Vietnam's tourism hot spot becomes foreign investment hub

 Halong Bay © AP

With its emerald green ocean and moss-covered islets, the world heritage site of Halong Bay in northern Vietnam is one of the country's most popular destinations, attracting tourists from around the world. In 2023, it welcomed about 2.6 million foreign visitors, accounting for 21% of Vietnam's total inbound tourists.

However, the province where Halong Bay is located has another face. Quang Ninh has recently become Vietnam's largest recipient of foreign direct investment, overtaking Hanoi, Ho Chi Minh City and other economic hot spots, thanks to global supply chain diversification and a new port in a nearby city.

According to data from the General Statistics Office of Vietnam, Quang Ninh last year topped other provinces and the country's five biggest cities, receiving $3.1 billion of FDI. Thai Binh province was the second-hottest destination, attracting $2.68 billion, followed by Bac Giang province at $1.53 billion.

Quang Ninh province was expected to welcome another $1 billion in the first quarter of 2024 and will likely surpass $3 billion for a second consecutive year.

The province, which shares land and sea borders with China, began attracting attention as the U.S.-China trade war accelerated. Due to its proximity to China and its 250 kilometers of coast, the province is considered one of the best locations for companies moving production out of China. These factors keep China's existing supply chains in play and make it easy to ship products.

In addition, the number of LNG and wind power plants in the province has increased recently. This reflects a big energy shift as Quang Ninh holds rich mineral resources, including more than 90% of Vietnam's coal reserves. Industries like solar photovoltaic cell technology, electronic equipment and petrochemicals are also expanding in the province.

Jinko Solar PV Vietnam's photovoltaic cell technology project might be the largest and most symbolic of these projects. With total registered capital of over 34.65 trillion dong ($1.5 billion), it is funded by a Chinese company.

The top three provinces in the 2023 FDI ranking were all around Haiphong. One of Vietnam's five biggest cities, Haiphong itself finished fourth in the ranking, attracting $1.48 billion.

The opening of Lach Huyen International Port in 2018 in Haiphong has given rise to the city and surrounding areas. The first large-scale port in the north has a water depth of 14 meters. Before it opened, the region had only a shallow port that almost no large container ship could enter.

Expressway 04, which connects to Hanoi, opened at the same time. Also, the opening in 2022 of Expressway 06, to the city of Mong Cai, near the Chinese border, was a significant tailwind for Quang Ninh Province.

Another boon to the city has been Vingroup, Vietnam's largest conglomerate, which reportedly is close to the authorities and has received preferential treatment. It has built a VinFast electric vehicle factory in Haiphong.

Until a few years ago, Vietnam's investment hubs were Hanoi and Ho Chi Minh City, the two biggest cities. However, labor costs and industrial park prices in recent years have soared.

According to Sufex Trading, a Japanese company that helps Japanese companies enter Vietnam, Hanoi industrial parks charge tenants $100 to $170 per square meter, up from $90 to $120 around 2019. Prices in Ho Chi Minh City range from $160 to $270, up from $130 to $160.

Rents at Quang Ninh province parks, meanwhile, range from $80 to $100, compared to $60 to $70 before the pandemic.

Personnel costs are also lower outside the big metropolises. According to the General Statistics Office of Vietnam, the average monthly salary in Hanoi in 2022 was 8.86 million dong ($385). In Ho Chi Minh City it was 9.1 million dong, but in Quang Ninh province, it was 7.03 million dong.

VinFast EVs wait in line in Haiphong to be sent to the U.S.
Haiphong's new port has made the city and surrounding
areas an attractive investment destination. © Reuters

"The area around Haiphong will continue to be popular among foreign companies," said Hirokazu Tsuchiya, General Manager Japan of DEEP C, a vast industrial park spanning Haiphong and Quang Ninh, where Pegatron and Apple supplier USI have their factories, pointing out that land prices and labor costs are soaring in Haiphong. "Surrounding provinces such as Quang Ninh and Thai Binh are cheaper, and the convenience is almost as good as Haiphong," he said.

The strategic importance of Quang Ninh province is also evident in its railway development plans. The Ministry of Planning and Investment of Vietnam on Tuesday said work on two high-speed railway lines linking Hanoi with China will start before 2030. The trains are expected to stop in Haiphong and Quang Ninh.

Although the number of companies that hope to enter Quang Ninh province is likely to increase, there are concerns.

One is heavier investments. According to a few companies that have already entered Quang Ninh, the minimum investment amount per hectare has been raised to $8 million from $5 million, which they say reflects local authorities' desire to invite larger companies. Another is the cost of labor. More Chinese and South Korean companies are raising their salary offers to attract talent.
*Additional reporting by Kim Dung Tong in Ho Chi Minh City. *NIKKEI Asia