HO CHI MINH CITY -- Kolon Industries, a subsidiary of South Korea's Kolon Group, signed a memorandum of understanding Wednesday with the government of Vietnam's Binh Duong Province to spend $600 million to construct a tire cord fabrics plant there.
The 42-hectare facility will be built inside Bau Bang Industrial Park, a site some 50km from Ho Chi Minh City that is owned by Vietnam's Becamex IDC.
The new plant, slated to be put into operation in 2018, will become Kolon Industries' third biggest for the fabrics, which are used to reinforce tires. The two others are located in South Korea and China.
The company plans to spend $220 million next year for the first phase of the project. The investment will ramp up to $600 million for the second phase from 2018 to 2026. The total value of the project could reach $1 billion.
After two years scouring Asian countries for a suitable site and conducting surveys on many industrial parks in Vietnam, the company chose Binh Duong since the province aims to build manufacturing plants for chemical fibers and industrial fabrics used in auto tires.
The plant will have a monthly capacity of 6,000 tons, a scale that will allow it to export to multiple countries, according to Kolon Industries Chairman and CEO Park Dong-moon.
Kolon Industries already operates a $14 million plant producing auto air bags in Binh Duong.
During the first 10 months of 2016, Vietnam welcomed $17.6 billion in foreign direct investment, down 8.7% year on year.
South Korea is the biggest investor in the Vietnamese market, accounting for 31.9% of investment, followed by Japan at 10.9% and Singapore at 9.8%.
South Korean enterprises have registered to invest over $50 billion via 5,600 projects in Vietnam. Notable projects include a $1.5 billion LG Display plant; LG Innotek's $550 million plant; Seoul Semiconductor Vina's $300 million plant; Samsung Electronics' $300 million R&D center and Woojin Construction's $247.6 million wind power plant.
Meanwhile, Binh Duong Province has attracted 2,818 projects from 59 countries and total investment of $25.6 billion as of October 2016. South Korea ranked as the third-largest investor in the province with 594 projects worth $2.4 billion, including Kumho Vietnam's $128 million tire plant, Orion Vina's $80 million confectionary plant and a $40 million Lotte shopping center.