Northern Vietnam: An 'extended arm' of the global factory

Property consultancy Cushman & Wakefield explains why northern Vietnam is a key part of the global manufacturing and supply chain.

Northern Vietnam is considered an area with great potential for economic development and an important geographical position, and is part of the supply chain of a great number of international manufacturing giants.

More than 30 years after opening the economy, the industrial and manufacturing sectors in the north of Vietnam have grown tremendously and this is positively reflected in the economic and industrial indicators.

According to the Ministry of Planning and Investment, the first nine months of the year saw a total registered FDI capital of nearly $18.8 billion. Rank-wise, Bac Ninh is third in the country with a total registered capital of nearly $1.78 billion, accounting for 9.5% of total capital. Followed by Thai Nguyen, Hai Phong, Hanoi, and Bac Giang as the provinces to have attracted the most FDI inflows in recent years. All of the provinces are in the north.

According to our research, as infrastructure development is prioritized by the local government, northern Vietnam currently has 13 expressways connecting the northern provinces to Hanoi, with a total length of 895.8 kilometers including the Noi Bai-Lao Cai (264 kilometers), Hanoi-Bac Giang (45.8 km), Bac Giang-Lang Son (64 km), Noi Bai-Bac Ninh (31 km), Hanoi-Thai Nguyen (63 km), Phap Van-Cau Gie (30 km), Cau Gie-Ninh Binh (50 km), Cao Bo-Mai Son (15 km), Mai Son Expressway-National Highway 45 (63 km), Hanoi-Hai Phong (105 km), Hai Phong-Ha Long (25 km), Ha Long-Van Don (60 km), and especially Van Don-Mong Cai (80 km) connecting three border gates and leading to three most important international airports in the region.

The northern region has six railway lines, including the Hanoi-Hai Phong (102 km), Hanoi-Lao Cai (296 km), Hanoi-Dong Dang (162 km), Hanoi-Quan Trieu (75 km), Kep-Luu Xa (57 km), Kep-Uong Bi-Ha Long (106 km) and North-South axis (1,726km).

The Red River Delta provinces and the Northern Midlands and Mountains have a total national highway length of 9,389 km with the Hanoi-Hai Phong Expressway axis (105.5 km) and Hanoi-Thai Nguyen (61.3 km). The road network covering the whole territory acts as the main connection for the transport network between industrial zones, airports, seas, border gates, and important traffic hubs. According to the road network planning for 2021-2030, it is expected that the North will have 14 expressways with a total length of about 2,300 km and four to six lanes.

The North is the region with the strongest increase of 154% from 2017 to 2021 in terms of exports through seaports, compared to the rest of the regions. According to the Vietnam Seaport Association, seaports in the north recorded a total of 2,000,000 TEUs of containers passing through the three main seaports of Quang Ninh, Dinh Vu, and Hai Phong. In November, for the first time, the Hai Phong seaport successfully welcomed a ship with a tonnage of up to 145,000 DWT. The ship is 335 m long, and 51 m wide, has a capacity of 13.58 TEUs, and is operated by Wanhai Lines which directly connects Vietnam with the West Coast of the U.S.

In addition to the road, railway, and seaport systems, the area also has an inland waterway transport infrastructure system: the Quang Ninh-Hai Phong-Viet Tri route across the Duong River (205.6 km); the Hai Phong-Ninh Binh route crossing the Luoc River (264 km); Hanoi-Lach Giang route (194 km) and Cua Day-Ninh Binh route (72 km) to support the transportation of traditional goods with large volume and low cost, and reduce pressure on North-South road transport.

The area also has seven passenger airports including Noi Bai, Van Don, Cat Bi, Tho Xuan, Vinh, Dien Bien, and Dong Hoi; only Noi Bai international airport has a specialized cargo terminal with a capacity of 403,000 tons of cargo per year, according to the Ministry of Transport. The other airports are currently receiving investment to increase passenger capacity and open direct flights to welcome more passengers and investors to Vietnam.

With favorable geographical features, coupled with strong investment in infrastructure and a series of policies to promote investment from the government, it can be said that the northern Vietnam has what it takes for "queen bees" to nest and further contribute to Vietnam's GDP.

Industrial parks in the north received a wave of investment from global electronics enterprises from early on, such as Panasonic (1971), LG Display (1995), Canon (2001), Foxconn (2007), Samsung (2008), Fuji Xerox (2013), and more recently corporations such as Pegatron, Goertek, Jinko Solar.

With so many high-tech, electronic manufacturers choosing the region as their base, a wave of auxiliary product manufacturers to cater to these giants followed. Notably, by 2022, the total number of Vietnamese suppliers in Samsung's tier 1 and 2 is 250 enterprises, of which 52 businesses are in tier 1. This is a huge increase from just four tier-1 businesses in 2014.

According to Ministry of Industry and Trade statistics, the total export and import turnover of goods in the first nine months of 2022 of Vietnam reached $558.52 billion, up 15.1% year-on-year. Many downstream industrial products such as leather, footwear, and textiles have a higher export rank compared to the region and the world. In recent years, Vietnam has been pushing to grow large private enterprises in the processing and manufacturing industry (midstream), as this is the driving force for the economy and its participation in the global value chain. The market has witnessed the participation of multiple domestic enterprises in the global supply chain like Truong Hai, VinFast, and Thanh Cong.

Domestics companies are pushing for growth and increasing investment, this signals a great “turning point” for the domestic manufacturing sector, especially in electronic technology. The northern region is poised to grasp the opportunity to enhance manufacturers’ supply chain value and increase its regional GDP.

Adjacent to northern Vietnam is the Southern Economic Corridor of China, with prominent cities and regions like Shanghai, Hong Kong, Shenzhen, Fujian, and Guangdong. This economic region serves as the base for giants in manufacturing, biochemistry, commerce, and electronic technology. According to estimates by Cushman & Wakefield, this region accounts for more than 30% of China's total GDP in 2021, playing an extremely important role in attracting capital and economic development.

Additionally, Vietnam's northern region has a direct road, sea, and rail route connecting to Shenzhen, known as China's Silicon Valley, creating favorable conditions for businesses wishing to expand and diversify production in the region. In addition, the industrial real estate market in the north has also formed early and is quite diverse in property types to serve businesses from mainland China and Taiwan to expand factories.

According to our Q3 report, the total supply of industrial land in the north reaches 13,600 hectares; with the average rent per square meter per rental cycle in Hanoi is $139, Bac Ninh $130, Hai Phong $121, Vinh Phuc $113, Hung Yen $112, Hai Duong $98 and Quang Ninh $90.

The market of ready-built factories and ready-built warehouses has also received a significant amount of investment as domestic investors have begun to participate in the development of modern factories and high-quality products, equivalent to that of international investors and at competitive prices.

The total supply of ready-built factories in the north reached 2.5 million square meters with an average rent of $3.5 - 5.7 per sqm per month, and the supply of ready-built warehouses reached 1.8 million sqm with an average rental price of $3.5-5.6 per sqm per month.