Many businesses operating in IPs and EPZs have benefited from tax preferences, simple investment procedures and support in terms of workforce and other resources.

In Hanoi, the number of projects in IPs and EPZs increased from 155, with a total investment capital of US$1.55 billion in 1996-2000 to 1,377 worth US$ 8.08 billion in 2001-2005.

From 2006-2010, Hanoi saw an impressive growth with 2,309 new FDI projects capitalized at US$42 billion.

Up to September last year, more than 3,841 FDI projects and 4,617 domestic projects in IPs and EPZs zones throughout the country got off the ground with a total disbursement of more than US$17.6 billion.

Marketing and Business Development Director of Colliers International Vietnam, Dane Moodie, said the economic downturn in 2007-2009 appeared to have little impact on northern IPs where the average rental fees rose slowly from US$41.3/m2 in 2008 to US$58/m2 in 2010.

Northern key economic zones, including Hanoi, Bac Ninh, Hai Duong, Hai Phong and Vinh Phuc will continue to lure more investors while Thai Nguyen and Hung Yen are becoming more attractive with their good infrastructure facilities, the strong economy and favourable strategic positions near seaports, airports and areas sharing the border with China.

According to Colliers International Vietnam, Vinh Phuc and Bac Ninh have the highest rates of land rental. However, there are certain problems arising from policy, that need to be solved such as a shortage of skilled workers, pay rise, infrastructure development, complex legal and taxation frameworks. For this reason, investors need to make a careful choice of localities which are most favourable for their business, said Dane Moodie.

Anna Lomas, Market Research and Evaluation Manager of ColliersInternational said the number of tenants who want to rent on a more flexible term is increasing. Thus many IP investors engage in building or supplying a wide range of workshop packages at an average price of US$3-6 per sq.m per month. The business of this kind will develop strongly in the next three to four years.

Increasing demands

Economic experts said the next few years will be a very important period for the industrial sector in Vietnam.

From early this year to March 22, FDI inflows hit US$2.533 billion, up 12.9 percent compared to the same period last year and equal to 12.756 percent of this year’s total target for US$20 billion while FDI in real estate accounted for 25 percent.

Hanoi’s FDI attraction in the first three months of this year reached US$427.7 million, including US$28.93 million from 47 new projects and the remaining from 10 old projects, showing an increase of 19.7 percent over the same period of last year.

“Judging from this fact, we think the rental fees will continue to rise on account of increasing demands and inflation rates”, Dane Moodie said. The proportion of rental accommodation will increase slightly thanks to the gradual recovery of industrial production. New IPs are unable to compete with the old ones which enjoy big advantages in location and infrastructure.

“Increasing demands and prices are just telltale signs. Professor Dang Hung Vo argued. “Vietnam should consider developing IPs and IZs carefully as many provinces and cities only want to increase industrial proportions in the local economy. They are vying with each other by granting incentives to attract more investors with almost no conditions attached.”

Vo noted that some countries in the world are based on the provincial competition index (PCI) to create the most favourable environment for investors.

Vo said any planning for sustainable development in provinces or cities must be placed under the overall planning of the country.