Solutions to help Vietnamese IP developers maximize local supply chain productivity

Vietnam Texhong Nonwoven Factory (phase 1) is synchronously and modernly invested in Hai Ha Seaport Industrial Park.

>> A connectivity mechanism needed for IZs development along the Eastern Highway Economic Corridor

SEA is still leading in CO2 emissions, and not dealing with this could shrink its economy. Supply chain and transportation, in particular, are significant contributors, and each temperature increase results in a GDP decrease.

Therefore, the stakeholders above should take a holistic approach and focus on co-designing sustainable solutions, with the key objective being building a superior, resilient supply chain that efficiently mitigates disruptions caused by local events and global megatrends. We see the role of the developers of industrial leases as the catalyst for success in this process.

Industrial real estate developers

To elaborate, I first need to introduce who we are and why our part should not be overlooked before looking at solutions on the plates of the industrial park developer and the logistics service providers.

Indochina Kajima, the young joint venture between two experienced real estate developers, realizes that, with its initially American industrial real estate platform Core5, we are considered the incubators of solutions for the vast Industrial Zone ecosystem. And with only a few percent occupied by ready-built factories and warehouses for lease complexes, we could act as microecosystems with the right ingredients to incubate the solutions that would enhance supply chain productivity.

Despite the economic headwinds, the momentum for investors to opt for leasing remains strong in the coming years, amplified by regional and global megatrends, and the still-soaring demand means we need to grasp this opportunity the right way. Supported by the fact that Vietnam has a healthy supply of millions of square meters of ready-built or turn-key factories with international standards, in addition to advanced infrastructure development, a high-quality, affordable workforce, a day-by-day growing presence of Queen Bees, and suitable compelling incentives and business support.

This all, underpinned by the strong fundamentals of Vietnam and the growth potential of the industrial real estate (RE) market, led to the launch of Core5 one year ago, a new Vietnamese industrial lease platform. Our current portfolio covers 80ha of land, including seven projects in North Vietnam and one in South Vietnam. Our first three projects in Vietnam are located along this unique economic corridor and will offer nearly 228,000 m2 of net leasable area for factories to the market between now and May 2024. And this micro-ecosystem of like-minded occupiers is what we have named Core5 (Eco)-Factory Village: a manufacturing community that combines the best of project locations, whether Quang Ninh, Hai Phong, or Hung Yen, each with its own strengths, with a more characteristic yet holistic project design following LEED and as a project operator with hospitality DNA, to deliver the main benefits for our occupiers and partners: incubating faster or accelerating growth, saving cost, and aiding ESG requirements from the supply chain.

Our investors are looking for world-class infrastructure, incentives, sustainable, flexible growth solutions, high ESG standards, proximity to (deep sea) ports and border gates, stable long-term renewable power and other utilities, skilled labor, supply chain localization, and primary and secondary services such as education frameworks, schools, and healthcare.

Concluding the industrial for lease developers and our Factory Villages are part of the solution, one part of the helix for this holistic cooperation between the industrial zone and logistics services to build a productive and integrated supply chain, as businesses would be close to their suppliers and customers. Furthermore, planning for logistics centers is critical. This planning was not always present in industrial zones in the past and is still causing issues and unbalanced demand in the south of Vietnam.

Often, as showcased in Core5 projects, the service level of RBF and RW should be as comprehensive as an affordable luxury hotel for the sake of this analogy. Including certain on-demand/pay-per-use services for our tenants, often at the back, supported via partnerships with partners like industrial park and logistics service providers to support these businesses in the industrial zones, with pre- and post-end operation licensing value-added services, transportation, warehousing, and customs clearance Warehousing operations can also be made more sustainable by using energy-efficient lighting and heating, as well as implementing recycling programs and other sustainability initiatives.

Companies are increasingly looking to work with suppliers who share their commitment to sustainability. This includes sourcing materials and products from environmentally responsible suppliers and ensuring that suppliers adhere to sustainable practices throughout their supply chain. Core5 Factory Village will be home to these types of suppliers.

Logistics service providers

With Vietnam shaping up to become a logistics hub in APAC, the logistics service providers still have a long way to go and need to strongly contribute their efforts, which means switching to electric vehicles for their fleets to reduce emissions. This trend is prevalent in Europe, where cities are implementing low-emission zones and regulations to encourage the use of electric cars. Still, with Vinfast as a pioneer, this supply chain is moving to Vietnam.

Companies are also looking to reduce waste and improve the sustainability of their packaging materials. This includes using recycled or biodegradable materials and designing packaging that is more efficient and uses less material overall.

And the importance of developing collaborative logistics, which involves sharing logistics resources and infrastructure, is becoming more popular as companies look to reduce their carbon footprint. This can include sharing warehouse space, transportation, and other resources, as well as a role for industrial real estate developers.

Developing frameworks and incentives for SMEs to implement green logistics, green inland barging, and multi-modal transportation The untapped potential is in the development of 'green' inland barging infrastructure to unburden roads, decarbonize, and lower costs. It requires investment in barging ports, transfer terminals, and specialist port operators, but this can be quickly developed in a carbon-neutral way. With its built-in port infrastructure, Deep C is at the cradle of green barging, looking at its unparalleled power planning.

For example, the Green Freight Program (GFP) is a joint initiative between the Ministry of Transport, the Global Environment Facility, and the United Nations Development Program to reduce greenhouse gas emissions and improve the fuel efficiency of road freight transport in Vietnam. The program includes a carbon footprint assessment tool that enables participating companies to measure and track their carbon emissions from freight transport; a set of best practices guidelines for participating companies to follow, covering topics such as fuel efficiency, eco-driving, vehicle maintenance, and logistics management; and training and capacity-building activities for participating companies to improve their knowledge and skills in sustainable freight transport practices.

More importantly, financial incentives for participating companies to invest in sustainable transport technologies and practices, such as fuel-efficient vehicles, eco-driving training, and logistics optimization, Finally, certification is available for participating companies that meet the program's sustainability criteria.

This way, the Green Freight Program in Vietnam is helping to create a more sustainable freight industry by promoting the adoption of green logistics practices and technologies. This is important, as the freight industry is not only the most significant cost component in the supply chain (40–70%) but also the major contributor to Vietnam's greenhouse gas emissions and air pollution. By reducing the environmental impact of freight transport, the program is helping to improve air quality and mitigate the effects of climate change. In addition to the environmental benefits, the Green Freight Program in Vietnam also provides economic benefits for participating companies. By improving their operational efficiency and reducing fuel costs, companies can save money and improve their competitiveness in the market. The program's financial incentives and support for sustainable technologies make it easier for companies to make the initial investments required to adopt sustainable logistics practices.

The business support and incentives should constantly adapt to the market and types of investors and remain competitive with our peers in the SEA region.

Digitalization, automation, and digital twins Not only could the government provide financial assistance to businesses willing to invest in new technologies or train their employees, This would help ensure that the local supply chain is as competitive as possible. The logistics service providers and ports that have invested in digitalization in the last few years are leading the market in demonstrating the importance of incentivizing investment.

Industrial Zones: the main actors

Critical solutions Industrial zone developers in multi-helix cooperation could take command to support productivity and integration of the supply chain and for logistics companies to be able to implement these solutions described above and to contribute to lowering the cost of transportation for logistics service providers to be able to adopt sustainable logistics practices, reduce their environmental impact, and improve their operational efficiency while also positioning themselves as leaders in the industry.

Power: sustainable power supply with long-term planning, high uptime, and the potential to become energy positive for neighboring communities to enjoy and offset carbon credit. Harnessing rooftops for lease developers, wind, LNG, and other sources and distributing green certificates in return Independent grids and mini-grids should be stimulated and regulations simplified to open up this potential.

And not only power but also sustainable solutions to spare resources and/or supply other utilities. For example, water is a critical, essential resource. In the coming decades, water stress will define infrastructure development. It also affects more than four of the SDGs. And the possibilities for such exchanges are endless: wastewater from a paper mill is routed to an aquaculture farm; leftover woodchips from a timber processing plant are turned into coal at a charcoal factory; and organic waste from a food packaging plant is used as agricultural fertilizer—landfill to generate energy for electric barging and cold storage.

Development of the labor stock by forging cooperation between local and foreign government institutions applying grants to develop frameworks with educational institutions to build a good labor stock and independent sector-oriented small excellence/R&D and, for example, learning factories in partnership with industrial lease developers

This is how Vietnam's industrial developers, logistics partners, and authorities can optimize productivity in the local supply chain by working together, creating more transparency, improving efficiency, and reducing costs.

The Eastern Highway Economic Corridor Industrial Park Development Forum will take place on August 31, 2023 in Hai Phong city.

Geographically

It is now projected on the eastern expressway economic corridor with Hung Yen, Hai Phong, and Quang Ninh, admittedly one of the most dynamic areas in the country. This is due to several factors, including the government's focus on economic development in the region, the availability of land, and the proximity to key ports and airports. Each province along the eastern expressway axis has its own unique advantages. Hanoi is the capital city and the center of economic activity in Vietnam. Hai Phong is a major port city with a solid industrial base, superior eco-industrial park developers boosting built-in ports and jetties, and an ample skilled labor force with economic zone incentives. Ranking No. 1 PCI six years in a row makes Quang Ninh a very progressive province, driving sustainable solutions and being very well connected to border gates as well as the integrated (dee) sea ports linking the Chinese manufacturing supply chain and the world. It is also home to several natural resources, including coal, oil, and two economic zones, and has high potential to grow into a crucial cross-border logistics hub.

Hung Yen and Hai Duong provinces are located along the QL5 and have become a central industrial hub in recent years. They also have a unique ecosystem characterized by the following: Mature yet organic urban industrial symbiosis; high quality of life; excellent transportation infrastructure.

Because it is located between Hanoi and Hai Phong, two of Vietnam's most significant cities and most prominent ports, with just the right amount of distance in between to gradually develop itself as one ribbonlike industrial complex that gives the province easy and stable access to markets and suppliers and a skilled workforce, the area near Hanoi has several universities and colleges that produce graduates with the skills businesses need. And a very healthy industrial park pipeline ramping up along the new expressway, supported by the mature supply chain ecosystem of the existing highway, guarantees its productivity. These advantages have helped Hung Yen and Hai Duong attract significant investments from Japan's leading investors, including Honda, Panasonic, Daikin, Ford, and Brother. It also holds an excellent future for sectorial R&D centers regarding e-mobility, battery lifecycle, and F2C concepts to bring the first and last mile together.

The Economic Corridor gives life to a larger-than-life territory. It should not become clogged, and sustainable infrastructure planning to decrease radius and carbon footprint is the only way forward.