Factory location in Vietnam comes down to one structural decision before any comparison of provinces or rents: inside a zone, or outside it. The two routes differ in licensing burden, timeline, cost and risk allocation, and choosing wrongly is expensive in ways that only become visible eighteen months later.
Factory location inside a zone
The tenant takes a sub-lease of serviced land from a developer that has already completed planning, clearance and infrastructure. Licensing is faster because much of the underlying analysis was settled at zone level, the management authority carries delegated powers, and incentives frequently attach to the location itself – as our industrial zone investment guide sets out.
The constraints are real but usually acceptable: higher land cost per square metre, service charges, zone regulations on permitted activity and building form, and a landlord relationship rather than a direct state one.
Factory location outside a zone
A standalone site can be cheaper per square metre, larger, and configured exactly as the process requires – which matters for heavy industry, very large footprints, or operations needing a specific geography such as a river frontage or a mineral source.
The cost is that the investor absorbs everything the zone developer would otherwise have done. Planning conformity must be established for the specific parcel, using the analysis in our planning conformity guide. Land clearance and compensation may fall to the project. Infrastructure – power capacity, water, waste treatment, access road – must be secured individually. And licensing runs across several provincial departments rather than one authority.
The five questions that decide factory location
Footprint – can the zone supply the area required, now and for a realistic expansion? Utilities – does the process demand power or water beyond what the zone can commit? Timeline – how much is eighteen months of earlier operation worth against the land premium? Environmental profile – does the process fit within the zone’s treatment capacity and permitted categories, examined in our environmental permit guide?
And exit – a zone sub-lease with clear assignment rights is far easier to sell than a standalone site with a bespoke facility, which bears on the eventual project transfer.
Factory location: what most manufacturers actually do
First-time entrants and mid-sized projects choose a zone almost universally, and the ones that regret it are those that outgrew the plot faster than expected. Very large or utility-intensive projects go outside, accept the longer runway, and build the licensing programme accordingly.
A third pattern is increasingly common: enter through a zone to start production quickly, then develop a standalone site for the second phase once the business case is proven and the organisation understands the local process. That sequencing captures speed first and scale second, at the cost of running two sites.
Factory location FAQs
Does location affect incentives?
Substantially – location is an incentive criterion in its own right, as our zone tax incentives guide explains.
What about export-focused operations?
Consider the customs-separated regime in our export processing zone guide.
How early should this be decided?
Before the licence application, since the location condition is one of the six certificate requirements – see our certificate guide. Texts are published via the Ministry of Finance.
Costing the factory location decision properly
Comparing zone rent against raw land price per square metre is the wrong comparison, and it is the one most sponsors make first. A proper cost model includes six items the headline price omits.
Infrastructure delivery to a standalone site – substation, water connection, treatment plant, access road – which for a mid-sized factory can exceed the land cost itself. Clearance and compensation where the site is not vacant. The value of eighteen months of earlier revenue in a zone.
Licensing cost and management time across multiple departments versus one authority. The incentive differential, since location is itself an incentive criterion. And exit liquidity, because a serviced zone plot with clean assignment rights sells far more readily than a bespoke standalone facility.
Run that way, the factory location comparison usually favours the zone for projects under a certain scale and the standalone site above it – and the crossover point is far higher than the raw land price alone would suggest.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
