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Labor Productivity and Automation
Smart Facility Management (SFM)
Smart Cities in Vietnam
Vietnam’s Sustainable Development
This paper first analyzes the challenges of labor productivity facing Vietnam as automation is further incorporated into business operations. It then discusses the recent growth of smart facility management and its key leaders, industries that will be affected, and how the economy can take advantage of a budding industry. I further postulate how smart facility management can transition into a broader smart city network, and consequently a sustainable city, and the efforts by the Vietnamese government and private sector companies to incorporate smart technology into city infrastructure. I use examples from other east Asian countries to demonstrate the various initiatives the region is implementing and how they can serve as guides for Vietnam to keep pace with the Fourth Industrial Revolution.
Vietnam possesses one of the fastest growing economies in Southeast Asia, with a 7% annual growth rivaled only by China. While the country remains largely rural, urbanization rates continue to increase. Ho Chi Minh city is expanding 4% annually, the highest rate in the region. Moreover, Vietnam’s cities continue to be stalwarts for output—Da Nang, Ho Chi Minh City, Hai Phong, and Hanoi each grow over 8% per year—signifying that the future of an economy, and connectivity, is in an urban setting. Since the liberalization of its economy in the 1980s, Vietnam has transitioned from agriculturally dominant to primarily services and industry. These two sectors now account for approximately 80% of Vietnam’s GDP (Santander Trade 2019), and also happen to be most immediately affected by the development of smart facility management.
Labor Productivity and Automation
Despite its considerable growth, Vietnam has struggled with productivity. This has led to a gap in potential economic gains relative to China, one of its primary export competitors. According to McKinsey, Vietnam must boost its productivity level by 50% to reach its 7-8% growth target or else “By 2020, Vietnam’s annual GDP would be 30 percent lower than it would be if the economy continued to grow at a 7 percent pace” (McKinsey 2012). The International Labor Organization calculated that Vietnam has the highest percentage of unskilled workers in the ASEAN-5. Historically, machines have replaced laborers performing menial jobs because they are able to complete the same tasks more efficiently at lower costs to employers. The textile manufacturing industry is expected to be the hardest hit by automation, in which 86% of workers will lose their jobs (ILO 2016).
What is important for Vietnam to adapt is the government’s response to the changing labor trends. Critics have pointed out, however, that it is not doing enough to address the over-abundant low-skilled labor supply. Private companies have picked up their slack by creating retraining programs that teach their workers important IT, English, and other skills (Higginbottom 2018). Operations will not only be more efficient and bring in a higher revenue for the business, but workers will now be valuable assets that cannot be replaced by artificial intelligence.
Japan serves as an example as to how an East Asian country can develop rapidly though concerted changes in productivity. Several years after World War II, Japan had not recovered economically and struggled to grow despite heavy American investment. Japan then resolved to grow differently from a traditional manufacturing model by importing advanced capital for its factories and then training the workers how to expertly use this machinery. The finished goods would then be exported around the world. Now with advanced machinery and a highly trained workforce, along with other government investments, Japan’s economy soared, transforming it into the first East Asian Tiger.
Smart Facility Management (SFM)
Facilities management in the Asia Pacific region is expected to grow 16% from 2017 to 2023, according to KBV Research (KBV Research 2017). Ken Research estimated that SFM in Vietnam will have a revenue of more than $120 million by 2023 (Ken Research 2019). The primary players in Smart Facility Management in Vietnam appear to be foreign companies, investing in Vietnam’s expanding market. In fact, Atalian, a French company, is the largest SFM consulting firm in the country. Likewise, other conglomerates from East Asian countries like Singapore and Japan are buying shares (IWFM 2018). The fact is, right now IoT is a relatively new concept for a lot of small to medium sized businesses in Vietnam and as a result they have not designed a strategy that fully incorporates the potential of smart facility management beyond air control and electricity.
Because Vietnam’s service industry and manufacturing industry are most directly affected by SFM, they must adapt to the changing environment quickly. Vietnam must adapt its labor-heavy manufacturing to IoT management. The service industry, such as hotels and theaters, is likely to experience a horizontal change in response to smart facility management. It is certain that menial jobs such as cleaning, clerking, etc. will be replaced with machines. However, industry experts also argue that these businesses can shift their attention to improve valuable face-to-face services and experiences with guests that cannot be replicated by machines. Functions will change but businesses will not be impacted negatively in the same capacity as manufacturing.
Certainly, there are benefits and drawbacks to a changing IoT climate to Vietnam’s market. While labor issues will compound if not addressed adequately by the government and private firms, Vietnam will also experience increased productivity levels with more sophisticated SFM tools in place. In this way, Vietnam must take advantage of its recent entry to the technology race. Vietnam transitioned to a high-tech industry relatively later than other neighbors and it has a budding market. While SFM is still budding, the constantly developing IoT landscape means that there are considerable opportunities to grow. In turn, as smart tech enters the workplace, a key for Vietnam and its businesses is to utilize these technologies to their full capacities. The government of Singapore, for example, signed a pilot agreement in 2017 with Microsoft to create 30 smart buildings in an effort to reduce the city-state’s energy consumption though monitoring cooling systems and optimizing the efficiency of chiller plants (GovInsider 2016). Keeping up to date with the most recent facility management technologies enables companies to stay relevant in a rapidly evolving global economy.
There are already industries within Vietnam that can most benefit from IoT and government intervention to spur smart facility management and considerable economic growth. According to industry leaders, retail has the most immediate potential for Vietnam. With a burgeoning middle class apt to spend income on more goods, smart retail can squeeze more money out of consumers and help the economy grow. Such technology includes customer facial recognition, customer interaction, monitoring, etc. Agriculture also has long term potential for Vietnam that can be invested currently. Employing 40% of the working population, the country is still heavily dependent on agriculture and a new technological revolution could help boost productivity. In 2017 over $1 billion was invested in AgTech startups, and such technology involves storage sensors for savings, valuation, and sales optimization, autonomous tractors, drones, and urban farming (Antonopoulos 2019).
Smart Cities in Vietnam
Beyond facility management at an individual level, the Vietnamese government and interested stakeholders must use the rhetoric and planning to stimulate investment for broader smart city development. Smart cities are the pinnacle of smart facility management, with every building or hub integrated onto a single cloud network to allow for seamless connectivity. Vietnam indicated it plans for Ho Chi Minh City to become the country’s first smart city by 2020. A recent major initiative the city took was in 2017 when it announced a partnership with Microsoft to develop applications designed to communicate with the public on issues from sanitation to commerce, which will be shared to a data warehouse. The city government has also opened a Smart Urban Operation Center which will “collect important information and data sources, and help supervise and analyze service quality as well as issue policies for the city” (Vietnamnet 2019). Ultimately, there are designs to implement a robust system of cloud computing infrastructure, data warehouses, an open data ecosystem, and more, through 2025 (Sieburg 2018).
Beyond Ho Chi Minh City, 33 cities and provinces have joined the ASEAN smart city network including Da Nang and Hanoi. Government officials plan for Hanoi to become a smart city by 2030 and have already installed a digital traffic map to monitor road conditions and public transportation around the city. Hanoi policymakers have planned to develop the digital infrastructure by 2020 and expanding the grid through 2025 (Dezan Shira 2018). Likewise, Danang's efforts to become a smart city by 2020 and a green city by 2025 have been highlighted by the fact that they consistently top Vietnam's ICT Index ratings, with enormous tech integration investments in public health infrastructure, transportation systems, waste management infrastructure, and others. There is considerable opportunity for Ho Chi Minh City and Vietnam's cities to meet their smart city goals; as building construction is constant, firms will be able to implement new technologies into new facilities. It is often noted that it is easier to adapt to industry changes at the beginning of a development curve than retrofitting existing technology, and Vietnam can execute in a similar trajectory.
Ho Chi Minh City does have the infrastructure and resources in place to create tracts of smart buildings. The next key is to combine the smart buildings onto a single grid to have them communicate with each other. Vietnam is experiencing economic dynamism combined with rapidly modernizing technology; it must continue its current pace to ensure it does not miss its entrance into the next phase of the Information Age. Ho Chi Minh City has begun to do just that as well: a developing area in District 2, Thu Thiem New Urban Area, is set to be the city’s first smart neighborhood and potentially a model for the future. The investment firm, Lotte Group and developers, Sasaki, overseeing the construction of Thu Thiem New Urban Area are from South Korea and Japan, respectively. They made agreements with Vietnam’s government to revitalize the area and turn it into an eco-urban complex and the largest public space in the city, paired with the most up-to-date smart city technology.
One aspect that has prevented Ho Chi Minh City from taking advantage of its sizeable economic growth with widespread new technology is traffic congestion. The Metro system, currently being built, was designed to solve this issue. Funded by both the Vietnamese government and the Japan International Cooperation Agency, the project was initiated in 2012 and expected to be complete by 2017; however, due to delays, construction on Line 1 has just started in 2019 with a late 2020 completion. Line 1 “runs 20 kilometers (12.43 miles) through five districts of 1, 2, 9, Binh Thanh and Thu Duc and Di An District in the neighboring province of Binh Duong” (Nga 2018). A modern metro system streamlines commutes--people no longer are forced to sit in traffic to get around the city—and it also enhances data sharing. Much more of Ho Chi Minh City’s IoT grid will be connected, benefitting commerce and civil society. It allows Vietnam to leap over certain development checkpoints that other developing countries must tackle, for instance simply establishing a reliable mode of public transportation. Ho Chi Minh City Metro has the capacity to transform the city into a truly modern hub the government desires it to be in South Vietnam.
Vietnam’s Sustainable Development
Despite Vietnam's efforts to develop its cities more sustainably, the United Nations has criticized the country for its lagging pace. The three critical Sustainable Development Goals that must be attended to are SDG 6, 9, and 11 in the integration of green city networks. SDG 6 seeks to "Ensure availability and sustainable management of water and sanitation for all"; SDG 9 to "Build resilient infrastructure; promote inclusive and sustainable industrialization; and foster renovation"; and SDG 11 "Promote sustainable and resilient urban and rural development" (Government of Vietnam 2019). Ho Chi Minh City and Hanoi are expanding their grids at the detriment of the country's environment and the infrastructure in place is not strong enough to withstand climate shocks. To explain, Vietnam must fortify its most at-risk infrastructure through green technology. Vietnam is ranked 6th on the global climate risk index, susceptible to sea level rise, increased temperatures, and extreme weather. Moreover, the two cities have numerous issues that prevent them from being cities of a sustainable future. Severe road congestion and smog from motorized vehicles have contributed to a considerable pollution index—Hanoi is the 2ndmost polluted city in Southeast Asia and Ho Chi Minh City the 15th most polluted, per the 2018 World Air Quality Report (IQAir 2018).
The Saigon River, the country’s second largest river, is contaminated with trash and waste disposed by the city and residents. According to Vietnam's review of its Sustainable Development Goals, "Among 781 municipalities, only 44 have sewage treatment facilities up to required standards (equivalent to 5.63 per-cent in 2016)" (Government of Vietnam 2019). This not only endangers the ecosystem but also threatens the ability of the sewer system to filter water and of the flood control system to manage flood protection. The Mekong Delta region, a flat part of Vietnam, will have no safeguard against rising water levels without a robust protection system. South Vietnam is also experiencing land degradation as sand is being mined in the delta to be used as foundations for land development in Ho Chi Minh City. As a result, land is sinking along the river, destroying homes and uprooting residents from their communities. To summarize, urban sprawl is coming at the cost of Vietnam’s sustainable development and the country is mortgaging its future for the present if these risks are not alleviated.
The World Economic Forum estimates that climate smart investments account for a $30 trillion market globally (Le Houérou 2019). It is critical that Vietnam exploits the market and take advantage of the opportunity to build greener, technologically innovative cities. Areas of more comprehensive development that can benefit from smart green technology are flood protection systems, waste management systems, and the transportation grid. Numerous projects are already underway in Vietnam to improve the conditions of these vital systems. Businesses in Hanoi have begun using nanotechnology to clean up the Red River, which has been burdened by pollution. The use of big data in transportation can enable city governments to better manage road activity.
In an effort to dissuade congestion in Da Nang in the future, the Vietnamese government signed an agreement with IBM in 2012 to install sensors and data mines to control traffic and share public information on the city's bus fleet to encourage more public transportation (Wheatley 2013). As of late 2018, Da Nang has seen considerable progress in traffic data infrastructure. The Department of Transport introduced a mobile bus app, Danabus, that allows users to track bus routes and schedules. Moreover, the city government has installed numerous cameras in traffic cameras to monitor the flow of traffic and adjust light timing to ease congestion (Da Nang Today 2018). Such initiatives should be scaled up to larger cities like Hanoi and Ho Chi Minh City, where congestion is chronic.
Vietnam should not be concerned simply with designing advanced technology for smart cities. A smart facility will ideally automate heating and electricity, amongst other components. To take advantage of this, businesses and government leaders ought to orient these technologies to increase energy efficiency and greening of their buildings. Such projects include designing data storage mines to detect how much energy is being expended inside the facility and how much energy the building is reflecting from outside. Solar windows and walls can also be implemented to use the sun’s energy to power the facilities, increase self-sufficiency, and reduce carbon footprints. This initiative is possible within Vietnam's current urban development scope as green spaces and technology can be added to new and existing facilities throughout Ho Chi Minh City and further.
Ho Chi Minh City can look to Singapore as a beacon for being a large urban center and environmentally innovative. Singapore has a population of 5.6 million people, possesses a dynamic economy, and is also ranked as the greenest city in Asia, having almost 1200 green-earmarked buildings. The Vietnamese government has earmarked 2025 as the year in which smart city technology can be employed for further sustainable development and ensuring that transition is a critical factor. The government must draft legislation–and enforce it–thatrequire new buildings to be outfitted with green technology, as Singapore mandates. Unless if that occurs, green technology facilities will remain voluntary and the potential for greening is limited.
Smart facility management is the next step in transitioning to an increasingly automized and technologically connected world. With IoT, building and business managers can complete tasks more efficiently, cut costs, and access bigger markets than before. After years of having an underdeveloped infrastructure, Vietnam’s economic advancement has allowed the opportunity to comprehensively update its tech grid. It is certain that certain industries, like manufacturing, will suffer as a result of automation if their facilities or workforce do not adapt. However, there are also industries like retail that will benefit from new technology to tap into new markets. Vietnam has visions to transform its cities beyond facility management to integrated smart cities that master IoT connectivity. A challenge it must face sooner rather than later is designing city and tech networks that account for the environmental vulnerabilities the country faces. If Vietnam hopes to become the country of tomorrow, it must start building today.
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- Quote paper
- Michael Podesta (Author), 2019, Smart Facilities and Smart Cities in Vietnam, Munich, GRIN Verlag, https://www.grin.com/document/504156