08:52 | 13/03/2020 Industry
(VEN) - Most localities in Vietnam still look to the government to fund construction of infrastructure for industrial clusters (ICs).
Lack of capital
In order to promote the development of local ICs, Thanh Hoa Province has adopted attractive policies to draw investors, especially for infrastructure. Investors in IC infrastructure will enjoy other preferential treatment such as funding worth VND1.5 billion per hectare for ICs in poor districts (following Government Resolution 30a/2008/NQ-CP), VND1 billion per hectare for ICs in other districts with maximum support level not exceeding VND28 billion per IC; VND0.7 billion per hectare for ICs in plain and coastal districts with maximum support not exceeding VND20 billion per IC.
However, so far only nine ICs in the province have attracted investors due to the weak financial capacity of local enterprises compared with the amount of capital required for IC infrastructure works, sometimes up to hundreds of billions of VND. Furthermore, state support will not be provided until fundamental investments are completed and occupancy rates account for at least 30 percent of the area of ICs, deterring investors.
Thanh Hoa is only one of many localities nationwide that are lacking investment capital for IC infrastructure. Statistics from the Agency for Regional Industry and Trade (ARID) under the Ministry of Industry and Trade (MOIT) show that the capital amount for IC infrastructure until 2020 has only reached 22.2 percent of set plans.
Low disbursement rate
Like Thanh Hoa, other localities nationwide plan to call for investment in IC infrastructure from the private sector, but so far funding still depends on local and central budgets, which are limited and hard to access.
As for the central budget, the Prime Minister assigned a detailed medium-term investment plan for the IC Infrastructure Support Program in the 2016-2020 period with VND410.77 billion to implement 25 projects. However, only 65.6 percent (VND269.39 billion) of the planned capital was disbursed by 2019. The amount of allocated capital also decreased steadily, from VND155 billion in 2016 to VND32.2 billion in 2019.
The central budget can only meet about seven percent of total local capital needs, an amount insufficient to meet investment demand for IC infrastructure works, resulting in scattered and low investment efficiency. Similarly, local budgets are also limited.
In addition to central budget support, local budgets for the 2016-2019 period were set to be allocated for 139 ICs, with an estimated amount of more than VND2.43 trillion. However, so far only 18 localities have allocated this capital with more than VND1.22 trillion, accounting for about 50 percent of the plan for the whole period. The limited local budget sources resulted in low investment capital for ICs, or even insufficient funds to implement promulgated IC support policies.
More effective mechanism needed
The MOIT is studying more effective capital mobilization of funds for ICs based on the Law on Public Investment and the central budget for the 2021-2025 period. For ICs with enterprise relocation, the support level is unlikely to exceed VND30 billion per IC and will only be allocated to one IC in each locality; for operating ICs, the support level will not exceed VND10 billion per IC and at maximum three ICs in a locality.
Despite the efforts of state management agencies to remove difficulties in IC development through attractive funding packages, many localities seemed to show little interest in availing themselves of the opportunities. For example, the Government provided nearly VND3.23 trillion to 45 low-income localities to develop IC infrastructure, but many have not taken advantage of the proposed support. In addition, most of the existing ICs were established before Decision 105/2009/QD-TTg took effect, and therefore were not eligible for support because their documents did not meet the required conditions, such as approved detailed construction planning.
In some localities, support policies for IC infrastructure have not been issued, meaning that there is no legal corridor for coordination between them and central agencies. Therefore, it is very important to review, adjust and issue practical and appropriate policies so that localities can grasp opportunities and mobilize resources to resolve the capital shortage and complete construction of IC infrastructure.
Representatives of the Ministry of Industry and Trade have recommended that resources to promote the development of IC infrastructure be mobilized according to the following priorities: completing investment in environmental pollution treatment, investing in ICs with potential and advantages in attracting secondary investment.