Vietnam’s German-made smart cities

Any local in Hanoi or Ho Chi Minh City (the two largest cities in Vietnam) will tell you about the difficulties of getting around those places, as the roads struggle to deal with the masses of bikes, buses, and cars, the numbers of which seem to increase with each passing year.

And that’s just one of many issues. Dense traffic and other factors cause pollution. Heavy rain in the rainy season sometimes causes flooding and, even if it does not, puts pressure on the drain and sewer systems. Infrastructure, while acceptable in a few places, has generally not kept pace with other developments, and there are increasing needs for electricity and decent internet coverage.

When one understands that Hanoi and Ho Chi Minh City contribute over a quarter of Vietnam’s GDP, it is clear that what may seem like trifling matters individually, deserving of no more than a heavy sigh, together have real potential to cause a deep and long-term negative effect on the Vietnamese economy as a whole.

But this is only one side of the story. Earlier this year, Ho Chi Minh City and Hanoi were ranked second and eighth, respectively, in the JLL City Momentum Index, an index which ranks cities worldwide on how well they attract and integrate technology and innovation.

So with improvements needed in infrastructure, but with strong capabilities in technology, it is no surprise that Hanoi and Ho Chi Minh City (and Vietnam more generally) have embraced the concept of smart cities. The term “smart city” is somewhat nebulous, but essentially refers to a city which uses technology to make life better and easier for the residents of the city and the city as a whole.

As Vietnam readies itself for the challenges of the smart city movement, opportunities emerge for German firms

The government in Vietnam has been quick to see the upside of creating smart cities. In 2015, Prime Minister Nguyen Xuan Phuc issued a decision to begin the implementation of smart city concepts. Off the back of this and other supportive legislation, around 20 cities and provinces in Vietnam have launched projects to build smart cities, and it has been announced that a number of technology, infrastructure, and IT businesses have signed deals related to such ventures.

At a local level, things are moving quickly, too. The local government in Ho Chi Minh City, for example, has set up a smart city steering committee. It has announced plans to improve the city’s IT infrastructure, and plans to integrate traffic cameras and sensors into a system which collects data to monitor traffic density in real-time. These systems will also be used to better manage things like the city’s power usage and waste management capabilities.

But one thing is quite clear: cities in Vietnam will need outside help to achieve their smart city vision. This is because international partners are able to bring more money to a venture than their Vietnamese counterparts, and they are usually more experienced in dealing with the complexity of changes to infrastructure that are required.

The good thing for international investors is that Vietnam is well aware of this. Earlier this year, the EU launched a project called “World Cities Vietnam”, under which Hanoi and Ho Chi Minh City have been paired with two European cities, Milan in Italy and Košice in Slovakia, with the aim of enhancing co-operation and good practices on urban development, including smart city concepts.

Hanoi People’s Committee Chairman Nguyen Duc Chung, when speaking at a working session in the EU last year, said that Hanoi is keen to partner with small- and medium-sized enterprises in Europe to improve its IT infrastructure along with other smart city needs.

There are certainly opportunities for German companies to get involved in developing smart city concepts in Vietnam. Germany is already the fifth-largest investor in Vietnam, with a total registered capital of around $1.4 billion, and the quality of German engineering and technology is world-renowned.

Smart city concepts are already being developed in Berlin, Hamburg, and Frankfurt – as well as in a standalone smart city development, Telekom City, located in the city of Friedrichshafen, which has provided a single testing ground for smart city concepts in administration, traffic, and networked homes.

Finally, German firms are already gaining experience in developing smart cities overseas through a plan, announced last year, in which Germany will help implement smart city initiatives in a number of cities in India.

To be sure, there will be challenges in developing smart cities in Vietnam. So far, most projects in Vietnam involving international partners (involving smart city concepts or not) have been small technical projects built around development aid. But smart city projects will need to be big to work effectively.

How the project will be structured as a business model is also rather untested. To many people, smart cities in Vietnam have so far mostly been a case of “all talk and no action”. The local authorities will likely have some idea in high-level terms as to what they want, but the specifics might not have been developed yet. And of course, in Vietnam, things always take time.

But there are certainly encouraging signs for German investment in Vietnam. Just next to the Freshfields Bruckhaus Deringer office in Ho Chi Minh City is the recently-opened Deutsches Haus Ho-Chi-Minh-Stadt (German House Ho Chi Minh City). An international-grade office building and the new home of the German Consulate, it has been designed as the focal point for German-Vietnamese strategic and business relations.

There could be no better evidence of one country’s seriousness for its ambitions in Vietnam than this new high-tech building, and perhaps, one day, people will look at Deutsches Haus as the beginning of a new period in the development of Vietnam, one in which smart cities, and the technologies of the future, started to become a reality.

By Chris Milliken Freshfields Bruckhaus Deringer