JLL Research Report

Hai Phong
A vision for growth
April 2019

1
Contents
Introduction 03

Vietnam’s Unique Fundamentals 04

Fostering Industrial and Logistics Growth

• Favourable Economic Backdrop

• Strategic Location

• Strong infrastructure spending

• Encouraging business Environment

Hai Phong – A Vision for Growth 10

• Hai Phong Economy – One of the best performers

• Development of Strong Infrastructure Backbone

• Expanding Industrial and Logistics Market

A Way Forward 11

Case study: Deep C Industrial Zones 12

2 Hai Phong - A vision for growth

Introduction
Vietnam has gathered momentum over the past few years to
establish itself as the production hub for Southeast Asia (SEA)
and now offers a viable alternative for companies looking to
establish their operations outside of China. This is backed by a
number of key fundamentals, which include: strategic
zlocation, business friendly environment and competitive
labour costs. In 1986 there was 335 hectares of land dedicated
to industrial land, since then, Vietnam has quickly become
one of the brightest manufacturing hot spots in SEA. The
country now boasts more than 80,000 hectares of industrial
land, a phenomenal growth over the past two decades.
With a coastal line stretching over 3,200 kilometres along
the East Sea, Vietnam possesses an advantageous
geographical location that provides great access to the world’s
major shipping lanes. As a result, sea transport has been the
most prominent mode of freight transportation facilitating
international trade, with the majority of cargo going through
the shipping hubs located at either end of the country. The
South with the presence of long-standing ports such as Cat
Lai Port, Hiep Phuoc Port and the deep sea Cai Mep Port
typically contributes more than half of the country’s total
sea cargo throughput while its counterpart in the North with
the port cluster in Hai Phong, accounts for more than 30% of
the total. With an increasing proportion of FDI pouring into
the north over the past decade, Hai Phong is fast becoming
a focal point, providing companies with easy accessibility
to transport their goods on a global basis, which will create
considerable growth opportunities. In light of this backdrop,
this paper will discuss how Hai Phong will gear up to become
an internationally recognized trading hub and a driving force
for development in northern Vietnam.
3
Vietnam’s
Unique Fundamentals
Fostering Industrial and Logistics Growth

4 Hai Phong - A vision for growth

1
Vietnam’s GDP growth
Economic Backdrop

in 2018
reached 7.08%, an eleven-year record which surpassed el
Mod Mo
the year’s target of 6.7%. The prevailing transition of e ss re
in F
economic structure from primary to tertiary industry CAL AUTON

isc
Bu
is expected to result in wealth creation growth, rising LO

al
Champion New

Res
E

OM
consumption, and a growing trained labour force that

MOR

ources
all bolster the further development of the Vietnam

Y
economy. The country’s GDP is set to grow by 6.0-6.5%
on average per annum until 2025.

Hig
FDI SEA countries have received increasing
hi
n

ip

th
foreign direct investment, net FDI flow into SEA rose

rsh

eV
NT INFLOW
Entrepreneu
by 11% y-o-y to $150 billion in 2018, outperforming
Economic Reform

alue
FDI TRAC
the global figure of minus 5.1% over the same period1.

Chain
With FDI influx exceeding $19 billion, Viet Nam was the

AT
third largest recipient within SEA in 2018 and accounted
for more than 60% of flows to CLMV countries2. This trend
RA
IG TI
is set to continue as escalating U.S. - China trade tensions IMM
NG
and increasing cost in China prompt manufacturers to
relocate to Vietnam. With 25 FTAs currently agreed, Risk
Taking
Imm
itation
Vietnam is on a journey to become an export-driven
economy and one of the most opened economies in
the region.

Figure 01: Pace of growth after GDP exceeds USD1,000 per capita

5,000
GDP per capita USD

4,000

3,000

2,000

1,000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Years
Vietnam from 2008 Philippines from 2002 India from 2008 China from 2000
Source: IMA, JLL Research

Figure 02: Vietnam top the SEA in FDI in manufacturing sector, 2009-2018 (USD bn)

25.0
20.0 16.58

15.0
10.0
5.0
0.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Malaysia Vietnam Indonesia Thailand Philippines

Source: National State Bank, JLL Research
1
Oxford Economics, JLL estimate
2
Cambodia, the Lao People’s Democratic Republic, Myanmar and Viet Nam
5
Favourable Demographic Landscape
Excellent Labour Market Figure 03: Manufacturing wage in Southeast Asia compared to China
Lower labour costs is one major reason wage
why foreign manufacturers are attracted to 0.80

Manufacturing wage as % of China

Southeast Asia and Vietnam stands out as the 0.70
country’s labour cost remains competitive 0.60
when compared to the region. In 2018, the 0.50
country’s total working population aged 15 or 0.40
older accounted for 77% total population. 0.30
0.20
For a developing country, Vietnam scores 0.10
exceptionally well globally on education of 0
the workforce and labour market flexibility. Malaysia Thailand Vietnam Indonesia
2010 2018 2023
According to IMA Asia survey, Vietnam scores Source: IMA Asia
in global standardized mathematics
competency tests are in the same level as
Japan, Switzerland and Singapore. Figure 04: Vietnam has the fastest urban population growth in SEA
This generation will be part of Vietnam’s 4.0% 3.5%
workforce for the next five decades, provid- 3.1%
Urban population growth

2.9%
2.7%
ing companies the quality talent required for 3.0% 2.7%

growth. 2.0% 1.6%

1.0%
Urbanisation has been constantly improving,
0.0%
particularly in key economic zones that have Vietnam Indonesia Malaysia Philippines Thailand Singapore
attracted a large number of migrants from 2018-2025 2025-2035
nearby provinces as well as foreigners. Only Source: World Bank
36% of population live in cities in 2018, fast
forward to 2025, Vietnam is projected to
Figure 05: Vietnam’s middle income population to grow 12% CAGR in 2018-2030
attract 41 million urban residents, 45-50% of (Constant 2015 prices)
total population.
12%

10%
Growing middle income class 8%
Households earning more than USD 20,000
6%
annually is expected to be seven times
higher by 2030 and make up 23% of the 4%
population in 2030 compared to just 4% 2%
currently.
0%
Vietnam Philippines Indonesia Malaysia Thailand

Source: Oxford Economics, JLL estimates

6 Hai Phong - A vision for growth

Vietnam Strategic Location
Located in SEA, one of the fastest-growing regions and in close proximity to major market such as China and India, this
S-shaped country with its 3,260 km coastal line offers easy access to a market of over three billion population within five
days of shipping or four hour flight time.

Shortest flight time available

Hours

Tokyo

L aos
6 Non-stop flight

ai
Osa

m
ang
ka
5
Se

ep
Chi
ou

Ri
4

em
l

No

Si
go ou
ya 3 gzh
an
Gu
Deag 2
u
u
1 Maca

Busan
Hanoi Bangkok

oka 1 Hon
Fuku g Ko
ng
2
ore Sh
ap en
ing 3 zh
en
S
r
pu
m

4
Lu

Ya
la

n
Kao

go
a

ai
Ku

5
n
ngh

hsiu
Sha

Manila

Taipei

ng

Source: Google flight search

7
2 Strong Infrastructure Spending
Vietnam spends 5.8% of its GDP on infrastructure, the highest
level in SEA and the second highest in terms of total spending
on transport infrastructure. According to the 2018 World Bank
report, Vietnam, for the first time, has featured in the top five
PPI countries with ten projects at a total of USD 3.4 billion.
Vietnam is playing an increasingly important role in the global
supply chain, which has raised the interest of an increasing
number of logistic companies, who are eyeing Vietnam as their
next port of call.
The country is keen to improve its inefficient port infrastructure
to further support its attractiveness. According to Vietnam
Maritime Administration, the country aims to achieve the
annual throughput of 1,040-1,160 million tonnes by 2030.
Although the lack of well-developed infrastructure still prevails
across the country, constant improvements in the transportation
network under the Government’s effort to position the country
as a regional manufacturing hub is expected to continue to
tempt companies and investors into the country.

Figure 06: Vietnam has the second highest spending on transport infrastructure (road, rail, sea and airports).
In USD billion (2015 constant prices)
100

80

60

40

20

0
Indonesia Vietnam Malaysia Singapore Thailand Philippines
2015 2020 2025

Source: Oxford Economics, cited in PwC “Understanding infrastructure opportunities in ASEAN”, 2017

8 Hai Phong - A vision for growth

3 Business Environment

Global and regional uncertainty

Amid the ongoing wave of disruption in the global trading system,
Vietnam has stood out as the largest beneficiary given its flattering
economy, demographics and location.

Free trade agreement

Vietnam is considered as one of the Asian economies most open to

$
international trade. The country’s integration has developed at both
regional and global level, supported by the progressive development
of WTO and the most recently ratified CPTPP. This underpins the
Favourably impressive trade results of the country over the past two decades and
support the put Vietnam ahead of its goal of balancing trade by 2025.
development of
Industrial
and Logistics Government support
Established itself as an export-driven economy and focused on transforming
towards more efficient and sustainable development, Vietnam government
has created favourable environment for businesses with business incentives
offered within industrial parks and economic zones.

Vietnam has also launched a clear plan on industrial development by 2035.

Mechanical manufacturing, Electronics and New energy are three key pillars
driving the country’s economy.

Growing demand for logistics services

The robust growth of e-commerce has set a tone for the growing domestic demand
for logistics/warehouse properties. In addition, the shift of manufacturers from China to
Vietnam, due to its strategic location and competitive labour cost are the key demand
drivers for cross border logistics/warehouse services. Mordor Intelligence1 projected
the value of the Vietnam freight and logistics market would reach USD 113.32 billion
by 2023, reflecting a CAGR of 16.6% over the 2018-23 period. The market is set for
strong growth on the back of 1) Vietnam’s export-driven economy; 2) Vietnam’s
industrial expansion and 3) The growth of the domestic consumption market.

1
Mordor Intelligence, cited in Vietnam Freight & Logistics Market Study - Market Trends, Analysis & Forecasts to 2023 report
9
 Hai Phong A vision for
Growth
Hai Phong is one of five major municipalities in Vietnam, with
direct connection to the central authority. Located on the main
economic corridor, along the north-eastern coastal area, Hai
Phong is set to become the main gateway for import and export
for the Northern Region.
Given its proximity to China, being only 200 km from the border,
the city is widely regarded as the China+1 manufacturing base
in ASEAN to take advantage of China-ASEAN FTA.
Hai Phong has been the spotlight for FDI investment,
garnering attention and support from the central authority,
supported by a major infrastructure boom and numerous
governmental incentives.
The Hai Phong Economic Zone, which offers companies
preferential treatment when they set up operations, is also
acting as a catalyst to tempt more investors to the region.

10 Hai Phong - A vision for growth

Hai Phong Economic - One of the best performers
Home to nearly 2 million inhabitants, Hai Phong is the third largest city in Vietnam, after HCMC and Hanoi. The city’s
rapid urbanisation has underpinned its exceptional growth over the past five years.

The central government has shown its commitment to continue Hai Phong’s exponential growth by offering
numerous special tax incentives, which has paved the way for it to become a foreign investment magnet, as streams
of FDI pour it’s way into the city’s economy. The constant improvement of Hai Phong’s Provincial Competitiveness Index
(PCI) rating demonstrates the authorities continued efforts to enhance the business environment, which will
further bolster the attractiveness of Hai Phong.

Figure 07: Hai Phong is the fastest growing localities over the past three years
17%
GDP annual growth (%)

15%
13%
11%
9%
7%
5%
2014 2015 2016 2017 2018
Vietnam HCMC Hai Phong Da Nang Hanoi Can Tho
Source: Vietnam GSO

Figure 08: Hai Phong registered the second highest GDP per capita in 2018
12,000
9,800
10,000
USD per capita

8,000 6,628 6,700

6,000 5,672
4,292 4,082
4,000
2,000
0,000
HCMC Hai Phong Hanoi Da Nang Can Tho Vietnam
2018 2020 target
Source: Vietnam GSO

Figure 09: Registered FDI in Vietnam - Top 5 Localities

8
Registered FDI
(USD billion)

0
Hanoi HCMC Hai Phong Binh Duong Bac Ninh

Source: Vietnam FIA 2016 2017 Q2 2018

Figure 10: Hai Phong PCI amongst the top three in the north
25
Ranking, Lower is Better

20

15
10

0
Quang Ninh Hanoi Hai Phong Da Nang Long An HCMC Can Tho
Source: Vietnam PCI 2016 2017 Q2 2018
11
 Lang Son

Hai Phong Infrastructure

Thai Nguyen Development of Strong Infrastructure Backbone

Va
Vinh Nguyen
Bac Giang
Quang Ninh Cai B
Bac Ninh Islan

NR.
18 Hai Phong - Ha Long Highway
Uong Bi
HANOI NR. 18

. 10
Hai Duong Cam Pha

NR
ong
NR. 5 Ha L
A

Hanoi - Hai Phong Highway Cat Ba Island

Hai Phong A
SE
Hung Yen
A M
TN
IE
Phu Ly STV
E A

Nam Dinh
ad
l Ro
a
ast
Co

Ninh Binh

LEGEND PORT SYSTEM ROAD NETWORK

Lach Huyen Deep Sea Port Hai Phong – Hanoi Expressway 105 km
Highway Future Highway
Railway Draft -14 m Hai Phong – Ha Long - China 200 km
National Road Annual capacity 32 mil. tons in 2020 Coastal Highway 550 km
Existing Roads No. of berth 23
Future Roads
Cat Bi International Airport Hai Phong Port CAT BI INTERNATIONAL AIRPORT
Major Ports Draft -7 m No. of 2.7 mil
Haiphong Railway Station Annual capacity 92 mil. tons / year Passengers (2018 , ▲ 28.5% y-o-y)
Industrial clusters No. of Cargo 17,128 T/year
Port throughput 16.67% (2016-2017)
growth (2018 , ▲50% y-o-y)

12 Hai Phong - A vision for growth

 y
h wa Fangchenggang
ig Mong Cai
iH
g Ca
Mon 8
n- .1 Shortest flight and shipping time available
o NR
anD

Hours Non-stop flight

Bau
nd Recognizing that infrastructure is a 6

San

k
crucial element to leverage economic

gko
tos
development, Hai Phong will mobilise 5

Ban
Ne

en
its resources to develop modern and w

zh
synchronous transportation infrastruc- Yo 4

en
Va rk
n

Sh
ture, which will improve connections co
u l
to key surrounding regions. This will ve 3 ou
r Se
contribute to establishing Hai Phong Melb
as the main maritime trade gateway of ourn 2
e
the economic corridor in the northern
region. 1
Maritime
City’s infrastructure has undergone Manila
Hai Phong 5 10 15 20 25 30 Days
significant improvements through
the completion of three core projects
of Hanoi-Haiphong Expressway, Tan ey
Sydn Jaka
tar
Vu – Lach Huyen Highway, and Dinh
Vu – Cat Hai Bridge. By facilitating the s
le Sin
linkages to the Hanoi-Lao Cao Express n ge ga
sA pore
Way, these projects will reportedly help Lo
reduce the commute time between
a
am

the northern province of Lao Cai and

Os
h
ko

ak
ai

Hai Phong International Gateway Port

ou
Yo

a
ngh

Kaosiung

(HIGP) to approximately six hours.

Guangzh

Bus
Sha

an

Source: Google search

Figure 11: Vietnam’s container cargo throughput by 2030

100% Group 1 in the North from Quang Ninh to
90% Ninh Binh provinces
80%
70% Group 2 in the North Central Coast from
61% 62% 55% 49% Thanh Hoa to HaTinh provinces
60%
50% Group 3 in the Central Coast from Quang
40% Binh to Ha Tinh provinces
30%
Group 4 in the South Central Coast from
20% 35%
30% 33% 32% Binh Dinh to Binh Thuan provinces
10%
0% Group 5 in the Southeast of HCMC including
2016 2017 2020 2030 Ba Ria Vung Tau province

Group 1 Group 2 Group 3 Group 4 Group 5 Group 6 Group 6 in the Mekong Delta River including
Source: Vinamarine Phu Quoc Island and southwest islands
13
 Hai Phong on
Industrial and Logistics Landscape Va
nD

Bac Giang
Quang Ninh Cai Bau
Bac Ninh Island

NR. y
18 ighwa
ong H
Uong Bi - Ha L
hong
Hai P
NR. 18
Hai Duong . 10 Cam Pha
NR
Cai Lan
ng
NR. 5 Hai Phong Port Port Ha Lo
A
Dinh Vu Port
Hanoi - Hai Phong Highway Cat Bi Cat Ba Island
Intl. Airport
Hai Phong Lach Huyen
Deep Sea Port

A
SE
A M
E TN
T VI
EAS
Nam Dinh
Key facts
oad
al R
ast
Co

Total Land Area (ha)

4,701
Average Net Rent (sqm/lease term)
LEGEND
USD 92
Highway Future Highway Occupancy Rate
Railway
52%
National Road
Existing Roads
Future Roads
Cat Bi International Airport Total Ready Built (sqm)
Major Ports 395,000
Haiphong Railway Station Average Net Rent (sqm/month)
Existing Industrial Parks USD 4.6
Future Industrial Parks
Dinh Vu Cat Hai Economic zone

Note: Map only illustrate future projects having clear

address and development plans.

14 Hai Phong - A vision for growth

 Mong Cai
ay
g hw
i Hi
Ca 1 8
R.
ng
Mo N
n-

Over the past years, Hai Phong had established itself as a core industrial hub in Vietnam. Bene-
fiting from the positive effect of the China – ASEAN FTA, and the Official Development Assistance
(ODA) from Japan, Hai Phong is the preferred destination for manufacturing giants in high-tech
industries. Along with numerous incentives available to interested investors, Hai Phong, together
with Bac Ninh, are transforming the industrial landscape across the Northern region.

Key Developers Key Occupiers by Sector

Deep C Industrial Zone JSC 14% Computer Electronic and Optic

23% Machinery and Equipment N.E
32% Sao Do Investment Group JSC
10% Chemicals and Chemicals Prod
47%
Kinh Bac City
11% Logistics
10%
Vietnam Singapore IP JVC Plastic and Rubber Products
20% Others 10% Textile and Apparel
14%
4% 5% Other

Deep C Industrial Zone JSC 14% Computer Electronic and Optical Products
Sao Do Investment Group JSC Machinery and Equipment N.E.C
32% 10%
47% Chemicals and Chemicals Products
Kinh Bac City
Logistics
Vietnam Singapore IP JVC 10%
Plastic and Rubber Products
% Others 10% Textile and Apparel
4% 5% Other

15
Case study

16 Hai Phong - A vision for growth

Who
Founded in 1997, DEEP C had established itself as one of the
biggest industrial land developer groups in Vietnam.
It was derived from a successful partnership, between:
• Rent-a-Port – A Belgian company specialized in
industrial zones, renewable energy and marine
infrastructure development
• Hai Phong People’s Committee
Why
DEEP C has recognized the strong potential of Haiphong and
Quang Ninh to become a core industrial and logistics hub
in Vietnam, giving its strategic location, proximity to China,
logistics infrastructure, diversified economy along with its
population density.
DEEP C wants to foster the growth of manufacturing and
supporting services to turn the region into leading
destination for sustainable investment.
What
Deep C Industrial Zones consist of five subprojects in the
industrial area upstream of the Lach Huyen Port, with over
3,386 ha of industrial land. DEEP C offers a variety of options
for investment consideration, including:
• Industrial land for lease
• Ready-built-factory
• Logistic warehouse
• Built-To-Suit solutions
• Offices for lease
How
DEEP C has made green growth, sustainability and reliability
a key priority for its Industrial parks. Besides advanced
synchronous infrastructure and special tax incentives, all
investors will be benefitting from the reliable utilities such
as redundant underground energy supply partially sourced
from renewables, iso-certified waste water treatment
facilities as well as advanced telecom systems. The company
is also investing in a hybrid barging service via its inland
waterway terminal. All these efforts made DEEP C a truly
eco-industrial park and the best choice for investors in
north Vietnam.
17
 A Way Forward
Unlocking
Hai Phong Potential
There are many examples of port cities around the
world including London and Amsterdam. When
developed successfully, they can drive economic
activity and serve as a crucial connection between sea
and land transport. Hai Phong has all the necessary
ingredients to develop into a true global port city and
with continued investment in the development of new
roads, improvement of the city’s traffic management
system, improvement of rail and inland waterways,
increase in labour productivity, efficient custom and
administration procedures, development of supporting
industries and embracing innovation and technology
we firmly believe that Hai Phong has a vision for growth
which is set to continue for many years to come.

18 Hai Phong - A vision for growth

19
Key Contacts

Trang Bui
Senior Director of Markets
trang.bui@ap.jll.com

Van Nguyen
Director of Markets
hongvan.nguyen@ap.jll.com

Authors

Trang Le
Research and Consulting
trang.le@ap.jll.com

Hung Nguyen
Research and Consulting
quochung.nguyen@ap.jll.com

Stephen Wyatt
Vietnam Country Head
stephen.wyatt@ap.jll.com

Xuan Pham
Marketing and Communications
kimxuan.pham@ap.jll.com

jllvietnam.com

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20 Hai Phong - A vision for growth