Bac Giang: An Emerging Investment Destination
Surrounded by major economic hubs, ports, national highways, and an international border, Bac Giang province in northeastern Vietnam is situated at the crossroads of major trade routes. It is located adjacent to the key economic triangle Hanoi – Hai Phong – Quang Ninh, 110 km from the Huu Nghi Border Gate with China, 100 km from the Hai Phong seaport, and 40 km from Hanoi’s Noi Bai International Airport (HAN).
With its growing gross regional domestic product (GRDP), income per capita, trade, and favorable location, the province has started to emerge as an attractive investment destination.
Economic growth
In 2019, among Vietnam’s 63 provinces, Bac Giang was in the top two of GRDP growth rate reaching the highest ever at 16.2 percent to US$4.7 billion. The average GRDP per capita also increased by 13.9 percent, to US$2,260 the same year. Despite the impact of the COVID-19 pandemic, the province still grew 7.4 percent in the first quarter of 2020.
Sector growth
In 2019, the industry-construction grew by 26.4 percent, with the industry and construction sectors growing by 32.2 percent and 11.2 percent respectively. While the services sector reduced by 2.1 percent, agriculture, forestry, and fishery declined by 3.3 percent.
Taking note of the decline in the agriculture sector, the provincial government is trying to create favorable conditions for investment in high-tech agriculture and rural areas, focusing on organic and clean agricultural production. They are also trying to promote branding, packaging, and product labeling in the sector for value addition.
The tourism sector registered an increase in tourists to 2 million in 2019, double the yearly target. Moving forward, the government has emphasized the need to upgrade infrastructure, especially digital infrastructure, to promote tourism.
Economic structure
The industry-construction sector accounted for the majority of the province’s economy at 57.6 percent, while the services sector accounted for 26.6 percent in 2019.
As growth continued to decline in the agriculture, forestry and fishery sector, the share in economy reduced by 3.3 percent compared to 2018 to 15.8 percent. Nonetheless, agriculture still holds a competitive edge in Bac Giang. The province is home to the largest lychee areas and other tropical fruits.
Trade
In 2019, total trade volume was estimated at US$16.9 billion. Export revenue was valued at US$ 8.6 billion, an increase of 10.3 percent compared to 2018.
Investments
To date, Bac Giang has attracted 518 FDI projects valued at US$6.27 billion. The province currently ranks 16 out of 63 regions in terms of attracting FDI. In 2019, it ranked eighth nationwide in luring new FDI projects.
2019-2020 investments
In 2019, the province attracted 107 domestic and 76 foreign-invested projects, with registered capital amounting to US$1.3 billion and US$830.7 million respectively.
Additionally, in the first four months of 2020, Bac Giang attracted 12 new FDI projects, worth more than US$178 million, and expanded registered capital of 38 projects, worth more than US$139 million. These are promising performances given the adverse context of the COVID-19 pandemic.
Almost all FDI projects operate in industry sectors such as garments and textiles, electronic parts, and solar panels.
Regional competition
Bac Giang ranks as the 40th most competitive province in the country amongst 63 provinces as per the Provincial Competitive Index 2019. Meanwhile, according to the Provincial Administrative Performance Index 2019 (PAPI), which measures provincial governance performance, Bac Giang’s reached 81.84 points, up 3.7 points on-year, and the satisfaction index of people, enterprises and organizations on administrative agencies reached 89.18 percent, ranking ninth in Vietnam.
On the flip side, Bac Giang ranks poorly in audit as investors find the audit process lacking in transparency and fairness.
Working to address the issue, Bac Giang’s People Committee has promised to increase transparency and efficiency in audit and other administrative activities by learning from the successful experiences of other localities. The province aims to jump to the top 15 rankings in the PCI for 2020.
Infrastructure
Bac Giang ranked in the top five of the Infrastructure Index, also part of the PCI, and is one of the major industrial hubs in Vietnam. The region has seven industrial parks, namely, Dinh Tram, Quang Chau, Song Khe – Noi Hoang, Van Trung, Viet – Han (Vietnam – South Korea), Hoa Phu, and the newly-opened Van Trung 2 spread over 1,627 hectares.
In addition, the region is also home to 36 industrial clusters spread over 682 hectares. Currently, Bac Giang has asked the central government for permission to establish two new industrial zones with a total area of 1,380 hectares.
The region is well connected with its neighboring provinces through major highways such as 1A, 31, 37, 279, 17, 398, and the Hanoi-Bac Giang Expressway which handles the increased traffic between the capital Hanoi and Bac Ninh and Bac Giang provinces.
In terms of rail connectivity, Bac Giang is part of two major railway networks, Kep – Halong and Hanoi – Dong Dang, with the latter extending up to the Vietnam-China border. Apart from the road and rail network, the inland water navigation also presents opportunities. The waterway is continuing to improve, connecting infrastructure via a network of three major rivers, Thuong, Cau, and Luc Nam, which can accommodate vessels of 40 metric tons (MT) to 500 MT. In addition, the Hai Phong Port, the leading seaport for northern Vietnam is about 100 km from the province.
Preferential investment policies
As industrial land is increasingly occupated, Bac Giang has implemented four criteria to select investment projects, which are: effective land use, less labor-intensive projects, advanced and modern tech projects, high-value addition, and contribution to the state budget.
Going forward, the provincial government has also decided to focus on high-tech projects, such as electronics, machinery, and consumer goods, which are capable of joining global value chains and have high export potential.
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This article is produced by Vietnam Briefing, a premium source of information for investors looking to set up and conduct business in Vietnam. The site is a publishing arm of Dezan Shira & Associates, a leading foreign investment consultancy in Asiawith over 27 years of experience assisting businesses with market entry, site selection, legal, tax, accounting, HR and payroll services throughout the region.