Danang has emerged as an attractive investment destination for domestic and international investors, coming in third after the capital, Hanoi, and the country's financial center, Ho Chi Minh City. Here’s why.
Danang is one of the five largest cities in Vietnam and serves as a 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 Danang produce sustained economic growth, while also maintaining its reputation as the ‘most livable city’ in the country.
Danang is a top performer on a broad range of metrics across multiple studies. In 2022, the Provincial Competitiveness Index ranked the city at number 9 out of Vietnam’s 63 provinces. Not that Danang is considered a centrally-governed city which affords it the same rights as a province.
Danang Provincial Competitiveness Index scores 2018 to 2022
| Year | 2022 | 2021 | 2020 | 2,019 | 2018 |
| Entry costs | 7 | 6.94 | 8.75 | 8 | 7.94 |
| Access to land | 7 | 7.51 | 7 | 7 | 7 |
| Transparency | 7 | 6.3 | 6 | 7 | 6 |
| Time costs | 7 | 7.46 | 9 | 7 | 7 |
| Informal charges | 7 | 7.29 | 7.11 | 7 | 6.54 |
| Policy bias | 6 | 5.92 | 6.18 | 5 | 4.91 |
| Proactivity | 7 | 7.01 | 6 | 7 | 6 |
| Business support policy | 6 | 7.57 | 6 | 7 | 6 |
| Labor policy | 7 | 7.15 | 8 | 8 | 8 |
| Law & order | 8 | 7.33 | 7.05 | 7 | 6.7 |
| PCI scores | 69 | 70.42 | 70 | 70 | 68 |
| Ranking | 9 | 4 | 5 | 5 | 5 |
Source: PCI Vietnam
Furthermore, in the 2022 Provincial Governance and Public Administration Performance Index (PAPI), in e-governance and public service delivery, Danang was among the top performers. It has also shown consistent improvements since 2020.
Key findings – PAPI 2022
| 2022 | 2021 | 2020 | |
| Participation at local levels | 4.49 | 4.06 | 4.5 |
| Transparency | 4.91 | 5.06 | 5.04 |
| Vertical accountability | 4.20 | 4.27 | 4.6 |
| Control of corruption | 6.60 | 6.78 | 6.69 |
| Public administrative procedures | 7.31 | 7.33 | 7.34 |
| Public service delivery | 8.20 | 8.25 | 7.6 |
| Environmental governance | 3.17 | 3.23 | 3.14 |
| E-governance | 3.69 | 3.56 | 3.6 |
| Total | 42.57 | 42.54 | 42.51 |
Source: PAPI 2022
Since 1988, 1004 foreign-invested projects with a total investment capital of US$6.34 billion in Danang have been approved. In the first nine months of 2023, the city attracted just over US$36 million in foreign capital, with 86 newly registered projects and 27 adjusted capital projects, per data from the Ministry of Planning and Investment (MPI).
Top growth drivers
There are four main factors driving Danang’s healthy business environment: livability, labor, infrastructure, and regional connectivity.
Livability
Danang’s competitive economy has been complemented by the city’s many attractive 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 Hoi An, Hue, and My Son Sanctuary.
The city is known for its clean environment, pristine beaches, and well-established public services. It is one of the cleanest cities in Vietnam and aims to be one of the most environmentally friendly cities in the country.
The cost of living in Danang is relatively cheaper compared to Ho Chi Minh City. As such, the city is relatively safer compared to bigger urban centers in Vietnam.
Labor
Danang’s workforce accounts for more than 51 percent of the population. Its young and dynamic workforce has benefitted from the city's educational offerings: there are at least three international schools in the city and 44 vocational training schools or centers.
Investment in Danang 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
Danang’s growth can partly be attributed to its position as a regional transportation hub. The city is known for its broad roads, major highways, seaports, and airport, which connect Danang 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 investments.
Danang’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 Danang-Quang Ngai Highway facilitates freight and cargo contributing to the economic development of the region. The highway also connects Danang with Chu Lai and Dung Quang Economic Zones. The upcoming La Son-Tuy Loan Highway, which will connect Thua Thien Hue province to Danang, will further promote growth and economic development in Danang as well as the provinces in the Central Region.
The Danang International Airport is located within 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, and Taiwan.
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 passing through Danang 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
Danang serves as a gateway to Vietnam’s Central Region, which is emerging as a key destination for foreign investors in its own right. Danang is sandwiched between Thua Thien-Hue Province in the north and Quang Nam Province in the south. Their proximity to Danang has encouraged regional growth as investors look to diversify their manufacturing hubs.
Danang’s competitive industries
Tourism
Danang is an important tourism hub located close to several UNESCO Heritage sites. The government remains keen to promote tourism to cater to a diverse set of visitors, with tourist facilities continuously improving to meet international standards. Business-class hotels and resorts managed by Hyatt, InterContinental, and Novotel are among a number of hotel brands with locations in the city.
To be sustainable, the city has also promoted eco-tourism to enhance the competitiveness of its offerings. City officials are working to expand the meetings, incentives, conferences, and exhibitions (MICE) sector by working with ministries, business firms, and diplomats. These initiatives help illustrate the trajectory of the tourism sector, and some of the available opportunities for investors, particularly regarding the need for hotels, resorts, entertainment centers, and supporting industries.
Airport and seaport logistics
Tourist numbers before COVID-19 put considerable pressure on Danang’s airport and seaports. Whereas this subsided during the pandemic, as tourist numbers return to pre-COVID normal, these challenges are reemerging.
Danang city authorities proposed to build a third terminal at Danang International Airport to meet increased demand and future growth requirements. As the airport expands, this offers investors scope to become involved with infrastructure development, logistical services, and related commercial activity, such as retail shops, hotels, and restaurants that cater to travelers and traders.
Danang 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 into building the Lieu Chieu deepwater seaport, while roads and railways are also being developed to better connect to seaports in the area.
Retail
Danang is a popular shopping destination and the retail market in the city is growing. The city is peppered with domestic and foreign retailers. 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.
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.
Education
The education sector is open for foreign investment and there is a large demand for high-quality education. Danang 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 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.
Hi-tech manufacturing
With the government’s push to make Danang a smart city, several firms—such as EU-based ABB—have signed agreements with local authorities. 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.
Investors specializing in high-tech manufacturing should consider beginning operations at the Danang High-tech park due to government incentives tailored to it. Beyond these incentives, investors will find a growing ecosystem for high-tech manufacturing.
IT
Danang is becoming a magnet for domestic and foreign IT investors. The city is one of the leading locations for IT and software industry development in the country. The IT sector contributes around 5.5 percent to Danang’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 Danang 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, Danang 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, Danang links Vietnam with nearly 40 countries in Europe and Asia through an undersea communications cable and an international transmission line of 10Gbps.
Danang’s investment future
Moving forward, Danang has a positive future ahead of it. As rents rise in Ho Chi Minh City and Hanoi, this central Vietnam city has an opportunity to come through as a low-cost alternative.
Choosing the right location in Vietnam, however, can often depend on a whole range of factors specific to a business's operations. With this in mind, firms entering Vietnam are advised to pursue the services of site selection experts, like the business advisory team at Dezan Shira and Associates.
This article was first published July 4, 2022. It has since been updated to reflect the latest developments.
