Attorney Vu Manh Quynh is the Managing Partner of ECOVIS Vietnam Law, advising international investors on Foreign Direct Investment (FDI), corporate governance, and regulatory compliance in Vietnam.

Industrial location selection is the decision with the longest time horizon in a factory setup project — and the one most frequently made without adequate legal due diligence. A sub-lease signed on standard developer terms, without legal review and without negotiating key protective provisions, can create exit, assignment and expansion constraints that limit the factory’s strategic flexibility for the entire investment horizon. This section addresses the 10 most important questions about industrial zone selection and land.

This article is Section III of the 100 FAQ about Factory Setup Vietnam series. It covers questions Q21–Q30.

What is the difference between an industrial park, export processing zone and industrial cluster in Vietnam?

An industrial park (KCN) allows manufacturers to sell to both export markets and the domestic Vietnamese market, with standard import duty obligations on raw materials. An export processing zone (KCX/EPZ) allows only export-oriented production but provides full import duty and VAT exemptions on raw materials and machinery. An industrial cluster (cụm công nghiệp) is smaller, provincially-managed and less developed. Most large foreign-invested factories choose industrial parks or EPZs for their superior infrastructure and IPA service levels.

How does a foreign company lease land in a Vietnamese industrial park?

Foreign-invested companies do not own land in Vietnam. In industrial parks, investors enter into a sub-lease agreement with the industrial park developer, who holds a primary land use right from the state. The sub-lease grants the right to use a defined area for a specified term (30–50 years). The investor pays a land use fee (typically USD 50–200/m² for the full term), infrastructure fee and management fee. The sub-lease is the primary legal basis for the factory’s location and must be consistent with the approved IRC.

What are the typical lease terms for industrial land in Vietnam?

Industrial land sub-lease terms typically range from 30 to 50 years, aligned with the developer’s primary land use right from the state. The remaining primary lease term — which varies by industrial park age — is a critical due diligence point. Parks established in the 1990s and 2000s may have significantly shorter remaining terms. Sub-lease terms should be reviewed for: early termination clauses, assignment rights, infrastructure service standards and dispute resolution mechanisms.

Who are the major industrial park developers in Vietnam?

Major developers include: VSIP Group (Vietnam Singapore Industrial Park — Binh Duong, Bac Ninh, Hai Phong, multiple provinces), Becamex IDC (Binh Duong), AMATA Corporation (Dong Nai, Quang Ninh), Deep C / BW Industrial (Hai Phong, Quang Ninh, preferred by European manufacturers), KBC — Kinh Bac (Bac Ninh, Bac Giang, northern Vietnam), and Sonadezi (Dong Nai). VSIP Binh Duong is at 90%+ occupancy — investors planning entry today should assess available land in each park before assuming their preferred location is accessible.

What due diligence should a foreign investor conduct before signing an industrial park sub-lease?

Key due diligence items: (1) Verify the developer’s Land Use Right Certificate and remaining primary term; (2) Legal review of sub-lease terms — early termination, assignment rights, extension provisions; (3) Infrastructure capacity commitments in writing — power, water, wastewater; (4) Expansion land availability assessment; (5) IPA processing track record for IRC applications; (6) Environmental compliance status of the industrial park; (7) Logistics connectivity — port distance, road access; (8) Existing tenant mix compatibility; (9) Rent escalation mechanisms.

What infrastructure and utilities should a foreign manufacturer verify at an industrial park?

Critical infrastructure items: power supply capacity and dedicated transformer availability; industrial water supply volume, pressure and quality specification; wastewater treatment capacity and connection requirements (including pre-treatment obligations); telecommunications and fibre connectivity; road access width and weight rating for heavy vehicle and container traffic; proximity to customs inspection stations. All commitments should be obtained in writing in the sub-lease or a separate infrastructure agreement — verbal assurances from sales teams are not enforceable.

Can a foreign-invested factory be located outside of an industrial park in Vietnam?

Yes, but with significantly greater complexity. Outside-park projects must obtain land use rights through provincial-level state processes, arrange all utility connections independently, establish their own environmental compliance infrastructure and wastewater treatment systems, and cannot access EPE customs benefits. The approval process involves more authorities and longer timelines. Industrial park location is strongly preferred for foreign manufacturing projects. Outside-park location may suit very large projects above USD 50 million with specific site requirements.

How do expansion rights work for factory land in Vietnamese industrial parks?

Expansion rights are not automatic — they must be negotiated at the time of the initial sub-lease. Options include: (1) Right of first refusal on adjacent land before it is offered to third parties; (2) Option to lease a defined additional area at a pre-agreed price; (3) Initial sub-lease of more land than immediately required, with the excess reserved. Given that VSIP Binh Duong and many established southern Vietnam parks are at 90%+ occupancy, investors who do not negotiate expansion options at initial entry may face secondary-location expansion or premium pricing when expansion is needed.

What happens to the sub-lease if the industrial park operator changes or is acquired?

The sub-lease is a contractual obligation binding on successors. If the industrial park developer is acquired or restructured, the investor’s sub-lease rights are generally preserved. However, changes in park management can affect service quality, IPA responsiveness and infrastructure maintenance. Sub-lease agreements should include: change of control notification obligations; successor’s assumption of all sub-lease obligations in writing; and service continuity commitments. Legal review of the primary land use right structure is a standard due diligence step.

How does land use right registration work for foreign-invested factories in Vietnam?

In industrial parks, the factory investor does not hold a Land Use Right Certificate (sổ đỏ) — it is held by the developer. The investor’s entitlement flows from the sub-lease agreement, which is a contractual right. This means: the investor cannot mortgage the land to a Vietnamese bank; factory buildings and fixed assets can be registered separately and used as collateral; and the investor’s legal security depends on robust sub-lease terms rather than proprietary land rights. Outside industrial parks, foreign companies obtaining land directly from the state receive a Land Use Right Certificate in their name.