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Trade war

Sumitomo expands Vietnam industrial parks to tap trade war demand

$177m extension to aid Japanese manufacturers fleeing tariffs

Thang Long Industrial Park II is one of two sites that will be expanded, with groundbreaking on new land set for 2021.

TOKYO -- Japanese trading group Sumitomo Corp. will spend over 19 billion yen ($177 million) to expand two industrial parks in Vietnam, looking to serve businesses shifting production away from China to avoid the trade war.

Sumitomo will add about 290 hectares to two of its three complexes outside Hanoi. The three industrial parks host roughly 190 companies, 90% of which are Japanese manufacturers.

The tit-for-tat tariffs imposed by the U.S. and China have forced companies to revise production strategies to avoid the duties. Many Japanese companies interested in moving into Sumitomo's industrial parks are seeking to diversify manufacturing risks.

Sumitomo will spend over 14 billion yen adding about 181 hectares to the southeast portion of Thang Long Industrial Park II. The site already spans 346 hectares. Groundbreaking is scheduled for 2021, with lots going on sale in 2022. The expanded location will be one of the biggest Japanese industrial parks in Vietnam.

A 109-hectare expansion at Thang Long Industrial Park III will cost about 5 billion yen. Though the work was already planned, it has been accelerated by a year to the first half of 2020 at the earliest.

Sumitomo originally planned to sell out Thang Long III's first phase lots by 2022. But due to the unanticipated demand, the lots covering the initial 104 hectares -- completed just last November -- likely will be sold out by 2021.

Investments by Japanese companies in Vietnam rose 7% last year to 643 targets, according to the Japan External Trade Organization, or JETRO. Spending has increased for three consecutive years to a new record. Vietnam's proximity to China and its cheap labor costs have made it a draw for relocating production capacity.

Correction: The original photo attached to this story was not relevant and has been replaced.

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