11:25 | 04/12/2013 Economy
(VEN) - Vietnam has 289 industrial zones (IZs), of which 184 have begun production and or trading activities and others are under infrastructure construction. While IZs contributed greatly to economic development they achieved a modest occupancy rate of 60 percent.
Contributions to the economy
According to Ministry of Planning and Investment’s Economic Zones Authority Deputy Head Tran Duy Dong, each year, IZs made a 25 percent contribution to Vietnam’s industrial production value and an average 20 percent plus contribution to the country’s export revenue. IZs provided jobs for about two million people and paid about VND2 trillion in taxes to the state budget per year.
As of 2012, IZs attracted about 50 percent of all foreign direct investment (FDI) in Vietnam, with 70 percent of industrial production projects of FDI businesses found in IZs. In the first 10 months of 2013, Vietnam attracted US$19.234 billion in FDI, US$9.8 billion or more than 50 percent of which was attracted by IZs.
Many FDI projects in IZs are large in scale and owned by world leading brands including Nokia, Samsung, and LG, among others. Notably, the Japanese-owned Nghi Son Refinery and Petrochemical Complex project in the Nghi Son Economic Zone in Thanh Hoa Province has increased its capital from US$2.8 billion to more than US$9 billion; Samsung Group's projects in IZs in Bac Ninh and Thai Nguyen provinces have a total capital of more than US$5 billion; LG Group's project in the Trang Due IZ in the city of Hai Phong has an investment capital of US$1.5 billion; and the Nokia project in Bac Ninh Province-based Vietnam-Singapore Industrial Park (VSIP) is a large FDI project. This shows that IZs in Vietnam have attracted major investors.
Increasing occupancy rates in IZs
Although IZs made a great contribution to the economy their average occupancy rate was only 60 percent, Dong said. While IZs with a convenient location and adequate, good infrastructure reached a 100 percent occupancy rate, other IZs without good infrastructure and a favorable location obtained an occupancy rate of only 20-30 percent.
Dong said that the lease rate in IZs in favorable localities such as Hanoi, Ho Chi Minh City and Dong Nai Province came to about US$100 per square meter and this rate included US$80 worth of site clearance and infrastructure construction cost. This is a reason why a number of investors don’t want to lease land in such IZs.
The lack of infrastructure construction standards and post-investment support policies and housing for workers, and environmental problems discouraged investors from choosing IZs especially those without good infrastructure and a favorable location.
The government reviewed plans and objectives to minimize establishment of new IZs to increase IZs’ occupancy rates and attract investment in existing IZs.
According to the enterprise income tax law that was amended by the National Assembly in July 2013 and will take effect on April 1, 2014, apart from benefiting from preferences subject to all IZ-based businesses, new investors in IZs can be freed from paying the enterprise income tax for two more years and benefit from a 50 percent reduction in this tax for the following four years.
The Ministry of Planning and Investment will early work with the Vietnam Investment Connection Joint Stock Company to hold an exhibition promoting investment in IZs in 2013. Dong said that this event will introduce the potential of Vietnamese IZs to domestic and foreign investors./.
By Nguyen Hoa