The rise of FDI in Vietnam, driven by new free trade agreements and the US-China trade war, has generated greater demand for production workshops and storehouses in the country, and promises high profits for local industrial park developers.

Despite the 15.8 percent rental rate hike in the second quarter of this year, the Vietnamese industrial park market still has high demand thanks to the strong growth of foreign manufacturers.

According to reports from the Ministry of Planning and Investment, in the first six months of 2019, industrial parks and economic zones across the country have attracted about 340 FDI projects with a total newly registered capital of about US$8.7 billion.

Up to now, the total number of FDI projects invested in Vietnam has reached about 8,900 with a total registered capital of US$186 billion.

Vietnam’s industrial parks cover a total natural land area of approximately 95,500 ha, of which industrial land reaches about 65,600 ha, accounting for about 68.7 percent. In addition to 251 industrial parks in operation, 75 remaining ones are in the stage of compensation, site clearance and construction with a total area of about 29,300 ha.

As a result, higher foreign investment means better opportunities for local industrial zone developers. Business performance and shares at industrial zone developers such as Kinh Bac City Development Holding Corp (KBC), Nam Tan Uyen Joint Stock Corporation (NTC) and Investment and Industrial Development Corporation (BCM) have increased sharply year to date.

KBC’s H1 2019 financial statement reflected the positive prospect of the firm’s real estate business segment. The company’s revenue and after-tax profit reached VND1.57 trillion (US$66.8 million) and VND511 billion, up 56 percent and 76 percent year-on-year, respectively. Of the total, land rental revenue accounted for nearly VND1.4 trillion, accounting for 87 percent.

In the stock market, KBC shares are also being traded positively at around VND15,000 apiece. Its trading volume at 10 sessions averaged at over 3.1 million shares. Recently, Ho Chi Minh City Securities Corporation (HSC) also recommended buy for KBC shares.

The same move was seen with NTC, which gained nearly VND100,000 per share to VND193,500 in the past three months. The rise was given by the firm’s positive business performance results in the first half of this year. NTC’s after-tax profit in H1 2019 rose by 48.76 percent year-on-year to VND130.5 billion.

Meanwhile, BCM also announced revenue of VND3.38 trillion and after-tax profit of VND1.32 trillion in H1 2019, up 12 percent and 34.4 percent year-on-year, respectively.

Favorable conditions support

 According to Stephen Wyatt, general director of property consultancy company Jones Lang Lasalle (JLL) Vietnam, the US-China trade war is not the only cause for the strong development of Vietnam’s industrial sector.

In fact, he said, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) agreements showed that Vietnam always strives for international integration, bringing many opportunities and motivation for the country to improve its business environment.

Vietnam is one of the most attractive destinations for the industrial sector in Southeast Asia and JLL expects that the trend will continue in the second half of 2019 and interest from foreign investors in Vietnam will remain strong.

Experts forecast that high growth prospects of industrial zone developers and their shares will continue next years.

Analysts from BIDV Securities Company (BSC) said that Vietnam’s industrial parks will continue to benefit from the trade war and the EVFTA. Along with that, the land rental rates will increase by 7-15 percent yearly on average, which will continually bring big cash flows for industrial zone developers in the coming time.

A report released late this week by the Ministry of Industry and Trade said online sales of counterfeit goods remained a problem despite 35,900 fake and illegal products being removed from e-commerce websites as of last year.

Over 3,000 seller accounts have been blocked for selling these items, it added.

“The sale of fake, illegally imported and banned items is widespread on e-commerce websites and social networks such as Facebook and YouTube. This is causing distrust among consumers,” Tran Huu Linh, deputy head of the Vietnam Directorate of Market Surveillance, said at a Friday meeting.

Sellers usually advertise fake products with images of real products and offer lower prices, Linh said, adding that this particularly happens with cosmetics and functional foods.

Sellers have one trading address but keep their goods at multiple locations, making it harder for authorities to examine them, he added.

“Some trading locations are in apartment buildings, which require search warrants, delaying the investigation.”

Online transactions usually do not have bills, therefore investigating the source of the counterfeit foods is a challenge, he added.

Dang Hoang Hai, head of the Vietnam e-Commerce and Digital Economy Agency (iDEA), said that fraudsters use multiple tricks to avoid being discovered, for example listing the product as “N.I.K.E” instead of “Nike.”

Some have servers placed in another country and website domains bought through a foreign service without any real address and phone numbers to contact in Vietnam, Hai said.

The technical capability and skills of officers in the agency have not caught up with fast-developing technologies to identify fraudsters, he added.

Minister of Industry and Trade Tran Tuan Anh proposed making changes in the law that will require online channels to manage their products and prevent counterfeiting.

Buying via online shopping channels and social networks has become increasing popular in Vietnam in recent years. Online sales in Vietnam last year rose by 30 percent over 2017 to top $8 billion, accounting for 5 percent of retail sales, according to the trade ministry.

Nguyen Hoai Nam, Deputy General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), said the move would allow firms to directly export their goods.

Most of the Mekong Delta’s export turnover is made up of rice and processed seafood products. Every year, the region’s transportation demand for export goods is about 17-18 million tonnes. However, 70 percent of export products have to be transferred to major ports in HCM City and Cai Mep port (Ba Ria – Vung Tau province), increasing transportation by 10-40 percent depending on the route.

This situation leads to frequent overloads on the connecting routes from HCM City to Mekong Delta provinces. In addition, transport service quality is poor, costs are high and there is a lack of links between different modes of transport.

As one of the largest frozen shrimp exporters in the world, Minh Phu Seafood Joint Stock Company annually exports about 6,700-7,000 shrimp containers with a turnover of 750 – 850 million USD.

Chu Van An, Deputy General Director of Minh Phu Seafood, said if there was a more suitable logistics service, goods could be exported directly from the Mekong Delta and businesses could save 30-40 percent of their costs, which would increase the competitiveness of agricultural products.

Focused investment in regional transport infrastructure would help tackle the problem, with waterways investment the best option due to the area’s terrain.

A representative of Ca Mau province’s Transport Department urged prioritising investment in inland waterways that are connected with road traffic to enhance transport capacity throughout the region, and to exploit the waterway system linking HCM City with other provinces and cities in the region.

The Ministry of Transport said that it will study and implement a dredging project and renovate Khai Doc Phu Hien canal connecting the Tien and Hau rivers to shorten the transport distance between Can Tho port and the seaport in the southeast.

The ministry also plans to upgrade inland waterway routes such as HCM City to Kien Luong and HCM City to Ca Mau. It will also focus on improving the transportation infrastructure system, reducing congestion on main waterways and cutting the cost of transporting goods from manufacturers to consumers, Minister of Transport Nguyen Van The said.

According to Nam, there is a lack of seaports in the delta, especially deep-water ports capable of handling export container ships.

Meanwhile, goods being stuck at ports and overloads at some key ports in the southeast region occur regularly, allowing shipping enterprises to increase service charges and wasting businesses’ warehouse costs and time.

An Giang province is a big exporter and processor of seafood, but difficulties in transport infrastructure have affected the development of enterprises.

As a unit specialising in raising and processing tra fish and basa fish for export, Nguyen Anh Thu, Deputy General Director of An My Fish Joint Stock Company, said the province’s transport system lacks synchronisation. This has caused  difficulties and increased costs for businesses as goods cannot be transported by container trucks but must be carried by small trucks.

It is forecast that the transportation demand for the region’s rice by 2020 will be about 10.2 million tonnes and aquaculture output will be about 2.42 million tonnes.

This shows the logistics market of the Mekong Delta has potential to develop and attract investors, according to Nguyen Minh Toai, Director of Can Tho city’s Department of Industry and Trade.

He said developing logistics services and building a regional level logistics centre was an urgent need.

To meet demand for import and export of regional goods, the Ministry of Transport asks the Prime Minister for approval to adjust planning for Soc Trang and Tran De seaports to seek investment and form a gateway seaport to receive vessels of up to 100,000 tonnes.

Besides, the ministry proposed the Government and the National Assembly approve the allocation of capital to upgrade the second phase of Cho Gao canal and complete investment procedures for the southern region waterways and transport logistics corridor project with loans from the World Bank.

The General Department of Vietnam Customs noted that during the first half of August, the country’s cashew nut exports reached 21,500 tons, worth a total of US$146.2 million, representing a 10.1 per cent increase in volume and a rise of 9.3 per cent in value in comparison with the same period last month.

Since the beginning the year, cashew nut exports hit 261,200 tons, worth US$1.936 billion, a surge of 17.6 per cent in volume and a drop of 8.2 per cent in value compared to the same period last year.

The average export price of cashew nuts during the first half of August fell by 0.8 per cent to US$6,812 per ton in comparison with the same period last month. The average export price has fallen 21.9 per cent to US$7,415 per ton since the beginning of the year.

During the remaining months of 2019, the demand for cashew nuts in the global market is expected to rise with the cashew sector targeting the export of 450,000 tons of cashew during the year, according to Vinacas.

Experts have concluded that due to low export prices, the global demand for cashew nuts is forecast to increase in the short term, higher than the set target of 10 per cent.

Vinacas President Nguyen Van Cong believes that the price of cashew nuts is likely to rebound later this year with the world’s consumption demand for the food item projected to rise during the year’s fourth quarter.

Vinacas said the cashew industry is likely to face a number of challenges of processing and trading cashew nuts in the future due to stricter requirements being implemented by importing countries.

Most notably, demanding markets such as the United States and EU have announced that they are to apply additional food safety standards and inspect chemical residues on exports to their market.

The association also warned local cashew businesses about the need to further step up production and processing activities in a bid to supply their products to supermarkets in order to stabilize market prices.