Factors contribute to the potential development of Hanoi

Hanoi is one of the biggest, and fastest growing investment destinations in Vietnam. In recent years, the city has taken a holistic approach in improving its business environment. The city is rapidly developing its logistics infrastructure, industrial infrastructure and satellite areas. From the perspective of an investor, these changes bring unprecedented opportunities due to improvements in the flow of goods, services and highly skilled domestic workers.

Logistics infrastructure

In the upcoming years, transport and logistic infrastructure are expected to continue to be prioritized. Authorities propose that land area for transport projects will make up between 12-15 percent of total land for all construction projects by 2025, up nearly 50 percent compared to 2020.

Transportation 

In 2015, The Capital Transportation Plan was approved by the Prime Minister. The road infrastructure network of Hanoi includes 11 routes of belt roads and radial roads (the whole Northern region will have 14 high-speed routes), with a total length of over 287km, and all are 4-6 lanes. Currently, 8 out of 11 routes have been invested and formed.

With 11 belt roads and radial roads passing through the area, forming 4 important economic corridors of the Northern region, Hanoi will become the nucleus of the Northern economic region, solidifying its position as one of the economic locomotives of Vietnam.

Most recently in June 2022, Nguyen Chi Dung - Minister of Planning and Investment Ministry - presented an investment proposal on the Ring Road 4 project to the government. Ring Road 4 is expected to be completed in 2027 with the expectation of increasing connectivity between provinces in the region, helping to expand development space, reduce population density in urban areas and its pressure on existing traffic routes.

Other important transportation infrastructure in Hanoi include a $866 million metro line connecting Ha Dong - Cat Linh spanning 13.1km, another metro line connecting Nhon - Ga Ha Noi to be completed in 2027, 5 railway lines connecting with localities, 9 river ports with warehouse systems and auxiliary structures, and Noi Bai International Airport with an increasingly developed logistical support system.

Ports, warehouses and Inland Container Depot (ICD) 

Although there have been many positive developments, logistics enterprises in Hanoi still experience many bottlenecks. The first bottleneck is the system of warehouses and yards in Hanoi still lacking in number of locations, connectivity, specialization (cold storage, special goods storage,...). The second bottleneck is the difficulties in getting land clearance to build more logistics centers. 

There are still very few ICDs in Hanoi. Regarding their connection to different transport modes, they are currently only connected to roads, and not yet connected with railways and riverways. In addition, major obstacles to the development of logistics services are traffic jams, narrow roads, vehicle load limits…which have increased the costs for enterprises.

Mr. Tran Duc Nghia, director of Delta International, shares that Hanoi needs more logistics centers, more warehouses and yards. But the most important thing is the linkage along the logistics chain, the connection between modes of transport to reduce logistics costs and help the industry become more professional and efficient.

To solve these problems, Hanoi has issued the project “Management and development of logistics activities in the area until 2025”. Accordingly, Hanoi will build a Grade I logistics center (in the North) and a Grade II logistics center (in the South), with sizes between 20ha and 50ha. 

These centers connect inland ports, seaports (such as Hai Phong, Hon Gai, Cai Lan) and airports, bus stations, railway stations, industrial zones...The city will also build a specialized aviation logistics center at Noi Bai International Airport or with roads connecting directly to the airport.

In the logistics service development plan in 2022, Hanoi has set its goals to build 2 ICDs within the year (in Gia Lam district and Hoai Duc district). Other agendas include the planning for 2 new logistics centers (in Phu Xuyen and Soc Son districts) and the approval of an international container port (in Co Bi commune, Gia Lam district). The plan also encourages and advocates for continued investment in logistics service infrastructure projects

Industrial infrastructure

Current situation 

According to the Ministry of Industry and Trade, currently, the city has 10 operating industrial zones with an area of 1,347.42 ha. Specifically, 9 out of 10 industrial zones with an area of 1,270,5 ha have been consistently put into operation at near 100% utilization rate. 

In these industrial zones, a strong emphasis is put on attracting high tech FDI projects. A prime example is developing Hoa Lac industrial zone, which serves as the technology hub of Hanoi. In Hoa Lac, high tech FDI projects are given the largest land reserve, as well as the biggest incentives. High tech enterprises are eligible for exemption in corporate income tax and land rentals for the construction of scientific research facilities. Some cases are entitled to the preferential tax rate of 10% within 15 years. Older, more established industrial zones like Noi Bai industrial zone and Thang Long industrial zone have also had success in attracting high tech enterprises in biotech, high precision manufacturing…

As of early December 2021, Hanoi's industrial zones have attracted over 700 projects. Among them, 303 are FDI projects with a total registered investment capital of nearly $6.1 billion (average of over $18 million/project). The remaining 399 are domestic investment projects with a total registered investment capital of nearly 18 trillion VND. 

In Hanoi, there are about 165,000 employees working in industrial zones, including 1,100 foreign workers.

CBRE's report on the industrial zone real estate market in the third quarter of 2021 shows that because there’s not much land availability, the asking price for land in Hanoi is twice as high as in some neighboring localities. The highest rental price in Hanoi is 250 USD/m2, much higher than Hung Yen, Hai Duong at 100 USD/m2 or Hai Phong at 130 USD/m2.

Upcoming plans

On January 7, Hanoi People's Committee issued Decision No. 65/QD-UBND approving the project "Establishment of 2-5 new industrial zones, period 2021-2025". With this project, the city determines and strives to complete 5 new industrial zones in the period 2021-2025, specifically: Sach Soc Son Industrial Zone, Soc Son district with an area of 302.8ha; Dong Anh Industrial Zone, Dong Anh District with an area of 300ha; Bac Thuong Tin Industrial Zone, Thuong Tin district with an area of 112ha; Phu Nghia Industrial Zone, Chuong My district with an area of 389ha; Phung Hiep Industrial Zone, Thuong Tin district with an area of 174.88 ha.

Satellite urban development planning

Organizing urban space in Hanoi according to the urban cluster model is expected to be an important driving force for economic and urban development in the capital. The cluster consists of five urban areas: Hoa Lac, Soc Son, Son Tay, Xuan Mai, Phu Xuyen. 

Of these five, Hoa Lac is the biggest, has received the most funding and attention to be a hub for scientific and high-technology research with universities and medical centers, among others. However, after 20 years, only the two core zones (out of 6 zones) in Hoa Lac are being developed: Hanoi University area, and the Hi-tech park area.

Tran Dac Trung - Deputy Head of the Management Board of Hoa Lac Hi-Tech Park - said that up to now, the total land area that investors are using in Hoa Lac Hi-Tech Park is about 240ha/1,000ha. Currently, there are 94 investment projects, with a total registered capital of about 91,250 billion VND, of which 55 projects are in operation. 

More investment is needed in these satellite areas, and the government has made many incentives to attract investors including tax reduction, guarantee of accommodation for workers, ease of work and travel for foreign workers working in developmental projects, etc.