IPs going to town

From the outside, The Oasis seems to be an independent real estate project, providing luxurious villas for foreigners working in Binh Duong province in southern Vietnam. But actually, The Oasis is part of the 500-hectare Vietnam-Singapore Industrial Park I, which has attracted 242 manufacturing and service projects from 22 countries and territories to date.

Also in the industrial park, Singapore’s Goucoland Vietnam is developing an 18ha-residential and retail complex. The first phase has already been completed with 237 apartments released onto the market and another three apartment buildings will be completed by 2012.

This is not the only industrial park tied to residential area that Vietnam Singapore Industrial Park and Township Development JSC (VSIP) is developing. Following the success of its first industrial park project, VSIP is now developing VSIP II comprising 1,000 hectares of industrial park and a 700ha -township development. 

An industrial park combined with residential and service sites remains relatively new to Vietnam. Huynh Quang Hai, general director of VSIP, said this was also a new investment trend in Vietnam. Two other VSIP township and industrial park projects are under construction in Bac Ninh province in northern Vietnam and Haiphong.

Kinh Bac Development Corporation is also focusing on township and industrial park projects, instead of developing a separate industrial park. The corporation early this year gained an investment certificate to develop Nam Son-Hap Linh project in Bac Ninh province, comprising 430ha for an industrial park and 200ha for residential and service sites.

Furthermore, the corporation is also developing 790ha-Trang Cat township and industrial park complex in Haiphong, Phuong Nam township and industrial park project in Quang Ninh province and also studying to develop the 500ha-Viet Hung project in Quang Ninh’s Ha Long city.

The development of township projects beside industrial parks will make those parks more attractive to manufacturing investors, who want to set up manufacturing facilities in Vietnam to take advantage of the low-labour costs and market potential of this country.

Homes for the workers

Figures from Foreign Investment Agency show that Vietnam has to date attracted about 11,000 foreign direct investment projects, capitalised at $191 billion. Half of them have invested in manufacturing sector.

However, foreign manufacturers are facing difficulties when recruiting labourers for factories in industrial parks. One of the main reasons causing labour shortages at industrial parks is the lack of surrounding residential  and services projects.

“A huge number of workers in industrial parks will create a huge demand for accommodation and services,” said Dang Huy Dong, vice minister of Planning and Investment. “Thus, developing residential areas and services beside industrial parks is essential to improving the investment climate and also creating a new investment trend in the future.”

Japan's Canon, for example, has to provide tens of free buses to meet and see off workers living far from the firm’s manufacturing facilities in Bac Ninh province each day. The company said the lack of residential areas and services surrounding industrial parks did not encourage labourers to work for factories in industrial parks.

Keeping it close to home

For VSIP, Hai said the townships would firstly serve demand from workers, staff and foreign experts working at VSIP industrial parks. For industrial park and township projects in Bac Ninh and Haiphong, VSIP is now calling other investors to develop residences and shopping malls. Foreign investors like Goucoland Vietnam and SP Setia have signed memorandums of understanding with VSIP to develop residential projects in VSIP Haiphong and VSIP Bac Ninh.

And when developing those townships and industrial parks, developers have to select manufacturing projects built in industrial park. Only environmental friendly projects are allowed to operate in those parks. Projects in sectors like steel manufacturing and chemical production are turned down.

This compliments the current policy regarding foreign investment set out by the Vietnamese government, which is determined to attract hi-tech and environmentally friendly investments. This can even be considered a global trend. The United Nations Conference on Trade and Development reported governments, developers, and companies are increasingly considering industrial zone’s potential contribution to environmental sustainability and lowering carbon emissions.

Low-carbon special zones are being explored by China, India, and the Republic of Korea, as well as many other developing and developed countries. Hai at VSIP said a township and industrial park project was a kind of low-carbon industrial zone, if receiving only environmental friendly projects.

“If we receive manufacturing projects, which pollute the local environment that means we will destroy the surrounding township,” said Hai.

But like other real estate projects, a township and industrial park one is dependent on its location. Most township and industrial park projects now, like VSIP I, II, VSIP Bac Ninh, Nam Son-Hap Linh and Viet Hung, are located in favourable places, which are close to big cities or seaports.

VSIP I is close to Ho Chi Minh City, the country’s largest economic hub while VSIP Bac Ninh and Nam Son-Hap Linh are close to Hanoi.

“In the future, we will continue to choose big cities and surrounding areas for developing township and industrial park complexes. A complex cannot be developed in a poorly developed area,” said Hai.

However, this segment of township and industrial park complex development is not for weak developers. The investment costs of a complex are about 30-50 per cent higher than for a separate industrial park. Hai said the developer would only develop a part of the township, the remaining room would be reserved for other investors.