zones but only six among them have built accommodation for workers.
The movement of assembly line and labour – intensive to other provinces would help investors reduce cost of land leasing and salary compared to Ho Chi Minh City, said Phuoc from Hepza.