A subsidiary of Thailand’s Hemaraj Land and Development Pcl and Vietnamese construction firm Cienco 4 have teamed up to build a $1 billion industrial zone in Vietnam, the first country in Southeast Asia the Thai firm has expanded into.
The venture, Hemaraj-Cienco 4 Co, signed a deal on Wednesday with the provincial government of Nghe An, in central Vietnam, to start building the industrial zone next year in seven phases for completion in 2038, Cienco 4 said in a statement posted on its website on the same day.
While Vietnam’s economy has shown signs of slowing so far in 2016, manufacturing remains its biggest draw, with firms like Samsung, LG and Panasonic using it as an assembly base for tarriff-free exports under the numerous free trade agreements the country has signed.
Offering manufacturers lower wages than China, textile and shoe factories are also expanding in Vietnam to accommodate orders for high street fashion brands.
“Vietnam is the first foreign country that we will invest in the form of developing an industrial estate for rent,” Jareeporn Jarukornsakul, chief executive officer of WHA Corp, a major shareholder of Hemaraj, told Reuters.
She said Hemaraj will hold 80 percent of the venture, with the rest to be held by the Vietnamese partner, formally known as the Civil Engineering Construction Corporation No. 4.
The project includes two industrial parks, with a combined area of 3,000 hectares (7,400 acres) and rental contracts for 70 years, the executive said.
In the first phase, they will develop an industrial estate on an area of about 500 hectares, which should start providing revenue in the second half of 2017, Jareeporn said.
WHA, which completed its acquisition of Hemaraj last year, is Thailand’s market leader in building bespoke warehouses for leases and aims to become a fully-integrated industrial estate and logistic facilities developer.
The company operates warehouses for lease in Indonesia. It also plans to invest in Southeast Asian neighbours including Myanmar and Malaysia, Jareeporn said.
Manufacturing industries are Vietnam’s top source for attracting foreign direct investment (FDI), with a combined $12.15 billion in new pledges and increased capital registered in January-September, or 74 percent of the total FDI value in the period, based on government data.