HCM City IPs and EPZs Toward Sustainable Development

The presence of more and more IPs and EPZs has brought new vitality to Ho Chi Minh City industry. With three EPZs and 12 IPs, Ho Chi Minh City has become a reliable destination for domestic and international investors. To date, Ho Chi Minh City-based EPZs and IPs house more than 1,000 investment projects with total investment capital of US$3 billion, from many countries and territories in the world. In 2006, its EPZs and IPs drew US$472.42 million, representing an increase of 33 per cent against 2005. With a large number of big foreign investors, EPZs and IPs are the first in Vietnam to apply advanced scientific and technological achievements to production and management. As a result, production and business efficiency is very high here. The average growth of EPZs and IPs is 20 per cent per annum. In 2006, export revenues reached US$2.32 billion, accounting for 30 per cent of the city’s total export earnings. Output from EPZs and IPs has been exported to more than 50 countries and territories in the world.

 

The most important contribution of EPZs and IPs in Ho Chi Minh City is an impetus for economic restructuring in the city, and growing interest in EPZs and IPs from surrounding areas. Support services like banking, insurance and transport have developed very fast. Many fallow areas, salt-marches and abandoned land plots have been turned into prosperous areas with EPZs or IPs. In addition, the expansion of EPZs and IPs creates jobs for local and regional people. The workforce in Ho Chi Minh City’s EPZs and IPs jumped from merely 107 people in 1993 to more than 220,000 now. On average, EPZs and IPs create nearly 15,000 jobs a year.

However, the breakneck pace of development of EPZs and IPs in Ho Chi Minh City over the past 15 years has left many shortcomings. The overall development outline of EPZs and IPs has been unscientific and irrational. All districts want to have at least one EPZ or IP to draw investment capital and give a facelift to their economic structure. Therefore, EPZs and IPs used to be built irrationally and the occupancy rate was very low. The city government even had to revoke lands dedicated to EPZ or IP development because they had no tenants. In 2006, a total of 117.8 ha designed for EPZs and IPs was revoked, as a consequence of premature steps in attracting investment capital. In fact, the policy of attracting investment for hi-tech and clean production was based on expectation, and many tenants brought in common production methods including environment-polluting projects. According to a recent report by Ho Chi Minh City Export Processing and Industrial Zones Authority (HEPZA), among over 800 factories in the city’s EPZs and IPs, only 48 specialised in electronics products, or less than 6 per cent, and 136 units were engaged in mechanics, or less than 17 per cent. The remainder is made up of labour-intensive or environment-polluting industries like garments, textile, packaging, household appliances, plastics, rubber, chemicals, woodwork, leather and footwear. In addition, the traffic system linking EPZs and IPs to outside areas is still in poor condition. Many roads to EPZs and IPs have been downgraded, and are congested during peak hours. Wastewater treatment in EPZs and IPs is being disregarded. For many years, sewage was discharged into canals, rivers and fields, this is a high price for the easygoing and substandard development outlining of EPZs and IPs.

 

Additionally, accommodation and quality of life for workers has not been outlined. Up to 72 per cent of more than 220,000 labourers working in EPZs and IPs come from other localities and have to rent substandard houses on their own. Very few EPZs and IPs have entertainment centres for their labourers. Business owners usually take full care of their business situations, but disregard the spiritual and private lives of their employees. Salaries may not even be in line with the market mechanism. Hence, employees are not always loyal to employers. The role of trade unions has not been brought into full play. Labourers are willing to quit their jobs and work for others if the working condition and income is better. The employment situation in Ho Chi Minh City EPZs and IPs is very complicated.

 

According to the municipal People’s Committee, HEPZA began calling big investment projects into the city, such as Saigon Premier Container Terminal (SPCT) of P7O Group in Hiep Phuoc Industrial Zone. The authorities pay much attention to drawing investment in hi-tech areas. Many EPZs and IPs have developed service systems like information, customs, bonded warehouses and banks to provide more convenient services to tenants. Especially, several EPZs and IPs like Tan Thuan, Linh Trung 01, Linh Trung 02, Le Minh Xuan, Tan Tao and Tan Binh installed automatic wastewater treatment facilities. Similar facilities are being building in other EPZs and IPs. Many transport projects outside EPZs and IPs are underway. In recent years, several EPZs and IPs started building accommodations for their workers. From now until 2010, the city will allocate 3-5 ha of land to build houses (3-7 storeys), equivalent to 60,000-90,000 square metres of space, for workers each year, capable of accommodating 10,000-15,000 workers. In the following years, the new houses can provide living areas to more than 80,000 workers.

 

According to experts, to keep EPZ and IP development on the right track, Ho Chi Minh City should perfect its legal system related to the management of EPZs and IPs, especially simplifying procedures. At the same time, the Government needs to issue incentive policies for spearhead industries, especially high-tech, and to provide houses for workers. Salary payment also needs reconsidering, to match the market trend. In the long term, the city needs to build residential and urban areas adjacent to EPZs and IPs to provide stable accommodation for workers and their families. Practical provision for the spiritual and material life of labourers is one of the top criteria for sustainable development of EPZs and IPs in particular, and industrialisation and modernisation in general.