Compromising ESG efforts must be averted in Ho Chi Minh City

Dao Xuan Duc - Chairman Ho Chi Minh City Industrial Zones Business Association

The pivotal challenges encompass how Ho Chi Minh City can concurrently adapt and burgeon, embrace energy efficiency, transition towards a sustainable green model, and strategically intersperse industrial zones (IZs) amidst residential sectors, all while adhering strictly to environment, social, and corporate governance (ESG) standards.

A city’s vibrancy lies in its harmonious blend of industrial vigour and residential serenity. It is imperative for Ho Chi Minh City to devise urban solutions that allow IZs and residential areas to coexist symbiotically, ensuring economic growth does not come at the expense of residents’ quality of life.

Furthermore, there is a growing emphasis on ESG criteria when selecting IZs. Many large foreign corporations are not just looking for space; they are seeking zones that mirror their commitment to sustainable and responsible growth.

In recent years, Ho Chi Minh City has vigorously pursued investment into its IZs. Beyond the established Tan Thuan Export Processing Zone, the city boasts an additional 18 export processing zones and IZs with an occupancy rate exceeding 80 per cent. It is not that Ho Chi Minh City lacks land, but the challenge lies in securing vast tracts without compromising our green and ESG commitments. Regrettably, several investors have shifted their focus to neighbouring regions like Dong Nai and Binh Duong in search of larger land parcels.

To address these challenges, Ho Chi Minh City proposed the development of two new IZs, Pham Van Hai 1 and Pham Van Hai 2, spanning 668 hectares. With the endorsement for this planning adjustment secured earlier this year, the city now looks forward to both zoning and tender processes to draw in ecologically mindful major investors.

In terms of time-sensitive matter, Tan Thuan Export Processing Zone, having operated for 32 years, will see its land lease expire in 2041. Several other IZs are on a similar trajectory. If Ho Chi Minh City delays strategising the future of these zones over the next 20-30 years, opportunities may be missed.

In anticipation, Ho Chi Minh City has initiated a blueprint delineating the growth trajectory for these zones up to 2030, with an extended vision to 2045. This plan, approved and underway, earmarks five areas as pilot projects, with broader expansion targeted for mid-2024.

Moreover, as Ho Chi Minh City drafts criteria for investment capacity across sectors, the emphasis on sustainability is evident. Current investment density stands at $5 million per hectare. Yet, in alignment with its green vision, the city aims to elevate this to $12-15 million per hectare, tailored to the sector, thereby attracting projects that align with its sustainability ethos.

Addressing land scarcity innovatively, Ho Chi Minh City has piloted multi-storey workshop models in zones like Tan Thuan and Linh Trung. These 9-10 storey factories are conceived to suit projects in domains such as IT and high-tech, offering solutions that both maximise space and adhere to the city’s evolving green trajectory.

Regional collaborations can improve prospects for ESG Environmental, social, and governance criteria are not merely a hot trend, but a development goal of many enterprises. Benjamin Soh, founder and managing director of STACS, discussed the considerations with VIR’s Minh Dat.

ESG becoming a benchmark for IZs Key stakeholders are signalling a paradigm shift in Vietnam’s industrial real estate, spotlighting environment, social, and corporate governance as the new cornerstone for future growth.