Foreign Direct Investment in Vietnam – the Central Key Economic Region of Vietnam

Introduction

Over the past twenty years, Vietnam has established four Key Economic Regions (KERs): Northern, Central, Southern, and Mekong Delta regions, which comprise the main investment and economic zones of the country.

In one of our previous articles, we discussed the characteristics of the Northern Key Economic Region, a strategic area for companies pursuing a China+1 strategy, and the Southern Key Economic Region, the nation’s most vibrant business hub.

In this article, we will explore the features of Vietnam’s Central KER, the economic region with the largest port area, offering promising opportunities for several industries, including maritime transport and tourism.

Central KER’s Economic Outlook and Foreign Direct Investment (FDI)

The Central KER comprises five provinces and cities: Thua Thien Hue, Quang Nam, Quang Ngai, Binh Dinh, and Da Nang, with Da Nang being the region’s most significant city. Covering 8.4 percent of Vietnam’s total area and home to approximately 6.5 million people, this region stands as Vietnam’s third-largest economic hub.

It presents substantial potential for the growth of heavy industries, the oil and gas sector, maritime transportation, logistics, sea and island tourism, fishing, aquaculture, as well as wind and solar energy development. Furthermore, it serves as a vital bridge connecting Central Highlands localities through the East-West economic corridor.

The economic contributions of these five provinces are balanced, with each accounting for an average of 20 percent of the Gross Regional Domestic Product (GRDP). Currently, Da Nang stands out as the leader, boasting a growth rate exceeding 14 percent.

In terms of import-export activities, the Central KER achieved a robust growth rate of 17.1 percent compared to the previous year. Notably, Quang Nam led the region with a trade turnover of US$7.4 billion, constituting 35.6 percent of the total trade volume for the area.

Regarding FDI, the Central KER attracted US$531 million, equivalent to 2 percent of the total FDI in Vietnam. Thua Thien Hue leads the region with a 47.7 percent share of the total registered investment capital. However, Da Nang leads in the number of newly registered projects, accounting for 47 out of a total of 64 projects.

Some noteworthy FDIs in this region include KURZ Group, which opened a factory in VSIP Binh Dinh Industrial Park with a total investment of approximately US$40 million. Moreover, Quantum Group and BB Group are also considering substantial investments in this area.

Da Nang: The Pivotal Hub for Foreign Investors in the Central KER

Da Nang has increasingly become a magnet for foreign investors, driven by several compelling factors. In recent years, the city has witnessed significant economic growth, which, in turn, has attracted numerous substantial foreign investment projects. Currently, there are 888 such projects, collectively amounting to a total investment of US$5.9 billion. Remarkably, the city’s appeal endured throughout 2021, even in the face of the challenges posed by the COVID-19 pandemic.

Let’s take a deeper look at the factors that make this city so appealing to foreign investors. First and foremost, Da Nang enjoys a strategic location, serving as a vital entry point for businesses seeking access to the rapidly industrializing Central Region. Speaking of its infrastructure, Da Nang benefits from a well-developed network, including wide roads, highways, seaports, and an international airport. This system facilitates economic activities and investment opportunities.

Moreover, the city has fostered sustainable urban development, leading to consistent economic growth. Consequently, foreign investors have recognized its potential, resulting in numerous projects and capital inflows. Examining the industries where the city is thriving, we see airport and seaport logistics, retail, education, high-tech manufacturing, and information technology. In fact, the city is emerging as an attractive destination for IT and high-tech investments, thanks to a burgeoning ecosystem of companies specializing in software production and outsourcing, supported by advanced telecommunications infrastructure.

Additionally, the city is home to a youthful and dynamic workforce, bolstered by international schools and vocational training centres. For this reason, foreign investors are encouraged to explore opportunities in establishing international schools and education-related services.

When examining the foreign nations investing in Da Nang, it becomes evident that Japan takes the top spot. Japanese investors have poured over $1 billion into 222 projects within the city, firmly establishing their country as the primary contributor. Japanese investors have diversified their interests across various sectors, spanning component manufacturing, equipment, processing, IT, education, healthcare, services, and tourism. This involvement has significantly contributed to the creation of job opportunities for more than 40,000 workers in Da Nang.

Another fundamental sector for Da Nang is undoubtedly tourism. Despite the challenges posed by the pandemic, Da Nang remains a vital tourism destination, with proximity to UNESCO World Heritage Sites. Furthermore, the government is committed to promoting sustainable tourism development in the city, making this sector very promising for foreign investors.

Conclusion

In conclusion, the Central KER, encompassing provinces and cities like Da Nang, offers diverse investment opportunities, boasts impressive trade growth, and continues to attract FDI. While not as developed as the Southern KER or the Northern KER, it has room for further development. Da Nang, as its most important city, serves as the region’s pivotal hub, enjoying a strategic location and robust infrastructure, fostering sustainable economic growth across various sectors. Many nations, especially Japanese investors, are already taking advantage of this thriving and vibrant business environment. For foreign companies seeking investment prospects, particularly in tourism, logistics, or IT sectors, this region holds significant promise and potential.

D’Andrea & Partners Legal Counsel have authored innovative publications exploring Vietnam, produced in order to provide foreign investors and businesses with more practical guidance on how to do business in Vietnam, as it requires specific context of the economic and law framework of the country.

Disclaimer：

The above content is provided for informational purposes only. The provision of this article does not create an attorney-client relationship between D’Andrea & Partners and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel.