Electronics companies such as LG Electronics Inc. are sparking a boom in industrial parks in Vietnam as they seek alternatives to China’s rising labor costs.
Kinh Bac City Development Share Holding Corp. plans to expand a facility in northern Vietnam after LG, the world’s second-largest TV maker, agreed to lease more land in the Trang Due park.
“LG wants to build up something like a LG city here as it did in South Korea,” Dang Thanh Tam, chairman of Vietnam’s biggest-listed industrial park operator by market value, said in an interview yesterday in Hanoi.
Vietnam is increasingly attractive to electronics companies such as LG and Samsung (005930) Electronics Co., as well as Nokia Oyj and Intel (INTC) Corp., that are looking to locate factories in other Asian countries due to China’s rising costs and shrinking labor force. Disbursed foreign investment into Vietnam rose 3.2 percent to $8.9 billion in the first nine months, with South Korea, Hong Kong and Japan the top investors, government data showed.
Kinh Bac will expand the Trang Due industrial park in Hai Phong City, 100 kilometers (62 miles) from Hanoi, by 800 hectares (1,980 acres) to 1,200 hectares, Tam said. LG’s expansion will help boost foreign investment into the company’s 11 industrial parks next year to about $2 billion, more than double the amount estimated for this year, he said.
Vietnam has almost 300 industrial parks and economic zones. In the first six months, these areas accounted for more than 50 percent of foreign direct investment into Vietnam, 40 percent of the national export volume and created 2.5 million jobs, according to a report from the Ministry of Planning and Investment.
Kinh Bac’s net income will reach 200 billion dong ($9.4 million) in the January-September period, exceeding the full-year target by 25 percent, Tam said. Profit will climb 200 percent this year compared to 2013, he said.
An employee looks at notes in front of LG Electronics Inc. Cinema 3D televisions, which use LG Display Co. panels, at the company's Bestshop store in Seoul, South Korea.
“The improving economy and competitive foreign-investment policies have attracted more and more international firms to come to my industrial parks,” he said.
Revenue from the company’s industrial facilities is estimated to rise 50 percent to $90 million this year and to as much as $150 million in 2015, Tam said.
Leases in industrial parks have increased as much as 67 percent this year, Tam said. The parks account for 90 percent of the revenue at the company based in Bac Ninh province, about 30 kilometers from Hanoi.
The government forecasts Vietnam’s economy to expand 5.8 percent in 2014, the fastest pace since 2011, as exports accelerate and the country’s trade surplus widens.
Kinh Bac earlier this month announced a plan to sell 1.2 trillion dong of convertible bonds to repay debt. Investors have already subscribed to 800 billion dong of the notes, Tam said.
The company’s debt has fallen to about 3 trillion dong from 3.5 trillion dong at the end of last year, he said.
“If everything goes as we planned, we expect to clear all old debts within next year, and after that, our profit will continue to increase” Tam said.
Shares of Kinh Bac have rallied 68 percent this year, outperforming the 19 percent advance in the benchmark VN Index.