FDI in Vietnam

Rise of the north

A long-term, export-driven vision has handed Hai Phong the title of Vietnam’s fastest-growing city in terms of GDP since 2015. Deep C is one firm that has contributed to the industrial city's transformation in recent years with their vision of creating a sustainable, environmentally friendly economic hub

WHY WE WROTE THIS: Because growing foreign investment is transforming Vietnam into a major economic player in the region

February 25, 2020
Rise of the north
Old boats mingle with modern freight ships at a Deep C dock. Photo: Samantha McCabe

A glossy photobook sits on the coffee table of the Deep C Industrial Zone offices, surrounded by walls the colour of sunshine and an abundance of indoor foliage. 

“Compared with other big cities such as Hanoi and [Ho Chi Minh City], Hai Phong is still the most traditional. There is no Starbucks, no McDonald’s, nor skyscrapers (yet),” reads the introduction of the book, Hai Phong Through the Eyes of a Foreigner.

Commissioned by industrial firm Deep C for their 20th anniversary, the book was intended to provide a snapshot of Vietnam’s third-largest city 120km east of Hanoi, little-known to foreigners except for its proximity to tourist hotspots Ha Long Bay and Cat Ba Island. Now, just two years later, a busy Starbucks is nestled in the city’s core, and the skeletons of future skyscrapers are dotted with construction crews – though still no sign of a McDonald’s franchise. 

A long-term, export-driven vision has handed Hai Phong the title of Vietnam’s fastest-growing city in terms of GDP since 2015, with a population that has expanded by almost 50% in the past decade. Hai Phong’s growth has also been part of the the north’s transformation into an FDI hotspot in recent years. 

Deep C was established in 1997 to capitalise upon this trend, with their approach contributing heavily to the massive uptick in FDI and development in recent years. The result is a rapid transformation of the city that seems poised to continue. 

Deep C’s expansive industrial zones. The top two in the diagram sit in the neighbouring Quang Ninh province. Photo: Supplied

“If you drive through the city, you just feel the buzz of things being built,” said Hans Kerstens, Deep C’s head of sales and marketing, citing the under-construction five-star Hilton hotel as an example – an establishment that would have stuck out like a sore thumb just five years ago in the industrial port city.

Deep C’s main operation in the city is an industrial zone on land developed as a multitude of sites for factories hosting major international brands such as Chevron, Bridgestone and Puma. They also have service companies providing water and electricity. 

Following the creation of the ASEAN Economic Community in 2015 with the vision to create “a highly competitive region … fully integrated into the global economy”, industrial zones across Southeast Asia have gained increasing traction as a means to attract foreign investment.

Vietnam has been among the leading beneficiaries of this drive, and as of December 2018 over 326 industrial zones dot the country’s ports and countryside, with the north experiencing particular growth in the past decade due to its proximity to China.

According to Vietnam Briefing, by the end of 2018, industrial and economic zones attracted around 8,000 foreign projects with a total capital of over US$145 billion. With the displacement of Chinese factories to the area as a result of the ongoing “trade war” with the US, this number is projected to rise in the coming years.

Hai Phong has always been capitalised upon for its favourable port-side location on Vietnam’s northeast coast, and was an epicentre for violent conflict during French colonial occupation and subsequent decades of war.

As the city recovered from the heavy bombing it suffered during the Vietnam War, agriculture, manufacturing and fishing all grew as important industries in the 1980s. In recent decades, the area has also flourished on tourism, with it located a stone’s throw from UNESCO World Heritage Site Ha Long Bay. 

The new QSI school building. The school has seen the number of students triple in recent years, spurred on by the growing number of expatriate staff at Deep C. Photo: Samantha McCabe

But today, as Hai Phong rapidly emerges as a trading gateway and a modern industrial city, Deep C’s intent – to make it as easy as possible for foreign companies to invest in Vietnam – is spurring growth, sling-shotting the once-traditional community into a new age.

Among the clearest indications of the city’s shifting demographics is the QSI International School of Hai Phong – which opened in 2005 as one of a chain across 31 countries globally – that has tripled its student body over just three years. 

Jonathan Mudd, the school’s director, has been witness to this unprecedented change. QSI spent the past year constructing a new building – part of a “three to five year plan” according to Mudd – only to have it reach capacity as soon as it was finished. To accommodate further growth, the school started construction of its next building within two months, as opposed to the original plan of three years later.

It’s a far cry from the apartment building they were running the school out of previously, which has been renovated and turned into housing for some of the teachers. 

Most students are foreign, with the majority of Deep C’s expat employees enrolling their children in the school. A strong Western influence can be seen in the community that has popped up around the school, catering to the tastes of expats with wide, hushed streets and larger homes.

Mudd vividly remembers Bruno Jaspaert, general director of the Deep C company cluster, visiting QSI when he was considering moving to Hai Phong for his current job.

“Bruno walked in the door, it would probably be January, February, just to visit Hai Phong. He hadn’t even been accepted to his job. And he walked in the school and we said, ‘Oh yeah, we have 55 kids. And he said, ‘Okay, I’m going to accept my job. So when I see you again, you’re going to have double. 

“When he walked in the door again, in August of the following year, we had double, exactly, of when he walked in the door [the first time].” 

Jonathan Mudd, QSI International School of Hai Phong director, sits in his office in the school’s newest building. The building was constructed in reaction to increased demand. Photo: Samantha McCabe

Bruno said, ‘I’m going to accept my job. So when I see you again, you’re going to have double [the students].’ When he walked in the door again, in August of the following year, we had exactly double

Jonathan Mudd, QSI International School of Hai Phong director

Jaspaert has only been with Deep C for about 18 months, and moved to Hai Phong armed with an intent to re-envision the way the company was doing business. 

At the time of Jaspaert’s arrival, Deep C had one designated land zone, 113 employees and a vague idea of starting up an electricity company to support their clients. Today, they have 289 employees and two further zones are under construction in neighbouring Quang Ninh province.

Suddenly, the 23-year-old company is going through a rebirth, one meant to change their company’s position in the country’s economic landscape. 

“Within Southeast Asia, it’s a good place to be. It’s very simple,” the Belgian said. 

The figures largely speak for themselves: the company’s 2020 budget is triple what it was in 2019, and according to Jaspaert, as of 6 January 2020, they have already signed up enough new tenants to their industrial zone to make the budget for the year. 

Yawning arches mark the entrance to one of the land zones and the beginning of the recycled plastic road. Photo: Samantha McCabe
An original bamboo bridge, which has been restored, leading down to the dock is still used by workers making their way to and from shipping boats. Photo: Samantha McCabe

“If our sales department doesn’t do anything anymore for the whole year, we’re already good for the year,” joked Jaspaert. Shocking to think about, he agreed, and also “pretty frantic”. 

Fellow Belgian Koen Soenens is one of these new employees. After joining in late 2019 as Deep C’s international business development manager he has been bolstered by the amenable attitude of local government, who do not want to solely rely on nearby Ha Long Bay’s tourism dollars for income. 

“I’m really positively surprised about the the overall attitude of the local government, how they look at things,” he said. 

The neighbourhood around QSI school. Photo: Samantha McCabe

Soenens sees the same “exceptional momentum” in Hai Phong as Jaspaert, which is why he moved his family from Singapore to explore the area’s potential. 

He took Southeast Asia Globe on a daylong tour of the firm’s factories and infrastructure sites that form the sprawling 3,400ha facility sitting adjacent to the newly-operational Japanese-funded Lach Huyen Deep Sea Port. Its sheer size makes it impossible to tour without a car, and after a while, the endless greys and blues blend together. 

Driving back into Hai Phong, the city’s transformation becomes more evident as the car passes rows of glamorous, faux-European apartment complexes, blindingly white and adorned with black balconies that look straight out of a kitsch Parisian movie set. 

The massive Vincom Plaza mall, opened in 2015, sits across the way, with the entire area a brand-new development by the conglomerate owned by Vietnamese billionaire Pham Nhat Vuong – which has also firmly established its presence in the city in recent years.

For Deep C, standing out can be a challenge in Vietnam’s highly competitive growing FDI environment, especially as more people notice the north’s potential.

“We have to be better than the standard Vietnamese operator, who only is interested in one thing: develop some land, sell it, and that’s it,” said Jaspaert.

This has seen Deep C’s financial growth paired with a shift in mentality towards sustainability-minded planning, according to Kerstens. 

Koen Soenens, Deep C’s international business development manager, poses with a water bottle on Vietnam’s first road made partially out of recycled plastic. Photo: Samantha McCabe

I’m trying to help my people to rethink our vision and mission as a company. Of course we are selling land, but it’s more than that. I think we should be, and we will become, probably the first eco-friendly sustainable industrial zone [in Vietnam]

Koen Soenens, Deep C international business development manager

“Because it’s good for the environment, it’s good for the image of the part, and it’s good for the image of the customers, and it guarantees that the customers have energy,” he said.

Kerstens says that he is passionate about keeping the company sustainable, and sees a link between the environmental side and Deep C’s profitability long-term. Of course, it helps that many foreign investors increasingly have green concerns at their core to meet the public’s shifting attitudes towards the environment. 

When Kerstens started, he said, not one company would ask about the source of energy when considering investing with Deep C – today, many do. Corporations are becoming increasingly concerned with their footprint and how that presents to the public, more often forgoing cheap labour and questionable supply chain options for sustainability indexes and media-friendly goal-setting.

This green concern is also a departure from the norm in a country with ambitions to grow faster than China this year, and whose growing demand for energy is predominantly being led by the coal sector. Between 2000 to 2015, coal’s share in Vietnam’s total primary energy supply grew from 14% to 35%. 

The government has incorporated a renewable energy development strategy into its overall energy plan, but has plans to increase the number of coal plants. While the affordability of coal is attractive to developers, it has received scathing criticism from organisations like the World Bank for putting the environment and lives – due to worsening air quality – at risk. 

“I believe it should be Deep C’s goal to show … that we can bring economic growth in combination with an eye for the future, with respect for the environment, with sustainability ingrained in everything we do,” said Jaspaert. 

A bank of solar panels next to Deep C’s water treatment plant. Photo: Samantha McCabe

A bank of solar panels soaks up in the sun in a field near Deep C’s water management station; the plan is to generate enough energy to supply all of the industrial park within the next seven to nine years, and they offer discounts in exchange for occupying their customers’ roof space. 

Rows of trees are planted to create much-needed green space. And between zones one and three, on a 200m stretch, Deep C has constructed Vietnam’s first recycled plastic road, made out of plastics that have been dried, shredded, and integrated into the concrete. 

“We’re a foreign company, the majority of our tenants are foreigners. So we want to bring benefits to Vietnam,” said Kerstens. “Meaning we create jobs, we create taxes, but we don’t want to put a burden on Vietnam by, for instance, generating waste deposits.” 

They’re relatively small gestures for a company defined by industrial growth and development – with the unavoidable negative environmental impact that entails – but Deep C hopes the outlook will take hold in other parts of the country, as well. 

The aim isn’t to become the largest industrial zone in the country, clarified Soenens – that would perhaps attract unsavoury tenants. The vision, rather, is a slow transition to a full “eco-park”.

“It’s just more than just cleaning land and paying our taxes … I’m trying to help my people to rethink our vision and mission as a company. Of course we are selling land, but it’s more than that. I think we should be, and we will become, probably the first eco-friendly sustainable industrial zone [in Vietnam].”

And under new regulations introduced by the Vietnamese government in May of 2018, called “Decree 82”, “eco-industrial zones” will enjoy preferential treatment when it comes to loans, exchange of information related to the technology market and other benefits.

Hai Phong, as a city, is at the precipice of further rapid growth, and seems to be constantly planning for the future. 

A plane soars overhead close to the QSI International School of Hai Phong. Proposals have been made to expand Cat Bi airport, which would transform it into north Vietnam’s largest ahead of Hanoi. Photo: Samantha McCabe

The proposed addition of a second terminal to Cat Bi International Airport, on the outskirts of the QSI community, would make it the largest in northern Vietnam ahead of the capital Hanoi if realised. And with burgeoning infrastructure supported by the local government – such as the recently finished Ha Long-Hai Phong Expressway – you no longer have to pass through Hai Phong’s city centre to access highways that run to Hanoi and China. 

But Jaspaert notes that the north is growing so fast that there will no doubt be a plateau or slight fall the near future if infrastructure can’t keep up. 

“If you look at it, today, logistics in Vietnam are extremely important. And the reason why is because they’re extremely bad,” explained Jaspaert. “The impact of logistics is very bad.” 

But despite the challenges on the horizon, what ultimately makes Jaspaert confident of the industrial zone’s potential is its position in the country. When he pitches to companies, the bulk of his message is just three words: location, location, location.

“I don’t know any other spot that I would like to be more than Hai Phong today.”  

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