Small foreign investors opt for factory leases

Hung Le

According to a recent report of the HCMC Export Processing and Industrial Zones Authority (Hepza), the number of new FDI enterprises hiring land for factory construction fell considerably while those choosing ready-built plants rose sharply in the city in this year’s first six months.

Total land leased to the FDI sector at the city’s IPs and export-processing zones only reached nearly 3.9 hectares in the first six months, slumping over 55% year-on-year. Meanwhile, the total area of ready-built factory space for lease at these zones was nearly 18,200 square meters, jumping over 161%.

A majority of new foreign-invested projects hiring factories from IP infrastructure developers are SMEs in supporting industries, Hepza’s Investment Department said.

As these enterprises are still in the process of exploring investment prospects in Vietnam and looking for outlets for their products, they just want to lease workshops for trial production for about two to three years. Therefore, their investment capital is very small and they might consider expanding operations or asking for land to build their own plants when their business operations fare well.

These companies come mainly from Japan, South Korea and Taiwan but the city has seen German, Swedish and Dutch enterprises active in supporting industries coming, such as precision engineering.

The number of FDI companies using ready-built factories at the IPs is increasing, Hepza said. It noticed these businesses even hire the plants of the local enterprises that have suspended operations due to tough conditions at home.

Hepza said it would focus on working with companies developing quality factories to lure foreign SMEs to local supporting industries. The authority will cooperate with Japanese infrastructure developers to construct quality plants tailored to the needs of Japanese investors at Hiep Phuoc IP.

In contrast, the area of land leased to local companies has totaled 11.44 hectares so far this year, up 10.81% year-on-year, while the total area of plants hired by these entities has risen only 2,600 square meters, tumbling nearly 72%, Hepza said. It promises to create favorable conditions for enterprises facing difficulties in business and production to hire plants that are not in use in the near future.

The city attracted a combined US$214.5 million in investment from January to June, representing nearly 43% of the year’s target and surging 1.27% year-on-year, Hepza reported. Total leased land amounted to 15.33 hectares, dipping 20% year-on-year, while leased factory space leapt 27.45% to about 20,800 hectares, according to the authority.

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