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 zone selection is the decision that most directly shapes a factory project’s long-term performance — and it receives the least legal scrutiny during the project development phase. Investors assess location on cost, logistics and labour availability. They sign the sub-lease on a developer’s standard terms. Three years into operations, they discover that the sub-lease does not permit assignment to an acquirer, that expansion land is unavailable, or that the industrial park developer’s primary land use right expires before their planned investment horizon.

This article addresses the 10 most critical questions about industrial location and land for foreign-invested manufacturers in Vietnam.

Q21. What is the difference between an industrial park, export processing zone and industrial cluster in Vietnam?

Understanding the distinctions between Vietnam’s three principal types of industrial zones is essential for choosing the right structure for your factory project.

Industrial Park (Khu công nghiệp — KCN): A designated area allocated for manufacturing and industrial activities, typically with shared infrastructure (power, water, wastewater treatment, roads) managed by an Industrial Park Management Authority (Ban Quản lý Khu công nghiệp — IPA). Foreign-invested manufacturers can sell both to export markets and to the Vietnamese domestic market from an industrial park. Import duties apply to raw material and machinery imports (unless exempt under investment incentive provisions). This is the most common location choice for foreign manufacturers.

Export Processing Zone (Khu chế xuất — KCX or EPZ): A specialised type of industrial zone where all resident enterprises must produce exclusively for export. EPZ enterprises operate as if located outside Vietnam’s customs territory — they receive full import duty and VAT exemptions on raw materials and machinery, but cannot sell to the domestic Vietnamese market without going through formal import-export procedures. EPZ status is confirmed at the IRC application stage and registered with customs authorities. If your production model is 100% export, EPZ status provides significant cost advantages; if you anticipate any domestic Vietnamese sales, EPZ creates complexity.

Industrial Cluster (Cụm công nghiệp): Smaller, provincially-managed zones typically serving domestic-market manufacturers and local enterprises. Industrial clusters generally have lower land quality, less developed infrastructure and fewer IPA services than established industrial parks. Most foreign-invested factories do not choose industrial clusters — the IPA service levels and customs infrastructure in industrial parks and EPZs are superior for the approval processing requirements of foreign investment projects.

Practical implication: The choice between an industrial park and an EPZ must be made at the IRC application stage and is very difficult to change after incorporation. An investor who incorporates as an EPE and later wants to sell to the Vietnamese domestic market faces a structural problem — not just a licensing question.

Q22. How does a foreign company lease land in a Vietnamese industrial park?

Vietnam’s land ownership structure is a foundational point that every foreign investor must understand: no entity — domestic or foreign — owns land in Vietnam. The state retains ultimate ownership of all land. Enterprises and individuals hold land use rights for specified terms.

In industrial parks, the land use structure works as follows:

1. State → Industrial Park Developer: The state (through the provincial People’s Committee and the provincial Department of Natural Resources and Environment) grants a primary land use right to the industrial park developer, typically for 50 years from the date of the park’s establishment decision.
2. Industrial Park Developer → Foreign-Invested Factory: The developer sub-leases a portion of its land area to the investor under a land sub-lease agreement (hợp đồng thuê lại đất). This sub-lease conveys the right to use a defined land area for a defined term, subject to the developer’s primary land use right.

The investor pays:

• Land use fee (tiền thuê đất): Typically quoted in USD per square metre for the full sub-lease term or per year, depending on the developer’s payment structure
• Infrastructure fee (phí hạ tầng): For shared infrastructure maintenance (roads, lighting, shared utilities)
• Management fee (phí quản lý): For IPA administrative services

The sub-lease is the investor’s primary legal document establishing presence in the industrial park. It must be consistent with the approved IRC and is required as supporting documentation for the construction permit application.

Q23. What are the typical lease terms for industrial land in Vietnam?

Industrial land sub-lease terms in established Vietnamese industrial parks are typically 30 to 50 years from the date of sub-lease signing, aligned with — but not to exceed — the developer’s primary land use right tenure.

Key financial terms typically include:

• Land use fee: USD 50–200 per square metre for the full sub-lease term (paid upfront or in annual instalments), varying significantly by province, industrial park tier and remaining primary lease term
• Infrastructure maintenance fee: USD 0.3–1.0 per square metre per year
• Management fee: VND equivalent of USD 0.1–0.3 per square metre per year

Critical due diligence point — remaining primary term: The sub-lease term is limited by the developer’s remaining primary land use right. An industrial park established in 1996 with a 50-year primary lease has a primary term expiring in 2046 — meaning a sub-lease signed today would have a maximum of approximately 20 years’ remaining term, not 50. This is a significant distinction from a newer park with 40+ years remaining. In mature industrial areas (Binh Duong, Dong Nai), many established parks fall into this category.

Payment structure risk: Sub-leases that require full upfront payment of the land use fee for the entire sub-lease term (a common structure in Vietnam) concentrate the investor’s upfront capital commitment and reduce flexibility. Investors should assess whether annual payment structures are available and whether they better match the project’s cash flow model.

Q24. Who are the major industrial park developers in Vietnam?

The major industrial park developers in Vietnam and their principal locations are:

VSIP Group (Vietnam Singapore Industrial Park): Joint venture between Sembcorp Development (Singapore) and Becamex IDC (Vietnam). Operates in Binh Duong (multiple parks), Bac Ninh, Hai Phong, Nghe An, Quang Ngai and Binh Dinh. VSIP parks are generally considered best-in-class for infrastructure quality, IPA service levels and international investor support. Premium pricing reflects premium quality. VSIP Binh Duong parks are at 90%+ occupancy — available land is limited.

Becamex IDC: Binh Duong provincial state-owned enterprise operating multiple industrial parks in Binh Duong, including VSIP (joint venture). Strong provincial government relationships. Large land bank including BIWASE-connected industrial parks. Widely used by Korean and Taiwanese manufacturers.

AMATA Corporation (Thailand): Operates Amata City Bien Hoa and Amata City Long Thanh in Dong Nai province, and Amata City Halong in Quang Ninh. Well-suited for automotive, machinery and industrial manufacturing. Strong Thai and Japanese corporate tenant base. Long Thanh location benefits from proximity to Long Thanh International Airport (under construction).

Deep C Industrial Zones: Operated by BW Industrial (Vietnam-Belgium), located in Hai Phong and Quang Ninh. Preferred by European manufacturers, particularly those relocating from China. Strong logistics connectivity through Hai Phong port. Infrastructure quality and European management style appeal to German and Dutch investors.

KBC (Kinh Bac City): Listed company operating multiple industrial parks in Bac Ninh and Bac Giang provinces in northern Vietnam. Major tenant base includes Samsung Electronics and its supply chain. Strong position in electronics and high-tech manufacturing supply chain.

Sonadezi (Song Than Industrial Parks): State-owned enterprise operating Song Than Industrial Parks in Binh Duong and Dong Nai. Large land bank at competitive pricing. Well-connected logistics. Preferred by SME manufacturers seeking cost-effective locations.

Logistics-linked developers (newer entrants): Logos (Australia), ESR (Hong Kong) and BW Industrial have established large-scale logistics and manufacturing park facilities, primarily in HCMC, Binh Duong and the Hanoi logistics corridor.

Q25. What due diligence should a foreign investor conduct before signing an industrial park sub-lease?

The industrial park sub-lease is a major long-term legal commitment — typically USD 1–5 million or more in upfront land use fees for a medium-sized factory. Yet most investors sign it without the equivalent legal diligence they would apply to an acquisition of equivalent value. The key due diligence items are:

Legal title:

• Verify the developer holds a valid Land Use Right Certificate (sổ đỏ / giấy chứng nhận quyền sử dụng đất) for the specific land area being sub-leased
• Confirm the remaining primary lease term and compare it to your planned investment horizon
• Verify that the land is zoned for your intended manufacturing activity

Sub-lease contract terms:

• Early termination provisions — does the investor have any exit right? At what cost?
• Assignment rights — can the sub-lease be transferred to a related entity or acquirer without developer consent?
• Sub-lease extension rights — if the primary land use right is renewed, is the investor’s sub-lease automatically extended?
• Force majeure provisions — what happens if the primary land use right is not renewed?

Infrastructure:

• Written commitments on power supply capacity, timeline and connection specification
• Industrial water supply volume, pressure and connection specifications
• Wastewater treatment capacity and connection terms
• Road access for heavy vehicle and container traffic

Expansion:

• Availability of adjacent land for expansion — physically inspect the surrounding area
• Option to lease additional land — negotiate at sub-lease signing, not when expansion is needed

Occupancy context:

• Review existing tenant mix — are there tenants whose operations are incompatible with yours (odour, noise, chemical risk)?
• Assess the industrial park’s track record on IPA service levels for foreign investors

Q26. What infrastructure and utilities should a foreign manufacturer verify at an industrial park?

Infrastructure quality varies significantly between industrial parks and between individual plots within the same park. Written commitments from sales staff are not the same as contractual commitments from the developer. The following infrastructure elements require specific, documented verification before signing:

Power supply:

• Available transformer capacity at the specific sub-station serving the investor’s plot
• Whether a dedicated transformer substation is included in the sub-lease or must be purchased/rented separately
• Connection timeline from plot occupation to first power supply
• Backup power provisions — shared generator or independent backup
• Grid reliability data for the industrial park (ask for annual outage frequency and duration statistics)

Water supply:

• Industrial-grade water supply volume (m³ per day) committed for the investor’s plot
• Water pressure specification at the factory boundary
• Water quality specification (relevant for electronics and food manufacturing)

Wastewater treatment:

• Industrial park’s centralised wastewater treatment capacity and current utilisation rate
• Maximum wastewater discharge volume and quality standards the investor may connect
• Connection fee and ongoing treatment charge
• Whether a pre-treatment system is required at the factory before connecting to the centralised system

Telecommunications:

• Fibre optic availability and ISP options at the specific plot
• Latency and redundancy specifications (relevant for Industry 4.0 and connected manufacturing)

Logistics:

• Road width and weight rating for container truck access
• Nearest container port, its current capacity utilisation and typical container handling time
• Proximity to customs inspection stations

Q27. Can a foreign-invested factory be located outside of an industrial park?

Legally, yes. The Investment Law 2020 does not restrict foreign-invested manufacturing to industrial parks. A foreign-invested factory can be located on land obtained directly from the state (through a land lease granted by the provincial People’s Committee) or on land acquired through an existing land use right holder.

However, outside-park location involves substantially greater complexity in several dimensions:

Regulatory approval: Outside-park projects must obtain land use rights through provincial-level processes rather than the streamlined IPA process. The number of approving authorities increases, and the timelines are typically longer and less predictable.

Infrastructure: The investor must arrange and fund all utility connections independently — power supply (including grid connection and transformer), water supply, wastewater treatment infrastructure and road access. These can represent material additional capital costs for greenfield locations.

Customs: EPE status is not available outside of designated EPZs or industrial parks. Out-of-park export manufacturers must operate under the standard customs regime for each import and export transaction.

Environmental compliance: Outside-park manufacturers must establish independent environmental compliance infrastructure (wastewater treatment, air emission monitoring) rather than connecting to a shared industrial park system.

When outside-park makes sense: Very large projects (above USD 50 million) with specific site requirements (port-adjacent locations, large land area, specialised environmental conditions), resource-processing industries (mining, mineral processing), or integrated industrial complexes that create their own park-equivalent infrastructure.

Q28. How do expansion rights work for factory land in Vietnamese industrial parks?

Expansion rights are not automatic — they are a negotiated contractual provision, and they must be negotiated at the time of the initial sub-lease. Many investors fail to plan for expansion at sub-lease signing, then discover when expansion is needed that no adjacent land is available, or that expansion requires a separate negotiation with the developer under market conditions (which may be significantly less favourable than at initial entry).

Options to negotiate at initial sub-lease signing:

• Right of first refusal (ROFR): The developer agrees to offer the investor the right to lease adjacent available land before offering it to third parties. This does not guarantee availability but reduces the risk of being shut out.
• Option to lease: A contractual option to lease a defined additional land area at a pre-agreed price or price formula. Stronger protection than ROFR but typically requires a deposit or option fee.
• Initial land reserve: Some investors sub-lease more land than immediately needed, reserving expansion area within the initial sub-lease. This provides certainty but incurs land use fees on unused land during the initial phase.

IRC amendment for expansion: Any expansion of production scope or capital increase requires IRC amendment before implementation. Investors should coordinate land expansion negotiations with the IRC amendment process — the expanded land area must be reflected in the amended IRC before construction on the new area begins.

Market reality: VSIP Binh Duong and many established industrial parks in southern Vietnam have limited available land. Investors planning expansion 3–5 years into operations who did not negotiate expansion options at initial sub-lease signing may face the choice of secondary-location expansion or paying premium market prices for limited available land in their preferred park.

Q29. What happens to the land lease if the industrial park operator changes or is acquired?

The industrial park sub-lease is a contractual obligation of the developer entity — not of the individual management team. In principle, if the industrial park developer is acquired, restructured or changes management, the sub-lease obligations bind the successor. The investor’s sub-lease rights should survive a change in developer ownership.

However, several practical risks arise:

Service quality continuity: A change in developer ownership or management can affect IPA service responsiveness, infrastructure maintenance quality and the developer’s financial capacity to maintain shared infrastructure. These are not contractual protections — they depend on the successor’s operational standards.

Primary land use right continuity: If the developer is acquired and the acquirer is a domestic entity, the primary land use right should transfer with the acquisition. However, if the acquisition involves restructuring of the land-holding entity, there may be a gap period during which the primary land use right is temporarily in a transitional state — which creates uncertainty about the sub-lease’s legal basis.

IPA approval: The IPA (which is a government authority, not part of the developer) continues to function independently of developer ownership changes. IPA functions relating to investor approvals and compliance are not affected by changes in developer ownership.

Mitigation: Sub-lease agreements should include: (a) developer obligation to notify the investor of any change of control; (b) successor entity’s assumption of all sub-lease obligations in writing; (c) the investor’s right to terminate for cause if the successor materially fails to meet service level commitments.

Q30. How does land use right registration work for foreign-invested factories in Vietnam?

The land use right registration framework for foreign-invested factories operates differently depending on whether the factory is in an industrial park or outside one.

In industrial parks (sub-lease structure):

The factory investor does not hold a Land Use Right Certificate (LURC / sổ đỏ) for the plot. The LURC is held by the industrial park developer. The investor’s legal entitlement to the land flows from the sub-lease agreement, which is a contractual right rather than a registered property right. The sub-lease is registered with the IPA as part of the IRC documentation but is not registered as a property right at the Land Registry.

This has practical implications:

• The factory investor cannot mortgage the land to a Vietnamese bank (the land use right belongs to the developer)
• Assets built on the land (factory buildings, improvements) can be registered separately as the investor’s assets and may be mortgaged independently of the land
• The investor’s security over the land is contractual, not proprietary — making sub-lease terms (particularly default provisions and landlord security rights) more significant than in a direct land ownership structure

Outside industrial parks (direct state lease):

Foreign-invested companies obtaining land directly from the state receive a Land Use Right Certificate registered in the company’s name. This provides stronger legal certainty over the land but requires a more complex acquisition process through provincial land authorities. The LURC can be used as collateral for Vietnamese bank financing.

Fixed asset registration:

Factory buildings and fixed equipment installed in an industrial park sub-lease can be registered as the investor’s assets at the Department of Construction. These registrations support asset-backed financing and are relevant for EPE customs exemption records. Maintaining accurate fixed asset registers from the start of construction is important for both tax and customs compliance purposes.