Vietnam moves up in global value chain with high-value investments: Savills

Vietnam's industrial sector is undergoing a significant transformation, attracting a "new wave" of high-value investments and the attention of leading global manufacturers and technology experts, says a Savills Vietnam report.

It says that in the first nine months of the year, total foreign direct investment (FDI) in Vietnam reached $24.8 billion, with high-value sectors such as electronics, automotive components, semiconductors, and green technologies leading the charge.

Investments from countries like South Korea, Singapore, and Japan have highlighted the trend toward high-tech, high-value manufacturing. Manufacturing now accounts for around 63% of FDI, emphasizing Vietnam's growing appeal, far exceeding its traditional fame as a low-cost production hub.

The report notes that the northern key economic region, including Bac Ninh province and Hai Phong city, benefits from its strategic proximity to China and the North Asian market, making it advantageous for export-focused industries.

Meanwhile, the southern key economic region, which includes Ho Chi Minh City and the provinces of Binh Duong and Dong Nai, boasts a logistics network and port systems ideal for production for both export and domestic consumption.

Vietnam being a signatory to 17 free trade agreements (FTAs) including those with the E.U. and the U.K., also enhance its attractiveness by offering better market access and competitive trade advantages.

John Campbell, director and head of industrial services at Savills Vietnam, says in the report that strong FDI inflows, Vietnam’s strategic location, competitive costs, e-commerce growth, open trade policies and the country's role in the global supply chain are critical for long-term supply and performance in the warehouse segment.

To further reinforce this new wave of investments, the country is accelerating infrastructure development, dedicating 7% of its GDP to key projects such as the North-South Expressway, Long Thanh International Airport in Dong Nai province, and Cai Mep deep-water port in Ba Ria-Vung Tau province, which will directly connect to Europe, America, and Southeast Asia.

The northern key economic region benefits from strong infrastructure, including expressways and key ports like Hai Phong and Lach Huyen, which increases the attractiveness of export-oriented industries.

The southern region's extensive port system, especially the Cai Mep deep-water port, enables direct shipping to international markets, solidifying Vietnam's role as a key logistics hub.

In addition to transportation infrastructure, Vietnam is boosting its digital connectivity with the expansion of 5G networks and the development of data centers, which support the growth of e-commerce and logistics.

Strong demand for warehouses, industrial land

The Savills Vietnam report says that with the growth of e-commerce and rising FDI, demand for ready-built warehouses and industrial land has surged.

This year, the supply of ready-built factory and warehouse spaces increased by 31%, with occupancy rates exceeding 80% in key areas. The southern key economic region, with its logistics advantages, is seeing high demand for such facilities due to competitive costs and strategic location, catering to both domestic and international clients.

The cost of warehouse space in Vietnam remains attractive, averaging $5.6 per square meter, drawing companies adopting the "China +1" strategy. Developers are responding to the strong demand with modern, high-tech facilities, including environmentally-friendly options that meet international standards.

Government support for logistics development, through investment in diverse transportation modes and specialized logistics zones, is positioning Vietnam as a preferred location for efficient industrial solutions at competitive costs.

Campbell believes that with more than 44% of new manufacturing FDI in the first nine months coming from value-added products like electronics and electrical equipment, Vietnam's shift up the value chain is evident. He notes that the nation’s strong export performance has played a crucial role in Vietnam’s economic recovery this year.

FDI inflows into value-added manufacturing sectors have driven overall export growth, with electronics emerging as a key contributor, he adds.

Growing digital economy

Campbell also notes that as the digital economy expands across Asia, Vietnam is becoming a key market for data centers. The country's data center market, valued at $685 million in 2023, is expected to reach $1.4 billion by 2029, driven by increased demand for cloud computing, 5G and the Internet of Things (IoT).

The government’s digital transformation program, which aims for 50% of businesses to be digitally active by 2025, demonstrates Vietnam’s commitment to building a digital hub, Campbell says.

Regulatory changes are encouraging foreign investment in data centers by allowing investors to fully own domestic data centers, he adds. Moreover, Vietnam’s high internet coverage rate and booming e-commerce sector are also boosting demand in this area, positioning data centers as a critical economic pillar of the country.

E-commerce boom

So far this year, e-commerce revenue in Vietnam has surged by 38%, with platforms like Shopee and TikTok Shop leading in sales. The growth of online retail further boosts demand for warehouses, logistics and data storage, reinforcing Vietnam’s role as a rapidly growing digital economy in Southeast Asia.

Vietnam’s industrial and digital sectors are growing strongly, supported by FDI, large-scale infrastructure projects and a favorable legal environment.

The shift towards high-value-added manufacturing, combined with logistics and data centers, is enhancing the Southeast Asian country’s position in the global supply chain.

The report emphasizes that with competitive costs, strategic location, and numerous trade agreements it has signed, Vietnam is well-positioned to capture this new wave of investment.

As it becomes increasingly integrated into global markets, Vietnam will play a key role in the future of Southeast Asia’s industrial sector, maintaining its reputation as an ideal destination for efficient, advanced industrial and logistics solutions, the report concludes.