The pros and cons of IP relocations

There are many old industrial parks located in or near densely developed and populated urban areas in Vietnam that fail to provide adequate environmental protection. Timothy D. Van Epp, fellow of the American Institute of Certified Planners, and Mai Nguyen of the American Planning Association’s International Division, explain why new rules or incentives may be needed to implement the government’s relocation policy.

Traditional industrial parks (IPs) often include no access to centralised wastewater treatment, and are otherwise incompatible with the surrounding urban land uses. While the government approved a national policy of relocating IPs in 2009, until now, it has not implemented the policy due to economic reasons such as tenants having long land lease terms remaining and the additional expenses for leasing a new site.

The past 10 years have seen a growing focus on optimising IPs location and relocation decisions, reflecting the evolving needs of businesses, the dynamic nature of global manufacturing and supply chains, and the growing importance of sustainability.

This broader context of IPs market opportunities and constraints, the mission or function of an IP and corresponding mix of industries selected to accomplish that mission, may serve as an incentive for relocating an existing IP.

Some recent market trends influencing IP location include that global production networks and outsourcing are influencing relocation decisions, with some companies seeking lower-cost locations; industry-specific parks catering to specific sectors like pharmaceuticals or high-tech; development of smaller, strategically located parks within urban areas are catering to e-commerce and last-mile delivery needs; IP development strategies tailored to draw in specific segments; special economic zones offering tax breaks; and eco-IPs attracting environmentally conscious companies.

Factors affecting IPs location

Why do many existing IPs seek new locations? Shortcomings of existing locations that drive IP relocations include outdated infrastructure, environmental regulations, changing production needs, or economic shifts in the existing location, and land use trends in the surrounding area. These negative factors of existing locations are then compared against the positive attributes of potential alternative locations, many relating to contemporary market realities.

Key factors include logistics and connectivity, with studies emphasising the increasing importance of access to transportation infrastructure (roads, railways, airports, ports) and efficient logistics networks for IPs to attract businesses.

Smart technologies are also critical, with research being conducted on how parks can provide infrastructure and support for digitalisation and integration of technologies like automation, sensor networks, data analytics, and smart grids to enhance and optimise operational efficiency and resource management within IPs. Studies analyse how automation might affect IP space requirements and workforce needs in the future.

Skilled workforce and innovation are also needed. The availability of a skilled workforce and proximity to research institutions are becoming crucial factors, fostering innovation and attracting technology-driven companies. The need for parks to adapt to changes in workforce skills and automation is a growing concern.

Sustainability is also high on the agenda. Whether an eco-IP is envisioned, environmental regulations and growing corporate social responsibility are driving IP planning towards minimising the ecological impact of its site location, as well as its construction and operation and incorporating renewable energy sources, utilising green infrastructure, and minimising waste and pollution.

The challenges associated with relocation – for the IP tenants and owner – clearly include cost implications, disruption to operations, and potential workforce displacement. However, there are broader concerns, for the neighbouring community and the city in general, that must be addressed to ensure a smooth transition and win-win outcomes for all stakeholders. Using the sustainability framework of prosperity, people, and planet, involves balancing the economic impact of IPs on job loss or creation, regional economic development, and attracting foreign investments on the one hand, with community concerns relating to displacement of neighbourhoods, environmental pollution, and infrastructure strain caused by IPs.

Decision-making tools

There are many tools available to support decision-making relative IP location and relocation, such as multi-criteria decision analysis. This approach helps decision-makers weigh various factors with different priorities, leading to more informed choices for park location and relocation. Methods consider a wide range of factors, including proximity to suppliers/markets, land availability and costs, infrastructure connections and costs, labour availability and costs, environmental and other regulatory requirements and costs.

There are also data-driven approaches using spatial analysis tools and advanced location modelling. Big data and spatial analysis tools are increasingly used to identify optimal locations and predict relocation impacts. Geographic information systems and spatial modelling techniques are used to analyse potential locations based on various spatial data sets, including land availability, infrastructure, labour costs, and environmental regulations.

Environmental and Social Impact Assessment also play a key role. The Ministry of Natural Resources and Environment’s requirements do not include social assessment, but for site-specific analyses of IP relocation there would be advantages of applying international donor methods of social impact assessment. Management systems for addressing environmental, health and safety, and social concerns also offer time-tested methods for achieving performance objectives for cities, IP owners, and tenants.

Involving communities, workers, and environmental groups in the decision-making process is important for creating win-win outcomes for all parties affected and interested in a relocation decision.

The Ministry of Planning and Investment has partnered with international donors such as the United Nations Industrial Development Organization and the SECO Corporation of Switzerland in establishing frameworks and policies, including stakeholder engagement methods, in creating eco-IPs throughout Vietnam.

Stakeholder engagement in those development processes has emphasised state management agencies at all levels of government and relevant members of the private sector and local community. Methods utilised have included training courses, workshops, communication and exchange programmes to familiarise stakeholders with the positive experiences and benefits of eco-IP development, including its industrial symbiosis and circular economy attributes, in Vietnam and internationally.

Urban planning for IP relocation

Whether locating a new IP of any kind, or relocating an existing IP, there is a common need and challenge for not only stakeholder engagement but for comprehensive urban planning. And this applies to both the location of the existing IP and to the new location.

Firstly, what happens to a city neighbourhood or district when an existing IP leaves the area? Is there a loss of jobs or other economic loss due to lost demand for local goods and services that would not be replaced by the newly relocated IP? What can the buildings and land left behind be used for? Can some of the buildings be adaptively reused? Is there contamination by hazardous chemicals in the buildings, soil, surface water or groundwater that needs to be cleaned up before they can be productively used again?

These concerns will often reveal themselves in uniquely local ways, so that a one size fits all solution will not likely be effective for all relocating IPs. Local factors influencing the nature and extent of these issues include the type of IP and corresponding mix of industrial tenants, the economic conditions and economic development needs of the vicinity, the existing surrounding land uses and population, existing community concerns, and the potential and specific plans for improved social, economic and environmental conditions.

Relocating an entire IP is equivalent to relocating an entire urban land use. Such an endeavour necessitates engaging a wide range of city government, business and citizen stakeholders, as well as the IP owners and tenants, in a comprehensive urban planning process addressing and connecting both the existing and new IP locations.

This planning process should explore the opportunities and use the tools described above. In doing so, the process should strive for win-win solutions for all parties involved. While enforcing existing environmental standards and regulations at the existing IP location is a minimum approach to improving the situation, it is only a suboptimal solution.

Alternatively, regardless of what new type of IP may be preferred, there is no reason why it cannot be overlain with at least some elements of the eco-IP approach, and in so doing be able to leverage the now well-established frameworks and policies for developing such parks. Combining the eco-IP approach with a package of government incentives for relocation and/or financing through a public-private partnership may make the difference in IP relocation decision-making

Timothy D. Van Epp and Mai Nguyen

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