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Economic Sector

Last updated: Monday, August 21, 2017

 

IPs, EZs: Driver for Socio-economic Development

Posted: Wednesday, June 14, 2017


Developing economic zones (EZs) and industrial parks (IPs) is an important, consistent and correct policy of Vietnam on the way of industrialisation and modernisation and a facilitator to realise the goal of making Vietnam a basically modern industrial country by 2020. After 20 years of construction and development, IPs and EZs have come in various forms of development and positively contributed to the country’s socioeconomic development.

According to statistics by the Ministry of Planning and Investment, Vietnam had 325 IPs established with a total area of 95,000 ha of natural land by the end of December 2016, of which rentable industrial land accounted for approximately 64,000 ha or 67 per cent of total natural land area. Among them, 220 IPs have gone into operation with a total natural land area of nearly 61,000 ha and 105 IPs with 34,000 ha are under construction.

The tenant force in IPs has been gradually shaped and developed strongly, including many world-leading giants like Hyosung Group, Samsung, LG (South Korea) and Robert Bosch Group (Germany), to boost the chance of joining global value chains. The performance of IPs and EZs has become an important motive force for socioeconomic development.

Enabling investment and business environment development
Developing of IP and EZ models together with investment incentive mechanisms and policies has facilitated the utilisation of geo-economic advantages and the application of simplified administrative procedures. This has thus created attractive investment destinations and changed the investment and business environment of Vietnam. Engaging in IPs and EZs, investors - particularly foreigners - will reduce a lot of time for investment preparation like accessing land and building technical infrastructure. In addition, a number of technical facilities in IPs and EZs such as roads and wastewater collection systems are built before investors start production.

Besides, IP and EZ models can receive many investment and business fields and industries. Therefore, they meet diversified investment demand from investors. Typically, IP and EZ models have their particular development orientations and investment attraction advantages, and thus they do not compete with each other fiercely.

Huge capital for infrastructure development
According to the statistics from the Department for Economic Zones Management under the Ministry of Planning and Investment, as of December 2016, Industrial Parks and Export Processing Zones (EPZs) attracted US$3.48 billion of foreign capital for infrastructure development. High tech parks (HTPs) mobilised investment capital from foreign official development assistance (ODA) donors for infrastructure development. Other models (e.g. coastal economic zones, border gate economic zones, etc.) have also initially drawn private capital for infrastructure construction via the public-private partnership (PPP) investment form.
As for capital investment for production and business, EZs attracted US$123 billion. By the end of December 2016, IPs and EPZs had 6,947 FDI projects with a total registered investment of US$110.2 billion, of which US$66.8 billion (60.7 per cent of the registered value) was disbursed. Coastal EZs housed 354 projects with US$42 billion of registered investment capital in total, of which US$20.2 billion (48.1 per cent) was disbursed. Border gate EZs also had over VND1 trillion of investment capital engaged in production, processing, service and trade.

In addition to drawing direct investment capital for internal infrastructure construction, IPs and EZs have also significantly boosted investment for external socioeconomic infrastructure. Infrastructure system in IPs facilitates secondary investors to speed up their production and business projects on the one hand and help speed up local economic restructuring and improve overall infrastructure system, particularly infrastructure in the countryside where IPs are located, on the other.

Facilitating production, formation of driving industries
Starting from the agriculture-based economy and small-scaled industrial production, the formation and development of IPs and EZs has resulted in underlying changes in Vietnam’s industrial production. As a result, the technological level of industries has been raised significantly.

Furthermore, driven the movement of capital flows, foreign investors have introduced new advanced production technologies and skills, particularly in hi-tech production and hi-tech application, such as smartphone production projects invested by Samsung Group of South Korea in Yen Phong Industrial Park, Bac Ninh province and Yen Binh Industrial Park, Thai Nguyen province; and desalination projects invested by Doosan Group of South Korea in Dung Quat, Quang Ngai province.

IPs and EZs have also scaled up industrial production from small scale. Instead of locating small and medium-sized factories, IPs and EZs with broad modern premises have raised productivity and product quality. According to preliminary statistics, over 500 projects in IPs and EZs have registered investment capital of over US$100 million (VND2.1 trillion).

Some gigantic investment projects in IPs and EZs in 2016 included a US$1.5-billion display production facility invested by LG Display Company of South Korea in Trang Due Industrial Park (in Dinh Vu-Cat Hai Economic Zone, Hai Phong City), which will reach the designed capacity in five years and earn US$4 billion of revenue a year, of which 80-90 per cent of products are exported; an over US$1 billion solar cell factory invested by JA Solar Vietnam Co., Ltd and kicked off on November 27, 2016 in Quang Chau Industrial Park, Bac Giang province; and a US$550 million LG Innotek Factory invested by LG Innotek Co., Ltd, a subsidiary of LG Group, in Trang Due Industrial Park (in Dinh Vu-Cat Hai Economic Zone, Hai Phong City).

IPs are established in most provinces and cities across the country and distributed to tap geo-economic advantages and potential in major economic regions. Some are located in poor regions to prop up local industrial development.

Employment and socio-economic development
In addition to reforming the investment and business environment, attracting investment capital into infrastructure construction, and speeding up production, IPs and EZs have also created jobs and raised worker skills. At present, they directly employ over 3 million workers. And, with expansive project scale, the unemployed will reduce significantly. This also helps ensure social security and raise living standards for people. The LG display production facility will employ 6,000 workers in the first five years of operation. The solar cell factory of JA Solar Vietnam will create 3,000 jobs. The seaport and industrial complex in Dam Nha Mac region is expected to generate 110,000 jobs.

EZs also provide some training modes and environments to improve worker skills. For example, the cooperation between employers and schools is a popular and high potential method. Some coastal EZs have their own vocational training schools.

In trade development, border gate economic zones serve as gateways for trade in commodities between Vietnam and neighbouring countries. Besides, IPs and EZs have boosted the country’s export and import, and importantly connected domestic production to international markets and engaged in global value chains of multinational corporations.

Last but not least, IPs and EZs have also helped raise State budget revenue and economic growth. In 2016, IPs and coastal EZs paid VND110 trillion to the State Budget and the export revenue of tenants in IPs, EPZs and coastal EZs accounted for nearly 53 per cent of the nation’s total export value.

Thu Ha








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