Could it be that the North's rapid growth, with the highest average GRDP growth rate among the four economic regions during the 2016-2018 period, is a positive sign, "triggering" the intention of Samsung, LG, and other factories to relocate there?
Why are giants like Samsung, Foxconn, and LG locating their manufacturing plants in northern Vietnam?
According to ACBS (ACB Securities Company), there are three reasons to explain why giants like Samsung, Foxconn, and LG chose the northern economic zone as the location for their factories instead of the southern one:
- The Northern key economic region is closer to China, South Korea, and Japan (two countries that contribute the most FDI to Vietnam) than the Southern region.
- Population density is higher in the northern region than in the southern region, with 946 people/m2 compared to 586 people/m2.
- The transportation system in the northern economic region is well-developed, with more expressways – 14 routes totaling 1.368 km in length. In contrast, the southern region has only half the number of expressways (7 routes, totaling 983 km).
Looking back at the economic advantages of both the northern and southern regions of our country.
As we all know, Vietnam has four key economic regions: the North, the Central region, the South, and the Mekong Delta. Of these, the North and the South are the two largest economic regions, contributing significantly to the state budget and having the best conditions for attracting investment and development.
Southern key economic region Male:
Comprising eight provinces/cities: Ho Chi Minh City, Binh Duong, Dong Nai, Ba Ria - Vung Tau, Long An, Tien Giang, Binh Phuoc, and Tay Ninh. The southern region is home to traditional industries such as plastics and textiles, which are core export sectors.
The South is the largest economic region, accounting for 45% of the country's GRDP and contributing 42% to the state budget, 40% of import and export turnover, and 40% of registered FDI capital in 2018. This region has 129 operating industrial parks.
The average land lease rate in this region is US$95/m2/50 years. Ho Chi Minh City leads the country with an average land lease price of US$162/m2/50 years. Warehouse rental prices range from US$3,5 to US$5/m2/month for 3-5 years, a slight increase compared to the end of 2018 (according to JLL data).
Northern Key Economic Zone:
Comprising seven provinces/cities: Hanoi, Hai Phong, Bac Ninh, Hai Duong, Hung Yen, Vinh Phuc, and Quang Ninh, this region is the second largest, accounting for 32% of the country's GRDP, and is a focal point for attracting FDI in emerging industries. The North is accelerating its growth with the highest average GRDP growth rate among the four economic regions during the 2016-2018 period, reaching 9,1%.
Currently, this region has 102 operational industrial parks, with an occupancy rate of 82%. Land lease prices are $80/m2/50 years, and warehouse rental prices range from $3 to $5,7/m2/month. ACBS believes that the region is heavily reliant on major tenants such as Samsung and LG, thus presenting both opportunities and risks.
