Amid disruptions such as canal blockages, unpredictable seafaring conditions and global pandemics, companies are diversifying their supply chains for resilience―and zeroing in on emerging production hubs such as Vietnam.
As of 2021, Singapore is Vietnam’s largest foreign investor. Manufacturers seeking to set up in Vietnam have found an efficient launchpad in Singapore, including through projects by Singapore-based companies such as Sembcorp Development’s Vietnam Singapore Industrial Parks (VSIPs).
Since their inception in 1996, Sembcorp Development VSIPs have attracted S$20 billion (US$15 billion) in capital investment from tenants. Much of VSIPs’ success is owed to their large land sizes, diverse localities, and proximity to Vietnam’s major seaports, airports, and financial hubs such as Hanoi. Proximity to China and the rest of Southeast Asia are also advantageous in helping companies to source for raw materials and export to other markets.
How VSIPs de-risk new ventures and support regional diversification
With coffee consumption booming worldwide alongside growing concerns over the beverage’s sustainability, coffee-product manufacturers must not only meet growing production demands, but make their operations sustainable as well.
This is precisely what conglomerate Tata Group’s subsidiary Tata Coffee Ltd. has achieved at VSIP Binh Duong II, located two hours away from Ho Chi Minh City. In addition to proximity to raw materials for its freeze-dried coffee products and to Tata Group’s ASEAN office in Singapore, the company’s custom-built plant is LEED® (Leadership in Energy and Environmental Design) certified.
Likewise, VSIP is committed to environmental sustainability with investments in smart energy solutions. In the future, tenants can have access to green solutions, such as renewable energy and water recycling.
“Working with Sembcorp made things easy for us,” says Mr. K. V. Rao, Resident Director, ASEAN of Tata Sons, the Group’s principal investment holding company. “The involvement of a major industrial park operator considerably de-risked set-up, and the reliability of a Singaporean brand really does add value.”
Tata Coffee received support from Sembcorp Development to launch its 5000 mtpa (million tonnes per annum) plant within a mere 19 months of groundbreaking. As its first coffee plant outside of India, Tata Coffee’s Binh Duong II future-ready facility has not only increased the company’s production capacity but also bolstered its supply chain against disruptions.
“Using Singapore as a base and partnering with Singapore-based partners such as Sembcorp Development has provided us with a foothold to expand in Vietnam,” Mr. Rao shares.
He adds that Singapore’s ease of doing business, strong trade connectivity, and vibrant innovation ecosystem “provide companies excellent support in their efforts to expand”.
How VSIPs offer seamless setup with room for growth
Singapore is also seen as a launchpad for global beverage leader Suntory Beverage & Food (SBF) APAC.
“Singaporean companies such as YCH Group and Sembcorp have a strong regional footprint, and we were able to leverage that in our expansion across Southeast Asia,” says Mr Shekhar Mundlay, Director and CEO of SBF APAC. “Whether we invest in Thailand, or Vietnam, or Indonesia, we have partnered with Singapore-based companies, and that has proved to be very beneficial for our business growth.”
To tap Vietnam’s burgeoning consumer market, SBF entered a strategic partnership with PepsiCo Vietnam to form Suntory PepsiCo Beverage Vietnam (SPVB), and chose VSIP Bac Ninh for its first manufacturing facility in north Vietnam.
Within two years, SPVB’s success necessitated the construction of a PET preform manufacturing unit in an additional separate plot within the same VSIP. VSIPs offer companies such as SPVB room to expand and custom-build facilities designed for evolving needs.
“Compared to more developed regions of the world, Southeast Asia’s demographics have a much longer runway to keep growing,” says Mr. Shekhar. “As the domestic middle classes swell, we anticipate an increase in premiumisation of brands and products”.
This shift towards premiumisation prompted Suntory to open a new manufacturing and R&D operations in Singapore this year. Singapore’s well-developed R&D and IP frameworks are conducive to the development of “high-value, specialised ingredients, which can then be downstreamed to our factories in other markets such as Vietnam,” says Mr. Shekhar.
Investing for the long-term
Having successfully leveraged Sembcorp’s industrial expertise to gain a foothold in the Vietnamese market, Mr Mundlay advises companies looking to manufacture in Southeast Asia to “partner with established industrial park operators. The initial costs may be high, but in the long term, well-developed infrastructure will make your overall cost of ownership lower”.
“The pandemic has driven home the importance of having diversified and resilient supply chains,” Mr Rao adds. “Companies looking to strengthen their value chains should consider countries like Vietnam, as they have plenty of expansion potential.”
With the unique range of opportunities and business advantages offered, you can build your perfect manufacturing base with Sembcorp Development’s Vietnam Singapore Industrial Parks.
Please note that industrial land in VSIP Binh Duong III (in Southern Vietnam) will open for booking in 2022.
Reach out to EDB at client_services@edb.gov.sg, or to Sembcorp Development at wendy.ho@sembcorp.com.
