Issue 39 • November 2019

From Dezan Shira & Associates

Da Nang: Vietnam’s
Emerging Investment
Destination
Business Environment and Growth P.04 The Most Competitive Sectors P.10
Drivers

Incentives for Investing P.07

www.vietnam-briefing.com
Introduction
www.dezshira.com
ALBERTO VETTORETTI
Partner
Dezan Shira & Associates www.aseanbriefing.com

www.china-briefing.com

Da Nang has emerged as an attractive investment destination for domestic and international
investors, followed only by the capital Hanoi and commercial hub Ho Chi Minh City.
www.india-briefing.com
Da Nang is one of the five largest cities in Vietnam and serves as the gateway to the Central
Region, which is rapidly industrializing. The city has undergone significant changes in recent
years, underpinned by a sustainable approach to urban development. This has helped the www.vietnam-briefing.com
city produce sustained economic growth, while also maintaining its reputation as the ‘most
livable city’ in the country.
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In many ways, Da Nang is in the right place at the right time. As the costs of production in
China grow, and the US-China trade war continues, Vietnam has become a go-to destination
for investors. Hanoi and Ho Chi Minh City still command the lion’s share of foreign direct www.silkroadbriefing.com
investment, but the cities are becoming crowded, driving up land and labor costs in the process.
Due to these factors, many investors are increasingly looking to the Central Region, with Da
Nang becoming a focal point. Investors that want the edge of an emerging marketing like
Vietnam should decide whether Da Nang fits with their business goals.
Reference
In this issue of Vietnam Briefing magazine, we examine the central city of Da Nang and its Vietnam Briefing and related titles are
investment opportunities. We first highlight its business environment and growth drivers, produced by Asia Briefing Ltd., a wholly
before exploring the city’s incentives and industrial parks. We conclude with an overview of owned subsidiary of Dezan Shira Group.
the sectors that are attracting investment, describing the scope for investors that are looking
to invest in this region. Content is provided by Dezan Shira
& Associates. No liability may be
We hope this magazine will empower you to make an informed decision on where to base accepted for any of the contents of
your operations in Vietnam. this publication. Readers are strongly
advised to seek professional advice
Best regards, when actively looking to implement
suggestions made within this
publication.

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this magazine, please contact:
editor@asiabriefing.com
Alberto Vettoretti
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© 2019 Asia Briefing Ltd.

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Design / Thu Ha, Nhat Do

Vietnam Briefing · Issue 39 · November 2019 2

 This Issue’s Topic

Da Nang: Vietnam’s Emerging

Investment Destination
Table of Contents

Business Environment and Growth Drivers P.04

Incentives for Investing P.07

The Most Competitive Sectors P.10

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Vietnam Briefing · Issue 39 · November 2019 3

Business Environment and
Growth Drivers
By Dezan Shira & Associates

Known as a provincial backwater for decades, Da Nang at a Glance

Da Nang is now emerging into an economic
powerhouse. GRDP Area
8% growth 1,285 km2
In 1997, the city separated from Quang
per annum
Nam province to become its own centrally
controlled municipality. The local government
has subsequently sought to promote itself
Districts Population
with pro-business policies, which have
helped the city achieve a consistently high 8 1 million
rank in the Provincial Competitive Index
(PCI), a report by the Vietnam Chamber of
Commerce and United States Agency for
Expats in Da Nang Workforce
International Development (USAID). Da
Nang was noted for decreasing entry costs, 5,000 549,602
transparency, and improvements to its labor
policy in this year’s PCI. DA NANG
Job Urban
Da Nang was the first city to start the creation rate unemployment rate
e-Government system, which it unveiled
4.80% 4.15%
in 2014. The system provides 1,200 online
administration procedures, including
one-stop shops, residential management,
public transport and water supervision for Number of non-state Number of
consumers. The government coined the term enterprises universities and colleges
“E-Government, E-Citizens, E-Enterprises” to
27,168 36
describe the system. Now, the government
plans to become a smart city and join the
ASEAN Smart Cities Network by 2030 – Da
Nang’s development plan will be built in three Inward FDI in Da Nang Top FDI sectors
phases, with a total investment of US$95
million. US$3.12 billion / 715 projects High-tech manufacturing,
IT, Tourism, Education
Beyond these initiatives, the city offers
incentives for investors in the IT, manufacturing,
infrastructure, service and tourism industries Total retail sales of Import Export
goods and services turnover turnover
to complement its many attractive features. It
US$3.8 billion US$1.3 billion US$1.5 billion

Vietnam Briefing · Issue 39 · November 2019 4

 Business Environment and Growth Drivers

appears to be working: the city has the country’s
highest growth rate, and its Gross Regional
Domestic Product (GRDP) is US$3.12 billion,
which makes it the third largest economic
center in the country, after the capital Hanoi
and commercial capital Ho Chi Minh City.
While FDI continues to pour in those cities, Da
Nang is increasingly becoming competitive,
and with the government’s backing, it is set to
become a top FDI destination in the country.
Investment profile
In the first quarter of 2019, Da Nang attracted
US$500 million in total investment – its
highest ever. It also granted 32 new FDI
projects, an increase from 15 projects in
2018, with total registered capital of US$300
million.
Da Nang has a diverse set of industries, but
the main sectors include tourism, high-tech
manufacturing, information technology
(IT ), education, shipbuilding, and textiles.
By 2020, the local government wants
services to make up 55 percent of Da Nang’s
economy, industry to make up 42 percent,
and agriculture to make up 1 percent. Local
officials have stressed that this is on target.
The Da Nang Investment Promotion Agency
(IPA) encourages investment in Da Nang
from both domestic and foreign investors. It
facilitates the establishment and operation
of investment projects in the city and serves
as a bridge between investors and municipal
authorities.
It also has a separate Japan Desk to cater to
Japanese investors.
Top growth drivers
Da Nang has four main drivers that have
encouraged its healthy business environment:
livability, labor, infrastructure, and regional
connectivity.

Livability
Main Export Markets
Da Nang’s competitive economy has been
complemented by the city’s many attractive
20% 35% features. The city is often referred to as the most
livable city in the country and is situated among
several UNESCO World Heritage Sites, including
Japan Hoi An, Hue, and My Son Sanctuary.

Other The city is known for its clean environment,

pristine beaches, and well-established public
EU services. It is one of the cleanest cities in
15% Vietnam and aims to be one of the most
US environmentally friendly cities in the country.

The cost of living in Da Nang is relatively

cheaper compared to Ho Chi Minh City. As
such, the city is relatively safer compared to
30% bigger urban centers in Vietnam. The following
cost comparison between Da Nang and Ho Chi
Minh City from Numbeo is illustrative:
Main Export Products
• Apartment rent prices are 13.28% lower
than in Ho Chi Minh;
• Restaurant prices in Da Nang are 10.85%
Rubber products
lower than in Ho Chi Minh;
• Transportation costs in Da Nang are 9%
Toys lower than in Ho Chi Minh;
• Entertainment costs in Da Nang are 2%
Seafood lower than in Ho Chi Minh.

Labor
Garment & textile

Electrical & Da Nang’s workforce accounts for more than

electronic product 51 percent of the population. Its young and
dynamic workforce has benefitted from the
0 100 200 300 400 500 600 city's educational offerings: there are at least
three international schools in the city and
Unit: in USD million 44 vocational training schools or centers.

Vietnam Briefing · Issue 39 · November 2019 5

Business Environment and Growth Drivers
Notably, the University of Da Nang delivers
training programs in cooperation with
foreign universities.
Investment in Da Nang is creating more jobs
– and competition for talent – in tourism,
real estate, education, entertainment, and
IT. While this has helped attract workers to
the area, some businesses find it difficult to
hire and retain high-tech workers and senior
managers.
Infrastructure
Da Nang’s growth can partly be attributed
to its position as a regional transportation
hub. The city is known for its broad roads,
major highways, seaport, and airport,
which connect Da Nang to the rest of
Vietnam and other Asian countries. The
synchronized transport network allows
for easy connectivity, which facilitates the
development of economic activities and
investment. In this year’s PCI, Da Nang was
ranked second best for its infrastructure. The
PCI noted that places like Da Nang, which are
well governed, generally have higher quality
infrastructure.
Da Nang’s inner-city and suburban road
networks are continuously expanding,
connecting the city center with neighboring
suburbs and surrounding areas. The recently
completed 80 miles (130km) long Da
Nang – Quang Ngai Highway facilitates
freight and cargo contributing to the
economic development of the region. The
highway also connects Da Nang with Chu
Lai and Dung Quang Economic Zones. The
upcoming La Son – Tuy Loan Highway,
which will connect Thua Thien Hue province
to Da Nang, will further promote growth and
economic development in Da Nang as well
as the provinces in the Central Region.
The Da Nang railway station is the largest
in the Central Region and plays a key role
in the national rail system. City authorities
want greater investment in the station to
meet increasing demand for transportation
in the region.
The Da Nang International Airport is located
within 3 miles (5km) of the city center and is
the third busiest airport in the country, after
Hanoi and Ho Chi Minh City. The facility is
connected to 48 international air routes
with 462 flights per week connecting the
city with China, Japan, South Korea, Thailand,
Vietnam Briefing · Issue 39 · November 2019
and Taiwan. The airport saw more than 13
million passengers transiting in 2018 and
has two terminals with a third expected this
year to meet increasing passenger traffic.
Authorities will increase the airport capacity
to 28 million passengers by 2030.
In 2018, the local government approved the
city’s logistics infrastructure development
planning – with a vision towards 2045.
Authorities forecast that the airport and
seaports will handle 80 percent of cargo
traffic through Da Nang by 2045. The plan,
worth US$606 million, aims to build the
city into a key logistics service center in the
Central Region, becoming a traffic hub for
the entire country.
Regional connectivity
Da Nang serves as a gateway to Vietnam’s
Central Region, which is emerging as a key
destination for foreign investors in its own
right. Da Nang is sandwiched between
Thua Thien-Hue province in the north
and Quang Nam province in the south.
Their close proximity to Da Nang has
encouraged regional growth as investors
look to diversify their manufacturing hubs.
Da Nang, being a gateway to the Central
Region, is a great opportunity for investors
that are looking for alternatives from Hanoi in
the north and Ho Chi Minh City in the south.
East West Economic Corridor
MYANMAR
MAWLAMYINE
THAILAND
International trade corridor
Da Nang is on the eastern end of the East-
West Economic Corridor (EWEC), which
was established in 1998. It acts as a key
import and export platform for the virtually
untapped market between Vietnam and
Laos, Thailand, and Myanmar.
The EWEC is 900 miles (1,450 km) long by road
and presents significant opportunities for Da
Nang to promote economic exchange with
other countries, such as Cambodia, China,
Laos, Myanmar, Thailand, and Vietnam, that
are part of the Greater Mekong Subregion
(GMS) and the Mekong-Ganga Cooperation
(MGC).
The GMS is an economic area involving
Cambodia, China, Laos, Myanmar, Thailand,
and Vietnam, while the EWEC is one of the
three economic corridors being developed
in the GMS. The MGC was established in
2000 as an extension to the EWEC, allowing
for greater cooperation and trade among
Cambodia, India, Laos, Myanmar, Thailand,
and Vietnam. The MGC aims to facilitate
closer contact among people inhabiting
the two major river basins of the Ganga and
Mekong.
VIETNAM
LAOS
DA NANG
6
Incentives for Investing

In addition to efforts designed to improve

Incentives in Da Nang the business climate, the authorities in Da
Da Nang High-tech Park Nang offer incentives in several sectors
to foreign investors. Many businesses are
Incentives Duration
eligible for investment incentives, depending
Corporate on a business’ investment destination and
Exempt First 4 years
Income Tax industry.
Tax reduction of 50% Next 9 years
The government wants to provide favorable
10% Subsequent 15 years
conditions to investors who invest in specific
Import tax Exempt for goods imported for fixed assets Entire lease period geographical areas, such as the Da Nang
Land Rent Exempt for high-tech industries and production Entire lease period High-tech Park, or encouraged industries,
such as software.
Fair, exhibition, supermarkets exempt 19 years
Exempt for infrastructure of commercial operations As an illustration of the local incentives on
15 years
inside High-tech park offer, we have highlighted and detailed
Infrastructure 2 years, reduced by 50% incentive schemes for the Da Nang High-
Exempt for projects in R&D, incubation, and training tech Park, the software export sector, and
usage fee following 3 years
the general supporting industry.
Exempt for projects in list of high-tech products for
2 years
development
Locations
Exempt for projects in supporting industries 2 years
Software export enterprises Da Nang hosts six industrial parks (IPs) and
one high-tech park spread out across the city.
Corporate The government always describes industrial
Exempt 4 years
Income Tax
parks and high-tech parks separately due to
5% Next 9 years the different incentive schemes applicable
10% Next 2 years to them.

Exempt for machinery, equipment used in software

Import tax Entire lease period IPs are designated areas earmarked by
production
government for the production of industrial
Personal 50% reduction on salary based and wage-based goods and services. High-tech parks are a
Entire lease period
Income Tax incomes of individuals working in ICT sector type of an industrial park but are specifically
Labor training 30% subsidy for initial training expense Entire lease period meant for high technology enterprises that
produce state-of-the-art products, such as
Sales & 100% subsidy of registration costs of software computer chips, aircraft components, and
Entire lease period
promotion copyright protection domestically medical components.

Vietnam Briefing · Issue 39 · November 2019 7

Incentives for Investing

Da Nang Hi-tech Park technological innovation and high-tech IP – have available space for investors. To
enterprises and incubation, reinforcing Da plan for future growth, the Da Nang IP
High-tech parks specialize in research, Nang as a major technological and scientific management board has planned three
development, the application of high hub of Vietnam. additional industrial parks – such as Hoa
technology and training of high-tech HR Cam – Phase II, Hoa Nhon, and Hoa Ninh.
staff. Industries such as biotechnology, Industrial parks
nano-technology, and microtechnology Investors that require space in the area
are especially suited for high-tech parks in All IPs in Da Nang are well equipped with urgently may explore other near by
Vietnam. power, water, telecommunications, and alternatives. For example, there are two
roads. Investors from Japan, Singapore, IPs in Thua Thien Hue and Quang Nam
The Da Nang Hi-tech Park was established South Korea, Malaysia, and the US have the provinces, which have space available and
in 2010 and is about 13 miles (22kms) from most number of FDI projects in these IPs. are in close proximity to Da Nang. However,
the city center. It was one of the first three investors should note that these spaces are
national, multifunctional, high-tech parks in Da Nang’s IPs, however, have been occupied also in high demand and are likely to fill up
the country. The high-tech park was built quickly, and currently only two of the six in the near future.
to attract high-tech resources, promoting IPs – Lien Chieu and Hoa Khanh Expanded
The labor sourcing edge
Supporting Industry
Employers find it comparatively easier to
Corporate source qualified labor in Da Nang due to
10% 15 years
Income Tax well established universities and vocational
schools in the area. Reports state that the
Import tax Exemption for goods imported to created fixed assets
number of employees with technical skills
Infrastructure 50% off for SMEs investing in supporting industry account for one quarter of its total local
2 years
usage fee products in IPs labor force.
Waste water 50% off for SMEs investing in supporting industry
2 years But there are many training courses
treatment free products in IPs
provided in the area to help labor upskill.
Up to 50% subsidies for trial of supporting industrial Training courses in the area predominately
R&D Entire lease period
production focus on science, engineering, IT, and
economics, which help equip workers with
Technology technical knowledge the workforce needs.
Up to 75% cost subsidies for transferring technology in
transfer, Entire lease period
material manufacturing projects
innovation Many employers also find that it is compa-
HR Monthly allowance of up to US$23 per employee and ratively easier to source and retain labor at
Entire lease period Da Nang. In contrast to other areas where
development maximum training period of 3 months
IPs are far removed from city centers, the
industrial parks in Da Nang are situated
Da Nang’s Industrial Parks within the city and nearby areas on the
outskirts of the city.

This benefits many workers. Global trends

show that employees prefer a shor t
Lien Chieu commute, and this is also true for the
Industrial Park
Vietnamese, who often like to live in the city
Da Nang Seafood with their families.
SON TRA
Service DIST.
Expanded Hoa Khanh
Hoa Khanh For industrial parks that are away from city
Industrial Park
centers, investors can arrange transportation
Da Nang Da Nang for employees that live in Da Nang. For
Hi-Tech Park LIEN CHIEU THANH KHE Industrial Park
example, employees interviewed at IPs in
DIST. DIST.
Da Nang Thua Thien Hue and Quang Nam provinces
International Airport said they were happy to work there since
HOA CAM
HAI CHAU their employers provided transportation.
DIST.
DIST.

Hoa Cam NGU HANH SON

Industrial Park DIST.

Vietnam Briefing · Issue 39 · November 2019 8

 Incentives for Investing

Da Nang IP Stats

General Industrial Zone Information Utilities

Land Factory CIT CIT
Surface Occupied CIT
Province Name Industries price price holiday reduction
(ha) Status (%)
($/m2) ($/m2) (years) (year)
Electrical, electronic industry,
agricultural, forestry, marine products,
Dien Nam
418 100% garment, cosmetic and plastic products, 20 3
Dien Ngoc
wrapping and consumer goods
production, services and trade

Textile and garment, leather, electrical

and electronic appliances, processing
Da Nang IZ 50.1 100% industrial products, food and beverage, 100 5
wrapping and printing production,
handicrafts, jewelry, plastic products

Da Nang
Seafood producing and processing
seafood 50.63 100% 30 5
industry, pollution control industries
service

Electric, electronics, IT and software

production computer, peripherals, office
machines, mechanical engineering,
Hoa Khanh 394 100% measurement equipment, medical 75 5
equipment, supporting industry for
mechanical engineering, automotive
Da
assembly
Nang
Electrical industry, electronics, IT and
software, new materials, computer,
Expanded peripherals, office machines, mechanical,
132.6 91% 75
Hoa Khanh measurement equipment, medical
equipment, supporting industry,
automotive assembly

Electricity, electronics, IT and software

production, new materials, computer,
Hoa peripherals, office machines, mechanical
149.84 100% 35 5
Cam engineering, measurement equipment,
medical equipment, supporting industry,
automotive assembly

Electricity, electronics, IT and software

production, new materials, computer,
peripherals, office machines, mechanical
Lien
289.35 65% engineering, measurement equipment; 65 3
Chieu
medical equipment,supporting industry
for mechanical engineering, automotive
assembly

Leather shoes, electronics, IT, clean 10% for 50% for 9

Tam Thang II 103 50% 37 3 4
industry 15 years years
Quang
Nam Textile and garments, electronics,
10% for 50% for 9
Tam Thang 197.1 80% machinery, chemical, pharmaceutical, 35 3 4
15 years years
plastic

Thua Electricity, electronics, precision

Sai Gon - 10% for 50% for 9
Thien 138.94 20% engineering, garments, food industry, 30-35 2.5-3 4
Chan May 15 years years
Hue automobile assembly

Vietnam Briefing · Issue 39 · November 2019 9

The Most Competitive Sectors

In this chapter, we highlight and discuss the
sectors that are encouraged by the Da Nang
government for investment. Investors that choose
to invest in these sectors will find support from
the government and find it easier to set up their
operations as the city becomes selective on the
type of foreign investment it receives.
Tourism
Da Nang is an important tourism hub located
close to several UNESCO Heritage Sites. In 2018,
most tourists came from South Korea, China,
Japan, and the US. To cater to this diverse set
of visitors, tourist facilities are continuously
improving to meet international standards.
Business-class hotels and resorts managed
by Hyatt, InterContinental, and Novotel have
a presence.
Airport and seaport logistics
The increase in tourists and businesses has
increased pressure on Da Nang’s airport and
seaports. Recently, the Da Nang city authorities
proposed to build a third terminal at Da
Nang International Airport to meet increased
demand and future growth requirements.
As the airport expands, this offers investors
scope to become involved with infrastructural
development, logistical services, and related
commercial activity, such as retails shops,
hotels, and restaurants that cater to travelers
and traders.
Da Nang also plans to become an ASEAN
logistics center by 2030. To meet these goals,
the government is investing in its seaports,
which will be the primary growth driver for this
project. The city’s seaport system is expected
to handle 29 million tons of cargo by 2030.
Investors have already poured capital to build
the Lieu Chieu deep water seaport, while roads
and railways are also being developed to better
connect to seaports in the area.
Retail
Da Nang is a popular shopping destination
and the retail market in the city is growing. The
city is peppered with domestic and foreign
retailers, such as VinMart as well as Lotte
Mart, respectively. Convenience stores are the
fastest growing segment in the retail market. In
addition, with the number of foreigners visiting
or working in the city, there has also been an
increase in specialized markets, including a
market for furniture and preserved foods.

While Da Nang is a popular tourist destination, Encouraged Investment Sectors

tourists are also exploring surrounding areas,
such as Thua Thien Hue and Quang Nam
provinces. This has created a boom in real estate
SERVICES

from the hospitality and entertainment sectors.

This has helped Da Nang in becoming a hub, Healthcare Tourism, Airport and Education Banking Trade,
as tourists travel to Da Nang and then explore real seaport and and wholesale
the surrounding areas. estate logistics training finance and retail

To be sustainable, the city is promoting eco-

tourism to enhance the competitiveness of its
offerings. City officials are working to expand
the meetings, incentives, conferences and
High-tech industries Biotech ICT Supporting industries
INDUSTRY

exhibitions (MICE) sectors by working with

ministries, business firms, and diplomats.
These initiatives help illustrate the trajectory
of the sector, and some of the opportunities
for investors, particularly regarding the need Automation, New (renewable) Tech applied for Microelectronics,
for hotels, resorts, entertainment centers and precision energy, petrochemistry or other mechatronics and
supporting industries. machines nanotechnology special industries opto-electronics

Vietnam Briefing · Issue 39 · November 2019 10


Son Tra district accounts for the lion’s share
of retail at 45 percent, followed by Hai Chau
and Tanh Khe districts at 40 and 15 percent,
respectively. Da Nang’s newest shopping mall VV
mall, which is yet to be completed, has already
received almost 100 percent occupancy.
Education
The education sector is open for foreign
investment and there is a large demand
for high-quality education. Da Nang has 36
universities and colleges, churning out 44,277
graduates a year.
Decree 86, which took effect in August 2018,
is further expected to help the education
sector by allowing foreign investors to build
international schools. The reform increases
the number of Vietnamese students an
international school can enroll, from the
previous 10 percent to the new 50 percent.
The 10 percent ceiling limit of Vietnamese
students in the previous regulation was a barrier
for foreign investors and the new cap will make
many international schools more viable.
The reform also provides clarity on cooperation
between local and foreign players – giving
confidence to local schools to work with
foreign partners to develop services – as well
as guidelines on the issuance of certificates by
foreign language training centers.
Investors from Australia, the UK, US have
invested in over 21 FDI projects, with US$174
million in total investment capital as of 2018
in Da Nang.
High-tech manufacturing
With the government’s push to make Da Nang
a smart city, several firms – such as EU-based
ABB – have signed agreements with local
authorities to achieve this goal. This has created
a demand to produce high tech devices, such
as chips and physical devices, connected
to ICT to monitor data and meet smart city
requirements.
Most recently, US-based Universal Alloy
Corporation (UAC) made an investment of
US$170 million at the Da Nang High-tech park.
The firm manufactures electronic devices for
airplanes built by Boeing and Airbus. The firm
also plans to partner with location universities
and vocational schools to boost education in
training in aerospace. Up to 1,200 workers are
expected to join the firm.
Vietnam Briefing · Issue 39 · November 2019
I nve s to r s s p e c i a l i z i n g i n h i g h - te c h
manufacturing should consider operations
at the Da Nang High-tech park due to
government incentives tailored to it. Beyond
these incentives, investors would find a growing
ecosystem for high-tech manufacturing that
has been increasing steadily.
IT
Da Nang is becoming a magnet for domestic
and foreign IT investors. The city is one of
the leading places for developing IT and
software industry in the country. The IT sector
contributes around 5.5 percent to Da Nang’s
GDP. Of the 700 IT businesses in the city, around
43 percent specialize in software production
and outsourcing. Large companies, such as FPT
software, Gameloft, LogiGear, Global Cybersoft,
and Asnet, provide software outsourcing
services for partner firms in Japan, North
America, and Europe.
These companies have benefitted from
educational facilities in the city. The
University of Da Nang has partnered with
several universities in the US to provide
training in digital systems, automated
production and automation, software
engineering, and industrial computing. The
abundance of engineers trained by local
universities and software technology centers
has underpinned the success of the area’s
software outsourcing industry.
Beyond the local talent pool, Da Nang is
the most advanced telecommunications
hub in the country. It has a citywide wireless
broadband network with about 350 access
points across the city. As a telecom hub, Da
Nang links Vietnam with nearly 40 countries
in Europe and Asia though an undersea
communications cable, an international
transmission line of 10Gbps.
New energy, nano-technology
Da Nang is also embracing new energy,
which is also known as renewable energy.
With an average of 2000 hours of sunlight, city
authorities have approved a 4.4 MW solar farm
in Lieu Chieu district at a cost of US$5 million.
Most recently, Da Nang partnered with the
EU to build solar energy systems at hospitals,
schools and households. The project aims to
educate businesses and households on the
use of renewable energy technology. Already,
30 percent of the city’s population uses solar
power for water heaters. The sector is a great
The Most Competitive Sectors
opportunity for investors nationally: Vietnam
aims to develop the ratio of electricity from
renewable sources to 43 percent by 2050.
Da Nang has also become a leader in the use
of nano-technology. In 2016, the authorities
approved an investment license to the
city’s first nano-technology project, which
was developed by local firm Danapha in
partnership with two Japanese companies. The
city government has also used nano-lighting
technology to reduce 30 percent of power
consumption at public sites. The government
plans to use nano-technology for LED, solar
cell, water treatment, as well and oil and gas
representing diverse investment options for
foreign firms.
Supporting Industry
Da Nang has undergone a substantial change
over the last decade to shift its economy from
agriculture to industry to the services sector.
But it remains crucial for businesses that
want to realize greater efficiency to develop a
sustainable supporting industry by increasing
the localization rate with a stable supply of raw
materials, components, and spare parts.
Vietnam’s localization rate has been improving
over the years (the localization rate grew to 36
percent in 2018 from 32 percent in 2017), but
it still needs to improve further. Local firms
are still not able to match the high standards
demanded by foreign investors with several
components being imported, increasing costs.
While the involvement of the Vietnamese
supporting industry in the supply chain of
foreign invested enterprises remains low,
the local government has provided several
incentives to allow this sector to flourish in
Da Nang.
The incentives given by the government for
high-tech manufacturing and agriculture
will further have a knock-on effect for the
supporting industry, allowing it to develop
further and become more profitable. While
still developing, the sector is an attractive
investment option for investors. With
manufacturing making up over 80 percent of
the country’s total pledged capital, this sector
is continuously expected to grow, creating
further demand for the supporting industry.
Investors that can capitalize on this demand are
likely to see further investment gains.
11
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