When it comes to industrial parks in Vietnam, VSIP Bac Ninh Co. Ltd., located in the Northern Key Economic Zone (NKEZ), stands out. As the name suggests, it is part of the 800 square kilometers long Bac Ninh province. Despite being the smallest region in the country, industrial parks here have become an industrial hub, attracting key foreign direct investments (FDI). The area is especially lucrative for high-tech product manufacturing as it provides excellent business setup and development opportunities.
Since it lies within the economic triangle of Quang Ninh, Hai Phong, and Hanoi and is located close to the Noi Bai airport (22 km) and Hai Phong seaport (120 km), it has attracted the attention of global investors. The region has 16 industrial parks, including the VSIP, Gia Binh, Yen Phong, and Thuan Thanh. While four of the 16 parks are waiting for investments and two are under construction, 10 are already operational.
In this article, we have discussed the many aspects of the Bac Ninh province in detail, including its history as a manufacturing hub and future prospects.
Bac Ninh’s History as a Manufacturing Hotspot—VSIP Bac Ninh Co. Ltd.
Although Bac Ninh province was an agricultural area with little to no infrastructure, it went through a massive industrialization drive in the late 1900s, which resulted in the current manufacturing boom. The region ranked fourth in Vietnam in 2021 because of its VND 155.6 million gross regional domestic product (GRDP) per capita. In the same period, the industrial production of the region stood at VND 1.5 quadrillion (US$42 billion).
The driving force of the economy of this province is construction and industrial production, which has drawn many hi-tech and electronics companies to set up business here. The urban planning and administrative foundation also helped the region’s economic growth, as cities like Bac Ninh City and Tu Son City provided the base for employees and customers.
The 16 Bac Ninh province industrial parks, especially the Vietnam Singapore Industrial Park (VSIP), have drawn some of the largest companies like Microsoft, Samsung, etc. While Samsung Electronics set up business in Yen Phong I, Microsoft Mobile chose VSIP Bac Ninh Co Ltd, and Canon established a manufacturing unit in Que Vo. The region is home to companies from South Korea, Japan, and the US, which led to US$21 billion in FDI investments in 2021.
The presence of all these companies in this region has made it a hub for electronics manufacturing like tablets, smartphones, and other wearable devices, along with LCD screens and camera modules. While Samsung got US$9 billion in investments to manufacture these electronics items in the Bac Ninh province, Canon’s production facility makes scanners, printers, and other office equipment.
Meanwhile, Foxconn’s factory in Bac Ninh makes electronic components for Sony, Dell, and Apple products. Microsoft, on the other hand, makes Surface tablets and Xbox consoles, amongst other accessories. Other companies like Goertek, Hyosung, KCC, and Mobase produce acoustic components, ATMs, electronic appliances, phones, and electronic vehicle accessories, respectively.
The easy availability of a skilled workforce coupled with the infrastructural support provided by the Vietnamese government has made it an ideal manufacturing destination for these companies and others, making it the industrial hub we see today.
In the first quarter of the 2024 financial year, this region emerged in the second position in FDI investments as it drew US$745.2 million with 105 new projects in the pipeline. While the manufacturing sector got 64% of these FDI investments (nearly US$4 billion), real estate drew US$1.6 billion, which shows how crucial these two sectors are for the industrial growth of Bac Ninh.
Future Aspirations for Bac Ninh
Vietnamese authorities are further planning to facilitate the industrial growth of the Bac Ninh province in the following ways:
- Improving construction and operational efficiency, including authorization of industrial parks like Thuan Thanh, VSIP Bac Ninh Co Ltd. 2, and Gia Binh
- Reducing outsourcing from industrial parks
- Shifting the focus to high-tech industries
- Attracting high-quality investments in new parks
- Building and promoting an all-inclusive supply chain that includes manufacturing, processing, and supporting elements
- Reforming the investment incentive structures and the administrative aspects of the industrial parks
- Focusing on high efficiency
The government plans to diversify the supply chain to attract more foreign businesses to the region, as these large high-tech enterprises can help in building a network of local SMEs and Vietnamese support companies.
The close proximity to Noi Bai International Airport and being part of the Hanoi, Quang Ninh, and Hai Phong economic triangle is already boosting investments, adding infrastructure facilities like advanced telecom, wide roads, and other reliable utilities with further help.
Additionally, tax incentives and workforce training, along with the hospitals, schools, etc. living facilities, are drawing companies to this region.
Why Bac Ninh Should Be Your Next Destination for Manufacturing?
It is crucial to invest in the Bac Ninh province as it is a thriving ground for innovation, collaboration, and industrial diversity, along with a huge potential for growth due to the consumer market coming from the urban centers around it.
Operational Advantage
The first critical aspect to consider is the low operating costs in the various industrial parks like VSIP Bac Ninh Co. Ltd. In 2021, the operating costs in this region were found to be US$80,000 less compared to other regions.
Much of it could be attributed to the high foreign direct investments (US$25 million) that Bac Ninh receives and the strategic location. The region is 100km from both Hai Phong and Quang Ninh Port, while the Duong River Port is 1.5km away.
It has a bonded warehouse within a 6km radius. Additionally, the presence of a stable climate with no flooding or storms, which often disrupts business operations, acts as a catalyst for growth by reducing overhead expenses.
Supply Chain Advantage
Another crucial aspect for businesses to prosper in the Bac Ninh province is the infrastructural support, which has helped in creating a robust supply chain with high interconnectivity. The Vietnamese government is supporting the economic growth in the region with transport, real estate, and utility services.
This includes an interconnection of 18 well-connected national highways having roads as long as 129cm and 18m wide, four lanes of 50m width separated by 2m separators, and 16m by 2m dimension sidewalks. The industrial parks are well connected to the residential areas (the target market) with bus routes.
Additionally, there’s a well-built water and power infrastructure that provides a power supply of 110kV, 22kV, and a 0.4kV voltage transformer. Every corporate factory in Bac Ninh gets a supply voltage of 22kV.
The industrial zones are supported by two voltage transformers having 63MW capacity each. Bac Ninh’s independent power supply line ensures that the industrial parts don’t encounter any power cuts and have the required voltage stability for consistent production.
Furthermore, the government provides a clean water supply plant for these zones, which comes with an inverter pump and surface water treatment technology. As of 2023, these water plants can supply 4000-10000m3 for 24 hours, which would be increased by 2000m3. These plants supply water to the factories at 2.5kg/cm2 pressure.
Moreover, the supply chain in the industrial park is also supported by adequate communication facilities through Viettel and VNPT (Vietnam Posts and Telecommunications). There are proper water treatment systems, construction planning, and fire protection in place for uninterrupted and smooth operations across the supply chain.
Read More: An Overview of Vietnam’s Industrial Market: Industrial Parks, Factories, Warehouses
Incentives & Skilled Workforce
Last but not least are the tax incentives given to companies setting up business in the Bac Ninh province and the relative ease of finding skilled and well-trained labor. A corporate factory operating in this region receives more tax holidays than those in other parts of the country. They are also subject to preferential tax rates and tax reductions.
Moreover, companies are exempted from land rental if they set up a corporate factory in industrial parks. The corporate income tax (CIT) is given at a 10% rate to companies in this region for 15 years. Additionally, employees living in socio-economically disadvantaged regions in these industrial zones are eligible for a 50% reduced CIT for 4 years, along with 2 years of CIT exemption at the beginning.
There are specific investment incentives for hi-tech industries like a 15-year land rental exemption, a 4-year CIT exemption with a 50% reduced CIT rate for 9 years, an import duty exemption, and funding opportunities under the National Hi-Tech Development Program.
Read More: Vietnam’s Workforce: High Demand Skills and Advice for Business in 2024
How to Set Up or Move Your Manufacturing to Vietnam?
Foreign investors looking to leverage the manufacturing growth of Vietnam by setting up factories should consider the industrial parks of Bac Ninh province, like VSIP Bac Ninh Co Ltd, Thuan Thanh, and others. Other industrial regions like Dong Nai, Ho Chi Minh City, Hanoi, etc. can be beneficial for other types of industries. However, all entities setting up a manufacturing company in Vietnam have to go through a particular procedure.
Companies starting with an already-established factory must take the following steps:
- Get an Investment Registration Certificate (IRC) and an Enterprise Registration Certificate (ERC).
- Form charter capital as per the directions of IRC and ERC.
- Authorize and sign the rental agreement for the factory.
Follow these steps in case you are building a corporate factory from scratch.
- Get the land rental registration done. You also need to register for the use of facilities and infrastructure.
- Ensure you fulfill the environmental requirements and submit an Environment Impact Assessment (EIA) accordingly.
- Get an IRC and an ERC.
- Form a charter capital as per the IRC and the ERC.
- Ensure that the design of the factory is compliant with the laws and register the design.
- Apply for fire protection facilities.
- Start building the factory.
Read More: A Guide to Launching a Manufacturing Business in Vietnam for Foreigners
Cooperation Agreement Between InCorp Vietnam and Bac Ninh Industrial Park Support Center
As of 2023, InCorp Vietnam has an agreement with the Bac Ninh Industrial Park Development and Investment Support Center which helps to draw foreign investments to the industrial parks of the region, including VSIP Bac Ninh Co. Ltd.
As per this contract, InCorp Vietnam will assist foreign manufacturers in setting up factories in Bac Ninh and other industrial regions of the country that have proper infrastructure and are supported by tax incentives from the government. This includes foreign companies like Foxconn, Samsung, Unilever, and Nestle. The two organizations are working together to help foreign companies throughout the market entry process, including:
Tax Incentives in Bac Ninh Province
To set up a corporate factory in the province, especially in industrial parks like VSIP Bac Ninh Co. Ltd., you must be aware of the various tax incentives offered by the Bac Ninh government. These incentives vary as per the industry you serve and the project size you are undertaking. The expert team of tax professionals and consultants can assist you in applying for the right corporate tax incentives based on your necessities, minimizing your risks of rejections.
CIT is offered in two ways in Vietnam.
- Standard CIT: You can opt for the standard CIT incentive, which is offered for 15 years, of which the first 4 years you get a complete CIT exemption. However, the next 11 years are divided into 9 years of 50% tax reduction of the 10% CIT rate, followed by 2 years of 10% CIT. This is strictly reserved for high-priority sectors like hi-tech manufacturing.
- Customized CIT: For large investment projects that have a hiring capacity of a lot of Vietnamese workers, there are customized CIT incentive plans available. InCorp Vietnam works with the Bac Ninh authorities to sort this out for you, helping you apply for the tax incentives suited to meet your project needs.
Read More: A Complete 2024 Guide to Tax Incentives in Vietnam for Foreign Companies
Assisting Chinese Investors in Bac Ninh
The Bac Ninh Industrial Park Development and Investment Support Center is always looking for Chinese entrepreneurs to set up business here, and InCorp Vietnam in-consultation helps in the process by getting the investors’ visas quickly approved in association with the authorities.
About the Bac Ninh Industrial Park Development and Investment Support Center
All industrial parks in the Bac Ninh province, including VSIP Bac Ninh Co. Ltd., come under the Management Board of Bac Ninh Industrial Parks. Now, the investment support center with which InCorp Vietnam has signed an agreement is a non-business public unit of this management board. This allows it to indulge in a range of activities like promoting investment activities and providing consulting and supporting services for investments. The center can also collect and distribute information related to the industrial parks and their activities. The primary objective behind this is to attract foreign funds and companies for sustainable development in the industrial parks, and for this, implementing investment projects is crucial.
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