A new bright era is on the horizon for the industrial sector in Vietnam as the country's effort to attract hi-tech foreign investment has taken off, according to consulting firm CB Richard Ellis (CBRE).
Vietnam is moving away from traditional focus areas of industrial production such as machinery, textiles, food processing, coffee and rice to targeting and attracting investment in new sectors like hi-tech, electronics, automotive, and research and development, said Greg Ohan, national head of Industrial and Logistics Services at CBRE Vietnam.
He said a prime example of the trend is a US$1-billion assembly and testing plant of US-based Intel, the world's largest chip maker, which opened in Ho Chi Minh City late last year.
"While we had seen considerable investment from the likes of Canon, Samsung, and Foxconn earlier, Intel's highly publicized, and the largest of its seven plants in the world propelled Vietnam's industrial sector into what we are calling the "˜Renaissance' period," Ohan said in an e-mail to Thanh Nien.
"As the only dedicated national industrial real estate team in Vietnam, what we are seeing firsthand is a shift from foreign manufacturers in the region seeking a cost effective manufacturing base in Vietnam," he said.
Manufacturers are seeking alternatives amid rising labor costs in China and Thailand, Ohan said. He pointed out that Vietnam's labor costs are 35 percent to 45 percent cheaper than those in China's second and third-tier cities and 20-35 percent lower than Thailand's.
Besides, Vietnam also offers cheaper construction costs, some 30 to 40 percent lower than the costs in China, Ohan said.
Vietnam's Foreign Investment Agency said Monday that nearly half of foreign investment in the first nine months was in industrial and manufacturing projects, with total pledges of $4.91 billion in 300 projects. The power sector ranked second with $2.52 billion, followed by construction.
Hong Kong was the biggest among the foreign investors during the period with an investment of $2.9 billion. Singapore came second with $1.5 billion while Japanese projects totaled $927.3 million, making Japan the third largest investor in the country.
In general, foreign investment was recorded at $9.9 billion, down 28 percent from the same period last year. Disbursed investment, however, slightly rose by 2 percent to $8.2 billion, according to the Foreign Investment Agency.
Vietnam expects disbursements of foreign direct investment to stay flat at around $11 billion this year, and rise by around 10 percent in 2012.
Preliminary findings of the 2010 Vietnam Industry Investor Survey announced last week showed that the main factors driving foreign investment into the industrial sector were political stability, market and low-cost labor.
But recently, the lack of a skilled workforce and economic difficulties have affected the investment, according to the survey, conducted by the Ministry of Investment and Planning and the United Nations Industrial Development Organization.
CBRE's Ohan said Vietnam has its "obvious challenges" related to workers, infrastructure and taxation. But at least for major multinational foreign firms with a long term view, Vietnam is proving a viable option, he said.
"In terms of attractiveness, there is a lot of interest in Vietnam as an emerging location for clean, hi-tech manufacturing," Ohan said. The sectors CBRE expect to be key areas of growth are the auto industry, supporting supplier industries, logistics and hi-tech manufacturing, he added.