Dung Quat Economic Zone - Future Open Industrial City

After 14 years of construction and development, the Dung Quat Economic Zone is considered one of the pioneering and successful economic zones in the country, with an average annual growth rate of 18.53 percent in the 2006 - 2010 period, and industrial production expanding 53.6 percent. The development of the economic zone has made significant contributions to socioeconomic development of Quang Ngai province.

 

At present, Dung Quat has formed the first group of heavy industries in Vietnam, constituted by Dung Quat oil refinery, heavy equipment factory, plastic plant, steel rolling mill and blue-print bio-fuel plant. The deepwater seaport and oil refinery are the two most important factors creating motivation for Dung Quat EZ to leap forward over the past five years. The value of industry, trade and service reached VND68,000 billion or US$3.4 billion (including VND55,000 billion from Dung Quat oil refinery, VND3,500 billion from Doosan Heavy Industries factory, and VND9,500 billion from service companies); export revenues amounted to US$300 million; and State Budget contributions totalled VND13,000 billion.

 

The Dung Quat Economic Zone Authority has granted investment certificates to 113 projects with total registered investment capital of US$8 billion, including 101 domestic projects with US$4.031 billion, and 12 foreign-invested projects with nearly US$4 billion. In 2010 alone, it attracted US$400 million. To date, 60 projects are in operation with a combined investment capital of nearly US$5 billion and they are providing jobs for nearly 12,000 workers.

 

The development of Dung Quat EZ has contributed significantly to the growth of provincial GDP, industrial production value, production restructuring, and local budgetary collection. While State Budget revenue in Quang Ngai was just VND153 billion in 2000 and VND500 billion in 2005, it soared to VND13,000 billion in 2010, making the province one of biggest tax collectors in the country. According to the Prime Minister’s Decision 124/QD-TTg dated January 20, 2011, Dung Quat EZ is planned to become an open industrial city, a national oil refinery centre, and an urban, industrial and port service centre of the central key economic zone. It is also planned to be a critical hub of transportation and commodity exchange for the central region and the Central Highlands, and serve an important role in national security and defence.

 

Currently, the Dung Quat Economic Zone Authority separates economic management and social management, administration and sanction. Or in other words, many tiers of governments and branches are engaged in the process.

 

In reality, three types of organisational models are engaged in managing the Dung Quat Economic Zone: The Dung Quat Economic Zone Authority, governments of affected communes and Binh Son district, and provincial competent organs. Most (post-licensing) management procedures intertwine powers and responsibilities of the above organisational models in such aspects as investment management, construction, land compensation, land management, environmental management, labour management and urban management, among others. Any delay in any step will lead to a congestion of the whole process. Many organs managing the same task will result in overlapping, unclearness and inconsistency. Late resolution of many social problems causes long distress, weakening management effectiveness.

 

Besides, the process of industrialisation necessarily begets the process of urbanisation. Urban zones, where residents will no longer live on agriculture, will be formed; hence, administration applied to rural agricultural zones will be not suitable. In essence, the Dung Quat EZ does not have enough criteria to become a city. The application of the ‘city’ model to the Dung Quat EZ is kind of a ‘shortcut’ for the process of industrialisation and urbanisation. This tendency is inevitable for the development of Dung Quat EZ. Hence, it is essential to transform the Dung Quat Economic Zone Authority into a single administrative unit powered by enough administrative authorities to combine currently separated functions.

 

At the request of leaders of the Quang Ngai provincial authorities, for this reason, the Prime Minister has advocated a study for this proposal. According to the Prime Minister’s Decision 2052/QD-TTg, the Dung Quat Industrial City will be applied a special administrative and economic institution, attract large-scale and modern foreign investment projects, implement international administrative institutions, lay the groundwork for the formation of a coastal economic corridor constituted by Chan May, Da Nang, Dung Quat and other components.

 

We identify heavy industries associated with deepwater ports as the strength of the Dung Quat EZ, especially when it is expanded to 45,000 ha.

 

We also focus on attracting supporting industries for heavy industries and developing post-heavy industry value chains after heavy industry (steel, petrochemical, manufacturing of heavy equipment), industries using local raw materials (downstream processing of wood, paper, plastic, etc) while accelerating the urbanisation of Dung Quat, especially in Van Tuong urban zone.

 

When the Dung Quat EZ is officially expanded to 45,000 ha, investing in marine and seaport infrastructure projects in Dung Quat Seaport 2 is an important objective, especially the breakwater project. When the second deepwater seaport is opened, the expanded Dung Quat EZ will be able to attract more large-scale heavy industry projects, which need seaports. Then, an infrastructure system will be built connecting the two Dung Quat zones. In the coming time, to carry out this task, apart from State-funded capital, we will seek other sources of investment to ease burdens on the State Budget and promote investment efficiency.

 

Regarding investment promotion activities, we continue to focus on attracting industries where Dung Quat EZ holds comparative advantages and our priorities will be given to potential countries and territories (mainly North East Asia like Japan, South Korea and Taiwan).

 

Another very important concern is to create clean land and ready infrastructure. This is very important for investors to lease land and carry out their projects quickly. This lesson is drawn from more than 10 years of management and development of Dung Quat EZ.

 

At present, investors in Dung Quat EZ are enjoying the highest incentives provided by the Government of Vietnam. We are not focusing on incentives, but on supporting factors like generating a clean land fund, seeking 30 percent of land compensation costs from provincial authorities, reforming administrative procedures, supporting investors after they obtain investment certificates, and investing in infrastructure development.

 

To maintain investment pace and sustainable development of Dung Quat EZ in the coming time, we have proposed development solutions and directions: Early completion of special mechanisms and policies applied to Dung Quat EZ, completion of the Dung Quat EZ 1, development of Dung Quat EZ 2, and expansion of Dung Quat oil refinery capacity to 10 million tonnes a year. By 2015, Dung Quat will become a centre of oil refining, heavy industries and seaports in the country.