For many consecutive years, Vietnam has maintained a significant economic growth rate and has become one of the leading exporting countries in the Southeast Asian region. Vietnam has established numerous industrial zones and economic zones in almost all regions of the country, attracting investment and creating employment opportunities for the workforce.
With a cumulative total of nearly $25 billion of foreign direct investment so far, and with another $10 billion expected by 2025, Haiphong is becoming the new hub for foreign factories in Vietnam.
Table of Contents
- About Hai Phong
- Hai Phong Statistics
- Industrial Parks in Hai Phong
- Foreign direct investment in Hai Phong
- Hai Phong as a China+1 location
- Concerns for foreign factories in Haiphong
About Hai Phong
Haiphong (Vietnamese: Hải Phòng), the third-largest city in Vietnam, is located at the mouth of the Cấm River in northern Vietnam and its population is about 2.389 million people as of 2022. It is also the country’s largest and most crucial port city of Vietnam.
Strategically situated on the edge of the Red River Delta and with close proximity to the border with China, Hai Phong serves as a major trading hub. Being the only city in the North that has five modes of transportation, including railways, roadways, airways, inland waterways, and maritime, with excellent connections to key industrial zones, Hai Phong has become an indispensable hub for manufacturing in Vietnam.
Hai Phong Statistics
In 2022, Hai Phong ranked 4th nationwide in terms of total registered foreign direct investment (FDI) with 1.96 billion USD and ranked 3rd out of 63 provinces in the Provincial Competitiveness Index (PCI). As of the end of March 2023, the city attracted a total of 860 ongoing investment projects with a registered capital of 24.6 billion USD.
The index of industrial production (IIP) of the northern port city of Hai Phong is expected to grow by 13.5 – 14.5% per year, towards increasing the proportion of the manufacturing industry in GRDP to 46%.
According to Chairman of the municipal People’s Committee Nguyen Van Tung, Hai Phong is striving to promote three economic development pillars of industry – technology, seaport – logistics, and tourism – trade, especially industrial development in a modern, smart and stainable manner.
Industrial Parks in Hai Phong
Hai Phong is home to the Dinh Vu – Cat Hai Economic Zone and 14 IPs that are operating in infrastructure investment, construction and business with a total area of over 6,000ha.
Under an action programme of the Standing Committee of the municipal Party Committee, Hai Phong plans to develop 15 more IPs with a total area of over 6,200ha in the 2021 – 2025 period.
By the end of 2022, economic zones and industrial parks in the province have attracted 671 foreign factories in Haiphong with a total capital of up to $36.32 billion, including 455 FDI projects with about $22.39 billion and 216 DDI projects with a total registered capital of VND13.93 billion.
In particular, the group of large projects belongs to South Korea, Japan, and Hong Kong in fields such as manufacturing electronic components, vehicles, electrical equipment, plastic products, metal fabrication, and logistics.
Dinh Vu – Cat Hai Economic Zone
The Dinh Vu – Cat Hai Economic Zone is one of the major coastal economic zones in Vietnam and is currently home to eight industrial zones in Hai Phong. Under the current law, Dinh Vu – Cat Hoi enjoys many investment incentives:
Corporate income tax
Incentive tax rate of 10 percent within 15 years (calculated from the first year the enterprise has revenue from new investment projects); and
Tax exemption for 4 years, and reduction of 50 percent for the next 9 years (calculated from the date of taxable income from the new investment projects);
Personal income tax
Reduction of 50 percent for those who directly work in the economic zone; and
Import-export tax, value-added tax, special consumption tax
Tax exemption in non-tariff zones
Foreign direct investment in Hai Phong
According to the Ministry of Planning and Investment (MPI), as of 2022, Hai Phong was the sixth-largest recipient of FDI in Vietnam with a total registered investment capital of US$24.15 billion. As of January 2022, the city has 12 industrial parks in operation, in which there were 420 FDI projects by foreign investors coming from 36 countries and territories. Most investors are from Japan, South Korea, China, the EU, the US, and Taiwan.
Currently, Hải Phòng is home to more than 1,000 foreign-invested projects, valued at nearly $28 billion.
Hai Phong as a China+1 location
Situated on the strategic economic corridor along the northeastern coast, Haiphong serves as the primary import and export gateway for the northern region. Thanks to the flourishing of Sino Vietnam border trade and its proximity to the Chinese border and , which is merely 180km away, the city has been acknowledged as a potential China+1 manufacturing hub. Investors can choose to set up alternate production facilities in another competitive market such as Vietnam for supply chain diversification.
In 2020, Hai Phong ranked 2nd out of 63 provinces in Vietnam, in terms of provinces having the most favorable business environment, according to the 2021 Provincial Competitiveness Index (PCI) assessment. The Index of Industrial Production (IPP) of Hai Phong in 2021 is estimated to increase by 18.15 percent year on year, which is among the highest growth rates of provinces and cities with large industrial-scale production in Vietnam.
With an advantageous geographical location, in addition to the infrastructure boost as well as numerous incentives to attract FDI from the authorities, the ongoing industrial development of Hai Phong will not only strengthen Vietnam’s connection with the global supply chain, but also make it one of the ideal locations for investors who are considering shifting their manufacturing operations and increase trade with the East and Southeast Asian countries.
Concerns for foreign factories in Haiphong
Vietnam is heavily reliant on imports of intermediate goods from China, such as semi-processed products and capital goods, resulting in substantial trade deficits with this country. This reliance also results in other manufacturing-related concerns including longer production lead times and higher logistics costs.
In addition, genuine concerns as to the lack of engineering expertise and ancillary industries within the country have posed challenges for any business undertaking more sophisticated production with a higher degree of automation.