Bidders of IP Construction Should be Expanded

Bidders of IP Construction Should be Expanded

Infrastructure development companies of industrial parks (IPs) and export processing zones (EPZs) should be equitised or the private sector should be allowed to get involved in the construction of infrastructure to accelerate the implementation of development and increase competitiveness in attracting investment into IPs in Ho Chi Minh City. This has been suggested by many economic experts to overcome obstacles in attracting investment capital to local IPs and EPZs.

Vo Thi Hiep, deputy head of the Ho Chi Minh City Export Processing Zone Administration (HEPZA), said that in the first six months of 2004, the attraction of new projects in IPs and EPZs of Ho Chi Minh City slowed, with the volume of capital and the number of projects were lower than 2003. The main reason is a lack of land for lease, the recovery and clearance of land reached 135 out of 495 assigned hectares, equal to 27.3 per cent of the yearly plan for 2004. A lack of land for production has become a great obstacle for investors when they plan to invest in the city's IPs. Furthermore, land rent has tended to increase sharply and this has consequently discouraged investors. For example, land rent in the Hiep Phuoc IP increased from US$35 per square metre for 45 years to US$65. Land rent of the Phong Phu IP has increased from between US$40 and US$45 per square metre for 43 years in its early days to between US$90 and 100 per square metre even though the construction of the IP has yet to be completed. Land rent in the Tan Tao and Cat Lai IPs stands at US$90 per square metre, while two years ago land rent of the two IPs was put at between US$50 and US$60 per square metre.

In reality, Ho Chi Minh City's land fund remains abundant, but the planning and allocation of land face many difficulties. The allocating of land to infrastructure developers, often State-owned enterprises, requires the completion of complicated procedures in compensation and allocation. Therefore, IPs developed by the private sector seem to have become more attractive to investors. Let's take the Tan Tao IP for example. The IP has attracted 194 domestic and foreign enterprises with a total investment capital of VND3,823 billion (US$243.5 million) plus US$110 million since it was built in 1997. Now, Tan Tao is the leading IP in Ho Chi Minh City in attracting investment capital. The IP is the also the first and only privately-run IP in the city. Dang Thanh Tam, director of the Tan Tao joint stock company (ITACO), the developer of the Tan Tao IP, said that concerning policies and mechanisms, privately-run IPs were not different to IPs run by State-owned enterprises. The only difference is that the State planned the development of the IP and ITACO won a bid for the IP development. Though the joint stock company has not enjoyed any state benefits, it has not faced many of the obstacles in procedures and has been able to implement its project rapidly to meet the demand of enterprises that want to invest in the IP. Tam said that ITACO had always considered infrastructure facilities and support services as its top priority. To date, Tan Tao has been considered as an IP with complete infrastructure facilities in Ho Chi Minh City. Regarding support services, ITACO has developed great initiatives to attract investment. Enterprises will receive free support from completing procedures for the establishment of companies to business licence application, project development and guidelines for preferential investment application and workshop design.

Clearly, to accelerate infrastructure development in IPs, it is necessary to have an enterprise specialising in investing and developing infrastructure facilities. This has been proved by many enterprises assigned to invest in infrastructure development in IPs but did not perform as effectively as enterprises of the private or other economic sectors because State-owned enterprises face difficulties in site clearance and procedures, relying to heavily on others instead.

Meanwhile, according to development orientations for IPs and EPZs in Ho Chi Minh City, from now until 2010, the local authorities will concentrate on developing specialised IPs, including those for electronics, engineering, plastic and chemical industries, and clearing sites for the expansion of approved IPs. To that end, Nguyen Thien Nhan, vice chairman of the Ho Chi Minh City People's Committee, said that bidders for the construction of IPs should be expanded to the private sector and Vietnam's enterprises in foreign countries. The State will only be in charge of planning and providing support. The city considers it a necessary measure to accelerate the construction of and further increase the quality of infrastructure facilities and services in IPs, thus helping promote investment and increase competitiveness of local IPs and EPZs.

• Duong Hai