Overseas Industrial Parks Business

Bidding to develop an industrial park in northern Vietnam

A 30-minute drive from downtown Hanoi, the capital of Vietnam, brings one to an open expanse 16km north of the city dotted with factories. This is Thang Long Industrial Park, covering a total area of 274ha, around 5.5 times that of Tokyo Disneyland. From the enormous gate erected at the entrance to the industrial park, large numbers of people can be seen coming and going along the roadway that runs straight through the site.

A couple of decades ago, this area had been farmland for as far as the eye could see. As Masayasu Otsuka, President & CEO of Thang Long Industrial Park, explains: “Before development on this industrial park began, there had been almost no industry other than agriculture in this area on the outskirts of Hanoi. When the Vietnamese government began attracting investment from abroad to further develop northern Vietnam, Sumitomo Corporation submitted a bid to build this industrial park.”

An enormous gate that serves as the entrance to the extensive Thang Long Industrial Park

Thang Long Industrial Park covers an area 5.5 times that of Tokyo Disneyland, and sits on a site previously farmland as far as the eye could see.

With experience in developing and operating industrial parks in Indonesia and the Philippines already under its belt, Sumitomo Corporation initiated a field survey and in 1997 established a local company to operate the industrial park. The park was named Thang Long, which in Vietnamese means “rising dragon,” to signify the hope that this new company and the country of Vietnam, as well as the Japanese companies who would come to operate in this industrial park, would soar for the heavens with the energy of a rising dragon.

However, development proved no easy task. Land is a precious asset for farmers, so development of the industrial park started with negotiations on acquiring this valuable asset. The site under consideration consisted of land owned by about 800 households, so the company entered into dialogue with each and every one of these households and steadily pursued negotiations.

Meanwhile in Japan, efforts in Japan to recruit tenants were not making as much progress as initially hoped. Companies at the time almost never included Vietnam among their prospective expansion destinations, so it was only natural that many companies saw significant risks in setting up factories in a country offering few examples of other Japanese companies operating there.

Yoshihiko Shimizu

Tomoyasu Shimizu has been posted to Vietnam twice since joining Sumitomo Corporation in 1991. Although he presently has a desk at the Tokyo Head Office, he is very enthusiastic about the prospect of working on-the-ground overseas again one day. “My personal goal at the moment is to hone my skills at golf, which I took up while stationed in Vietnam,” he comments with a laugh.

Alleviating the risks and concerns of tenants

The risks and concerns of these companies were eventually alleviated by Sumitomo Corporation’s unique integrated corporate strength. “Our policy was to comprehensively support companies operating in the industrial park with both hard and soft infrastructure,” says Tomoyasu Shimizu, formerly posted in Vietnam but now supporting efforts in Thang Long Industrial Park from the Tokyo Head Office as a member of the Overseas Industrial Parks Department.

“With the cooperation of the Vietnamese government, we were able to furnish Thang Long Industrial Park with almost all the infrastructure needed for production activities, including an electric power substation, a water treatment plant, and a sewage treatment plant. However, simply providing hard infrastructure and lots offered no guarantee that companies would be able to successfully operate there. We believed that tenants would only be able to focus on their production activities if they had access to ‘soft’ support as well, such as help with the licensing procedures for starting up local companies, personnel hiring, labor management, and information on the local legal system.”

It goes without saying that the knowledge an integrated trading company characteristically gains in creating local companies and opening offices around the world was put to good use in providing this soft support. Shimizu points out that the Company’s experience in operating industrial parks in other Southeast Asia countries was of great help.

Sumitomo Corporation’s support for tenants went beyond assisting in administrative procedures and supplying information to encompass functions such as logistics and goods procurement that are essential to production activities. It launched Dragon Logistics, a joint venture company responsible for local logistics, in 1996 when Thang Long Industrial Park was being developed, and in 2003 it opened the Hanoi Steel Center, which handles iron and steel material. Sumitomo Corporation thus made available both the locations and infrastructure needed for production, offered support to complete the various procedures needed to begin local business activities, provided the materials needed for production, and supplied logistics functions. The usual business model for industrial parks concludes with the sale of lots, but Thang Long became one of Southeast Asia’s leading industrial parks by creating a comprehensive and seamless support structure for companies known as “operational support” within the Sumitomo Corporation Group and thereby establishing the foundations on which tenants could securely devote themselves to their production activities.

Sumitomo Corporation’s Overseas Industrial Parks Business operates under the slogan “Our relationship with our clients begins when contracts are concluded.” Such a relationship only comes to an end when the tenants terminates its activities in the industrial park.

“There have been very few companies who have moved into Thang Long and subsequently left, and indeed a far greater number have expanded their businesses locally. That fact alone attests highly to Thang Long Industrial Park’s infrastructure and support,” noted Shimizu with pride. In effect, these relationships never end.

Making available all the logistics services companies need

“There are three stages in providing companies with logistics support. The first is providing logistics-related information and consulting when soliciting tenants, the second is conveying equipment to factories after tenancy agreements have been signed, and the third is transporting materials and finished products after production begins,” explains Keiichiro Seto, currently engaged in providing operational support for Dragon Logistics at Sumitomo Corporation’s Head Office. As a logistics professional, he advises companies from the initial stages of their tenancy and then arranges for production equipment to be conveyed to factory sites, for goods and materials to be supplied to the factories once production begins, and for the finished products manufactured there to be transported to destinations inside and outside Vietnam. Dragon Logistics offers nearly every logistics service the tenants need.

The monthly tenant meeting, “Ichimoku-kai” where the operators of Thang Long Industrial Park and tenants come together to exchange information, and where companies are provided with legal, logistics and other information essential to running their businesses

“Bonded warehousing is yet another key function that we offer. Parts or materials brought into Vietnam from outside the country are subject to duties. However, these parts and materials aren’t always put to immediate use, and may not be brought on to the production line for another two months or more. Import duties must be paid when goods are cleared through import customs, meaning that these duties are paid as much as two months before production. If parts are stored away in a bonded warehouse until just before production, however, they are still regarded under the tax system as being overseas, and paying duties only when goods are taken out of the bonded warehouse leads to improved cash flow.”

Dragon Logistics was the first private-sector company licensed to operate a bonded warehouse in northern Vietnam. Dragon Logistics staff members continue to participate in the monthly tenant meeting, Ichimoku-kai where tenants and the operators of Thang Long Industrial Park exchange information, in order to bring all parties up to date on the latest logistics-related developments.

Keiichiro Seto

Keiichiro Seto joined Sumitomo Corporation in 1996 with a desire to work in logistics. After a three-year stint in China for the Company’s overseas language training program, his long-cherished ambition of a logistics position was realized. “It is important that each and every one of us becomes a professional, and I am convinced that pooling our expertise as professionals will generate tremendous strength.”

Ayako Oguchi

Ayako Oguchi has been involved in metals-related businesses ever since she joined the Company in 2009. Her aim at the moment, she declares, “is to become a leader able to determine on my own the direction to be taken and one whose subordinates think that work is enjoyable.” She adds, “The atmosphere of flexibility that pervades the entire Group is in my opinion Sumitomo Corporation’s greatest appeal.”

Promptly delivering the quantity needed at the exact time needed

An iron plate processing facility known as the Coil Center has been set up within Thang Long Industrial Park, and the Hanoi Steel Center, another Sumitomo Corporation business company, has devised a system for promptly delivering materials to factories within the industrial park.

“Hanoi Steel’s role is to operate close to its customers in order to deliver the quantity of iron plates needed to customers right away,” explains Ayako Oguchi, who completed a two-year assignment to Thang Long last year.

Hanoi Steel processes and sells materials, provides information on iron and steel and, in responding to inquiries from tenants about materials and products other than iron and steel, introduces these tenants to relevant organizations and companies within the Sumitomo Corporation Group’s network.

“We do what we can ourselves, and we introduce tenants to business partners or other companies to do what we can’t. In this way we are offering our customers total support for their activities,” Oguchi remarks.

There are presently 98 tenants, and 79 factories operating in Thang Long Industrial Park. The lots have been sold out, but factories are still being rented out to small and medium-sized companies. All Sumitomo Corporation Group staff involved with Thang Long Industrial Park share a commitment to doing everything they can to enable companies producing goods in the industrial park to focus with peace of mind entirely on their manufacturing efforts.

The steel plate processing facility in Thang Long Industrial Park run by Hanoi Steel Center, whose mission is just-in-time delivery of materials to customers

A place that brings happiness to local residents

Every morning at 8:00 a stream of people pass through the gates of Thang Long Industrial Park. Nearly 60,000 people, the vast majority of whom are Vietnamese, work at the industrial park on day or night shifts. Some commute by bicycle, others by car and still others on foot, all heading to their respective workplaces with eyes alight. Witnessing this scene every day is a great joy, says Otsuka.

“There are many people working here, earning salaries, marrying and starting up families, building houses, enjoying meals, and buying toys for their children. They are realizing their dreams one by one, and they sincerely feel lucky, happy, and grateful to be engaged in this work,” he related with slightly misty eyes. Nothing could please us more, he added, than for both the tenant Japanese companies and the individuals working here to be happy.

Lots continue to be sold in Thang Long Industrial Park II established in Vietnam in 2006, and Thang Long Industrial Park III is expected to begin soliciting tenants in 2018. The future will likely see many Japanese companies heading to Vietnam, creating numerous jobs in the course of stepping up their production activities. In the process, Sumitomo Corporation’s integrated corporate strength will undoubtedly come into play in generating new happiness for still more people.

(posted November 2015)

Masayasu Otsuka

Masayasu Otsuka joined the company in 1983. Assigned to the industrial machinery sector, he has served assignments in Bangladesh, Papua New Guinea, Cambodia and India. He was named President & CEO of Thang Long Industrial Park in September 2013, and concurrently serves as President & CEO of Thang Long Industrial Park II. “The best part of my work is hearing directly from tenants how happy they are to have moved into this industrial park.” He and his wife are finding their time in Vietnam very fulfilling.

The Sumisho Scrum concept

Leveraging the integrated corporate strength of Sumitomo Corporation in various domains, this is the Sumisho Scrum.

TomoyasuShimizu, Leader, Team No. 1, Overseas Industrial Park Department

“The power of communication underpins Sumitomo Corporation’s integrated corporate strength. When problems arise, other in-house organizations are consulted and advice is offered without a single look of displeasure. It is this ongoing communication among employees that has given us this integrated corporate strength.”
──Tomoyasu Shimizu, Leader, Team No. 1, Overseas Industrial Park Department

“The Sumitomo Corporation Group has a culture of encouraging employees to promptly share all information, both positive and negative. This culture, which we term “immediate reporting,” has created a sense of solidarity throughout the Group.”
──- Masayasu Otsuka, President & CEO, Thang Long Industrial Park

Masayasu Otsuka, President & CEO, Thang Long Industrial Park
Keiichiro Seto, Logistics Business Department

“Integrated corporate strength does not come from just having lots of business functions. I feel that Sumitomo Corporation Group’s advantage derives from bundling functions together into potent tools.”
──Keiichiro Seto, Logistics Business Department

“I have realized that personnel rotation across organizational boundaries is conducive to the growth of each and every employee, and it is this growth that reinforces the Company’s integrated corporate strength”
──Ayako Oguchi, International Steel Sheet & Strip Business Department

Ayako Oguchi, International Steel Sheet & Strip Business Department
Etsuko Komiya’s perspective

Etsuko Komiya’s perspective

Working and living in a foreign country can cause anyone worry, and the same goes for companies. When carrying out production operations in countries with different cultural norms, customs and legal systems, companies need not only a location in which to do business but also a presence that will support their activities on a day-to-day basis. I saw clearly that one feature of Sumitomo Corporation Group’s Overseas Industrial Parks Business was that it provides both locations and support. Each and every employee involved in this business is dedicated to bringing a sense of reassurance to tenants, and I felt very strongly that integrated corporate strength is a manifestation of the power of attentiveness.

A scrum that will change the world

People are the bridge that links the future