FDI helps boost industrial infrastructure

FDI helps boost industrial infrastructure

Foreign direct investment (FDI) capital poured into industrial zones (IZs) has rapidly increased recently, bringing large profits for infrastructure development companies.

According to the Management Board of HCM City Export Processing and Industrial Zone Authority (Hepza), from the beginning of this year, export processing and IZs have received a large volume of FDI capital. Of the total US$128 million poured into export processing and IZs in the first two months, FDIs accounted for $80 million and the remainder came from domestic companies.

The neighboring Binh Duong and Dong Nai provinces have also seen an increase in FDI. In the first three months of this year, Binh Duong Province granted licences to 28 FDI projects, with a total investment capital of over $680 million. After registering to add more capital, investors have actively expanded plans to build new factories in the Song Than 1, Song Than 2 and Nam Tan Uyen IZs.

By March 18, Dong Nai Province's registered investment capital and newly added capital for FDI projects reached some $488 million, or a year-on-year increase of 311 per cent. Foreign investors have not only focused on developing industrial parks in Bien Hoa City but have also expanded land lease agreements and have invested in many factories and warehouses in new IZs such as Long Duc, Long Thanh and Bau Xeo.

Local experts attributed the increase in investment in IZs since October last year to the official conclusion of trade agreements such as the Trans-Pacific Partnership (TPP). Many investors from England, Japan, South Korea and Thailand have started investing in IZs.

In HCM City alone, investors have an ambitious plan to develop a Silicon Valley-style high-tech zone in District 9, with total investment capital of $1.5 billion.

By the end of 2016, the business results of five listed infrastructure development companies all showed a profit.

Accordingly, Long Hau JSC in the southern Long An province reported its revenue rose VND10.67 billion ($476,339). Of this figure, revenue from land leases accounted for VND6.69 billion. The company's after-tax profits reached VND20.33 billion, or a 20-fold increase over the same period last year.

Sonadezi Long Thanh in Dong Nai Province reported its total revenue of $46.23 billion in the first half of this year. Of this figure, revenue from land leases in IZs accounted for $18.54 billion.

In the northern provinces, Vinh Phuc Infrastructure Development Company reported revenue of $33 billion in the first quarter of this year, or a 3.7-fold increase over the same timeframe last year.

The Thoi Bao Ngan Hang (Banking Times) reported that all businesses are now involved in infrastructure development in IZs, with four businesses expecting strong growth in profits this year. They are Tan Tao, Long Hau, Kinh Bac and Viinh Phuc.

With these high profit targets for this year, industry insiders have predicted that fierce competition between these companies will prompt them to offer new incentives to attract FDI enterprises.

Instead of concentrating on land leases only, as in previous years, they will take advantage of spending their own money to build warehouses, offices, retail space, serviced apartments and high-rise apartments.

Hepza reports that this tendency will see major growth in the next 1 or 2 years as the TPP officially comes into effect.

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