The reconfiguration of global supply chain is transforming manufacturing dynamics, unlocking potential for Vietnam’s Industrial Park (IP) sector. With its strategic location, competitive production costs, political stability, and diverse free trade agreements, the country has emerged as a leading destination for companies seeking alternative manufacturing hubs outside of China to diversify their production bases. Intense trade tensions between the U.S. and China during Trump’s first term further amplified its role in global supply chains. Looking ahead to a potential Trump 2.0 presidency, emerging trade uncertainties are likely to prompt global manufacturers to accelerate their diversification efforts. Leveraging its sustained competitive advantages, along with a low likelihood of facing higher tariffs compared to countries such as China, Mexico, and Canada thanks to its genuine trade surplus and proactive measures to balance trade with the U.S. Vietnam is well-positioned to solidify its role as a leading hub for the next wave of foreign direct investment (FDI).

Undemanding sector valuation offers investors opportunities to capitalize on industrial land bank expansion. The current occupancy rates of industrial parks stand at 80% in the Northern region and 89% in the Southern region, both key manufacturing hubs, highlighting the need for industrial land expansion. According to the national land use plan, industrial land area will increase from the current 96,000 ha to 210,000 ha by 2030. A key trend within this expansion will be the conversion of rubber land in prime locations, which presents a cost-effective solution while shortening the development process. Developers with extensive land banks, solid financial positions, and proven expertise in attracting major tenants are ideally positioned to capitalize on the sector’s growth potential. Besides favorable outlooks, the sector’s valuation remains attractive, with the P/B ratio below its two-year average and the book value not fully reflecting the potential for land bank expansion, providing investors with growth opportunities.

Trump 1.0 sparks an FDI boom to Vietnam as global manufacturers pursue production diversification

During Trump’s first term, the country attracted USD143 bn in registered FDI, accounting for nearly 26% of its cumulative foreign investment since the first project in 1988. This growth reflected a broader global trend, as companies sought to diversify their supply chains, reduce reliance on China, and avoid the risks associated with escalating trade tensions. The country’s strategic location near China provides a clear advantage, enabling nearshoring strategies that maintain supply chain efficiency. Its proximity to the Southern Economic Corridor, referred to as the Silicon Valley of China and responsible for 20% of China’s GDP in 2023, further enhances its appeal for high-tech industries. During this period, major multinationals, including Apple, Foxconn, and LG, rapidly expanded their operations, capitalizing on a favorable manufacturing environment. As a result, the industrial landscape has been evolving, transitioning from labor-intensive industries such as textiles and plastics to higher-value sectors, including electronics, automotive, and machinery, reinforcing the industrial landscape and laying the groundwork for ongoing economic advancement.

Looking ahead to Trump 2.0: Vietnam emerges as a resilient alternative production base

Trump’s proposed tariffs are expected to accelerate supply chain diversification. During his campaign, he outlined plans to impose tariffs of 60% on imported goods from China and 25% on goods from Mexico and Canada. While no official tariffs have been announced, global manufacturers are likely to expedite the diversification of their production bases and supply chains to mitigate the impacts of heightened trade tensions and uncertainties. Vietnam stands out as a top choice, as the likelihood of it facing higher tariffs under Trump 2.0 remains low, thanks to its genuine trade practices and proactive efforts to balance its trade surplus with the U.S. According to Dezan Shira & Associates, the country is the most attractive destination for manufacturers seeking alternatives to China, outperforming its regional peers.

The risk of incurring higher tariffs is minimal compared to countries such as China, Mexico, and Canada.

• Genuine trade practices address transshipment concerns. Between 2017 and 2024, exports to the U.S. grew at a 15% CAGR, reaching USD120 bn in 2024,while the trade surplus tripled to USD105 bn. This growth has made Vietnam the third-largest exporter to the U.S., following China and Mexico. At the same time, the trade deficit with China expanded from USD23 bn in 2017 to USD84 bn in 2024, raising concerns about transshipment practices potentially driving tariff risks. A Harvard study, Exports in Disguise? Trade Rerouting during the US-China Trade War, found that only 1.8% of Vietnam’s exports to the U.S. in 2021 were rerouted. This demonstrates that the majority of export growth stems from genuine trade flows, effectively alleviating concerns over transshipment-related risks.
• Proactive efforts to rebalance trade. Initiatives are actively being implemented to address the trade deficit with the U.S. by increasing imports of critical U.S. goods, such as LNG and aircraft, demonstrating a strong commitment to strengthening trade ties.
• Resolution of trade investigations. Although anti-dumping and currency manipulation investigations were initiated during both the Trump and Biden administrations, no significant actions have been taken. Vietnam’s demonstrated willingness to cooperate has helped address and ease these concerns.

Many initiatives have been implemented to further enhance its attractiveness.

• Expanding strategic partnerships have reinforced the country’s position as a reliable trade partner. Its robust network of 17 Free Trade Agreements (FTAs), combined with recent upgrades in bilateral relationships such as the elevation to Comprehensive Strategic Partnerships with the United States in 2023, with Australia in 2024, and with France in 2024, as well as a likely upgrade with Singapore in 2025, continues to improve market access and provide competitive tariff advantages.
• Comprehensive infrastructure investments and supportive policies drive high-tech sector growth. To address high logistic costs, currently at 18% of GDP compared to 14% in Thailand and 8%in Singapore, the government is prioritizing infrastructure investments to enhance regional connectivity. Efforts also include ensuring a stable and affordable power supply to support industrial operations. Regulatory reforms are underway to loosen requirements and streamline processes for foreign investors in high-tech industries. Additionally, the newly established Investment Support Fund provides financial incentives to high-tech sectors, including chip manufacturing, semiconductors, and AI. These incentives include subsidies of up to 50% for initial investment costs, along with support for annual expenses, such as up to 50% for training and human resources, 30% for research and development, and 10% for fixed asset investments. These initiatives continue to attract global technology firms to establish and expand operations, solidifying the position as Asia’s leading manufacturing hub while fostering economic growth and navigating geopolitical challenges.

The development of the industrial park sector plays a pivotal role in advancing FDI attraction efforts

As of November 2024, Vietnam hosted 440 IPs, concentrated in two key economic regions: the Southern Key Economic Zone (SKEZ) and the Northern Key Economic Zone (NKEZ). These zones form the backbone of the manufacturing sector, attracting global corporations across diverse industries.

The SKEZ is the most dynamic economic region, underpinned by robust infrastructure and a large population. The region benefits from a highly skilled workforce, proximity to the largest consumer market, and competitive leasing rates. Key infrastructure projects, such as Tan Son Nhat International Airport and Cai Mep – Thi Vai seaports, provide seamless connectivity to global markets. While traditionally home to labor-intensive industries, the region is rapidly evolving, attracting high-tech and value-added sectors.

The NKEZ has emerged as a premier hub for high-tech industries. The zone has drawn substantial investments in electronics, semiconductors, and renewable energy, thanks to its strategic proximity to China’s Southern Economic Corridor. Competitive leasing rates and ongoing infrastructure upgrades enhance the region’s appeal. The NKEZ benefits from 13 highways improving connectivity between Hanoi and its surrounding provinces. Additionally, Hai Phong’s seaport clusters, positioned along key international shipping routes, provide direct access to global markets. In 2025, its annual capacity is expected to increase by 40% to 10 million TEUs, further enhancing room for trade activities.

Rising demand for Ready-Built Factories (RBF) and Warehouses (RBW). This trend is underpinned by the relocation of high-tech industries and the rapid rise of the e-commerce sector, which is forecast to expand at a 10% CAGR over the next five years. These facilities offer compelling advantages, enabling businesses to quickly establish operations and explore local markets without committing to large-scale investments upfront. Reflecting this trend, Apple’s supplier network expanded from 27 in 2022 to 35 in 2023, while Samsung’s Tier-1 suppliers surged from 25 in 2014 to 306 in 2023, underscoring the country’s rising stature in global supply chains. Currently, the market provides over 10.5 million sqm of RBF space and 8.3 million sqm of RBW space to meet this growing demand. Prominent developers like Mapletree, BW Industrial, and SLP are capitalizing on this trend. Additionally, traditional domestic IP developers have also entered the RBF market, recognizing its potential for stable cash flow and effective landbank utilization.

A promising outlook underpinned by attractive valuations

The sector’s valuation remains attractive, with the current P/B ratio below its two-year historical average. This relatively appealing valuation is further supported by the sector’s growth prospects, with the expansion of the land bank not yet factored into the book value. The industrial park real estate sector is well-positioned to benefit from the ongoing reshaping of global manufacturing, offering investors an opportunity to tap into a market with transformative growth potential.

TIM