Haiphong – „Scrappy Harbor Town“ Turning into Industrial Hub
Updated: Mar 26, 2021
The northern coastal city of Haiphong is not well-known to most foreigners. If it is mentioned internationally, it is often referred to as the “outport of Hanoi”. However, the third largest city of Vietnam with about 2,000 years of history surely is a major municipality in its own right. Locally, Haiphong has a pretty bad reputation similar of “something between Cleveland and Naples – an industrial port (…) famous for (…) organized crime”. This however is changing due to the city’s favorable geographic location and recent infrastructure developments that enable Haiphong to actually make use of it. In today’s blog we will reiterate on the city’s (economic) history, recent developments, and future plans of northern Vietnam’s new manufacturing hub attracting an increasing number of foreign companies.
Please note that this article is part of a marketing project in cooperation with DEEP C Industrial Zones.
Haiphong’s location might be its biggest advantage: The city is positioned on the north-eastern edge of the Red River Delta. It sits on the mouths of the rivers Lach Tray, Cam and Bach Dang. These waterways are connecting Haiphong with the rest of northern Vietnam. On the seaside the city is lying on the Gulf of Tonkin which grants it convenient access to southern China and south-east Asia. While the region is prone to seasonal Typhoons, Haiphong is largely sheltered from high tides by the neighboring Halong Bay with its world-famous limestone islands as well as Hainan island in China. Famous Vietnamese general Le Chan recognized these benefits and laid the city’s foundations at the beginning of the first century AD. The Chinese also saw that the region around Haiphong has strategic value. They tried to invade northern Vietnam twice through the Bach Dang river near the city and were both times repelled by the Vietnamese generals Ngo Quyen (938 AD) and Tran Hung Dao (1288 AD).
Haiphong has a strategic location to serve as an outport for northern Vietnam and southwestern China
It was the French who eventually fully developed the logistical and economic potential of Haiphong. In a first step they made Haiphong an outport for Hanoi; back then the capital city of their Indochinese colonial holdings. The city thus became a seaport in 1874. Albeit, the bigger goal was to connect mountainous Yunnan in China to the sea through the port of Haiphong. For this purpose, the French Empire built a railway track from Kunming along the Red River to Haiphong. In 1910 the “Kunming-Haiphong Railway” was completed. Through Haiphong harbor, primary goods such as rubber and tin from Yunnan where exported to the French Empire while French consumer goods where imported from here to China. This business made Haiphong the second most busy port in Indochina just behind Saigon. In the truest sense of the word the railway was a “locomotive” for the development of Haiphong. During the 1930s and 1940s the city developed into an economic powerhouse, especially for textile production.
Haiphong during French colonial times
However, the beginning of the Second World War all but stopped the dynamic development of the city. The Japanese saw Haiphong as one of their first strategic goals and took it in 1940. The city’s roughest patch began with the First Indochinese War which actually started with the “Haiphong Incident”: In 1946 the northern Vietnamese government under Ho Chi Minh denied the French to transfer the customs administration of Haiphong to them. The (former) colonial power reacted by bombarding Haiphong; the first hostility in the First “French” Indochinese War which lasted until 1954. In the Second “American” Indochinese War from 1962 to 1974 the city was crucial for the import of war materials for the communist forces from the Soviet Union. The USA mined the port to prevent these from coming in. The blockade was another blow to the city which also suffered under repeated air raids (e.g. Operation Linebacker).
After the Indochinese Wars (there was a third “Chinese” one from 1977 to 1979) finally ended, Vietnam’s economy experienced a catastrophic slump. Haiphong’s industrial and logistical foundations were shattered. It must have been during these times that the city developed its “scrappy” image. This was led by a peak in the activity of organized crime. In the 1980s and early 1990s colorful mafia lords emerged. These figures shaped Haiphong's image within Vietnam as “scrappy” or even “dangerous”. However, on a local level the city government eventually reacted to the mafia activity by cracking down on it. In 1995, notorious “Lesbian Mob Boss” Dung Ha was arrested, virtually ending the golden era of crime in Haiphong. The city had a hard time shedding its bad image though. Only recently, Haiphong's reputation has begun to change due to its dynamic economic development.
Meanwhile, on a country-wide level the economic crisis was finally brought to end by starting the famous “Doi Moi” reforms in 1986 which introduced certain aspects of market-economy to this socialist country. In 1990, the first two “Key Economic Zones” of “HCMC-Dong Nai-Ba Ria Vung Tau” in southern Vietnam and “Hanoi-Haiphong-Quang Ninh” were announced. The city was now a spearhead of economic modernization in Vietnam. In an innovative move at the time, Haiphong People’s Committee decided to establish a Joint-Venture with the private Belgian company “Rent-A-Port” in 1997 to develop a modern industrial zone. Today, this JV is known as “DEEP C”. The industrial zone laid the basis to grow the evolving international investor community in Haiphong. From its start, DEEP C must have been a draw for investors because it was (and is) situated closely to Haiphong’s river port. This therefore was an ideal position for exporting enterprises in contrast to the city’s hinterland. Back then, overland transport was still an issue. Goods from the greater Hanoi area were squeezed through the National Highway No. 5. Furthermore, because bridges were amiss, it took 75 km from Haiphong to Halong, although the city is only 25 km away by air path. Also, the river port could not accommodate the ever-growing international container ships and the city was without a modern airport.
It took Haiphong a few years, but it was able to solve the above-mentioned logistical issues recently through key infrastructure developments:
Construction of the Hanoi-Haiphong Expressway (2015): As mentioned above, National Highway No. 5 used to be the main link between Hanoi, the industrial heartland of Bac Ninh as well as Hai Duong and Haiphong. The street was (and still is) overburdened with traffic. In contrast, the Hanoi-Haiphong Expressway is a modern six-lane road meant to relieve the pressure on the old National Highway and to speed up transportation time. It now only takes about 90 minutes from Hanoi to Haiphong while the same route on the National Highway can take more than three hours. However, many trucks still use the old route due to comparatively high fees and overloading restrictions on the Hanoi-Haiphong Expressway. Because of this, the Expressway at times is rather deserted. In any case, the new connection has greatly improved Haiphong’s access to the manufacturing complexes in its hinterland.
Upgrade of the “Cat Bi International Airport” (2016): Haiphong’s main airport received an all-new terminal and a runway renovation and is now able to serve modern wide-body aircraft. It serves many domestic as well as direct international routes. In 2019, the airport was voted the “best” in Vietnam. The city plans to upgrade the airport by 2020 with an additional passenger terminal and an expansion of the cargo terminal in order to meet the growing demand for air travel and transportation within the city.
First phase of “Lach Huyen Deep Water Port” (2018): As described above, Haiphong already has been a seaport since 1874. However, since then it relied on its river port at the mouth of the “Cam”. The new port, also known as “Haiphong International Container Terminal”, is a deep-water port. It sits on newly claimed land right in the Gulf of Tonkin. While the river port is only seven meters deep, the new Lach Huyen port has a draft of 14 meters. Even the biggest container ships can now call Haiphong. The expansion of the port is still ongoing with the second phase bound for completion in 2020. There are no direct connections to Europe yet. However, with growing freight volumes this might change in the future. Access to the new port is possible via the newly erected Tan Vu-Lach Huyen bridge. With 5.4 km it is the longest sea-crossing bridge in south-east Asia.
Completion of Bach Dang Bridge (2018): Thanks to this bridge the neighboring cities of Haiphong and Halong came much closer. The thing lying between them is the mighty Bach Dang river. Building a bridge here was difficult because container ships are passing through the mouth of the Bach Dang to get to the Cam river port in Haiphong. People and goods travelling from one city to the other therefore had to make a huge detour through the coastal hinterland. Finally, in 2018 the Bach Dang Bridge was completed. It reduced the distance between Hanoi and Haiphong from 75 km to just 25 km. Equally, travel distance from Haiphong to the Chinese border shrank by 50 km to just 240 km and the industrial area of Shenzhen can be reached in less than 12 hours trucking.
Replacement of the Kunming-Haiphong Railway (tbd): The idea of re-employing the old railway connection from Yunnan to Haiphong has surfaced again recently. A Chinese survey found in 2019 that a complete replacement of the colonial-era narrow-gauge tracks and equipment of modern support facilities as well as rolling stock would cost about 4.3 billion USD. The Vietnamese government believes the project is necessary as a “key to establish a transport network north of the Hong River, connecting the northwest region to the delta and Hai Phong seaport – one of biggest maritime centers in Vietnam.” While the Chinese side seems to have great interest into the project, it seems unlikely that financing will be made through the BRI because of skepticism in Vietnam. Therefore, the local authorities will have to figure out how to allocate budget.
Infrastructure Projects in Haiphong
Due to these infrastructure projects Haiphong now is able to use its geographical advantages to serve as a logistical hub for northern Vietnam. But that is not the end of it: The city itself has become enormously popular with industrial investors domestically and from overseas. From 2015 to 2019 the accumulated international investments grew by 2/3 from 11,2 billion USD to 18,7 billion USD. Biggest investor is LG with over 4.6 billion USD. Bridgestone, located at above-mentioned DEEP C Industrial Zones, has invested 1.2 billion USD into the biggest tire plant it operates outside of Japan. Haiphong is now teeming with investments from Korea and Japan. Chinese companies also show increased interested. From Germany, notable investors are Knauf, ZF and Seidensticker. Investors value the port access, the connection to the hinterland, the tax and export incentives as well as the labor supply.
Top 10 biggest FDI projects in Haiphong
*Status: October 31, 2019
Another milestone in the city’s economic development was the establishment of Vietnam’s first big ticket national Automotive OEM, “Vinfast”. Belonging to the Vingroup, this manufacturer has started production of passenger vehicles in 2019. The factory is located on the island Cat Hai, right next to Lach Huyen Port. While historically international automotive suppliers mostly gave a wide berth around Vietnam, Haiphong hopes to establish itself as a car manufacturing hub.
Because of the strongly evolving industry in its city borders, Haiphong is experiencing unprecedented GDP growth. The local economy’s expansion accelerated from 10.17% in 2015 to 16.68% in 2019. While the population of Haiphong remains fairly stable with roughly two million inhabitants the city’s face is changing quickly. While still “scrappy” in many parts, Haiphong is modernizing. Vingroup (see above) has built a huge new township close to the city center with a blogger liking it to a “suburban project in Florida”. International schools, like QSI, and hospitals, like Vinmec (see again: Vingroup), complete the necessary infrastructure for international residents. While the Avani hotel in the past was kind of the only recommendable place to stay in Haiphong, new hotel projects such as Vinpearl (and again: Vingroup), Mercure, Pullman, JW Mariott and Hilton are either already completed or slated for operation in the short term. These developments signal a growing demand for accommodation for business and leisure travelers. While the city is now dashing into the 21st century it also sports many vestiges of the 20th century. Haiphong has a beautiful historic center and the architecture in the French quarter is still preserved. The city is also famous for its cuisine like “Banh Da Cua” and “Banh My Que”. While Haiphong is lacking the entertainment options of Hanoi or HCMC, Halong Bay, Cat Ba island as well as the mountains to the north are well-suited for quick getaways.
The coming years will bring further modernization of the cityscape and development of the economy. A key movement will probably be stronger integration and cooperation between Haiphong and its neighboring province of Quang Ninh of which Halong City is the capital. The Bach Dang Bridge is a cornerstone for this development. Deep C was a driver for the development of modern industrial zones in Haiphong from the 1990s on. Now, it is also showcasing a leading role into this new direction. While available land close to the ports of Haiphong along the Gulf of Tonkin is limited (in fact most new developments are already using land-reclamation to make space) there still is available supply in Quang Ninh. DEEP C will hence develop industrial zones there, too. Over the course of the coming years a huge chunk of bay area surrounding Haiphong could be transferred into a sprawling manufacturing complex. Within this vision, Haiphong and western Quang Ninh province would be a logistical and industrial hub while Halong City and eastern Quang Ninh province (including famous Halong Bay) would develop into a modern tourism and service center. This development could ensure a sustainable growth path for the region and improve the livelihoods of millions of people.
...aaand action! Watch our video on Haiphong here:
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