The Ministry of Planning and Investment recently hosted a meeting to review 20 years of building and developing industrial parks, export processing zones and economic zones in Vietnam.
One of the most attention-catching contents of the meeting was to seek out more proper models for economic zones to turn them into real economic engines for regional economies.
High in quantity, low in quality
Economic zone development policy was initiated in 1997. The Fourth Congress of the 13th Party Central Committee ratified the guideline for a pilot construction of some special economic zones and free trade zones in coastal areas.
Chu Lai Open Economic Zone was the first coastal economic zone to be established in the county in 2003. In 2008, the Prime Minister issued Decision No. 1353/QD-TTg to approve the coastal economic zone development plan through 2020, which clearly targets at the formation of a system consisting of 15 coastal economic zones.
In 2010, the Prime Minister agreed to add three coastal economic zones to this plan. As a result, 18 coastal economic zones have been approved for construction and development from now to 2020. They cover a total land and water area of 730,553 ha (equivalent to 7,305.53 square kilometres), or about 2.2 percent of the country’s total area.
Important infrastructures and utilities in coastal economic zones are funded by the State Budget. However, by the end of 2011, the State Budget reported to have spent just VND11,361 billion for infrastructure construction in coastal economic zones.
With a huge area and a limited funding source, most economic zones are now in the process of “investing, constructing and completing infrastructure”, according to the Ministry of Planning and Investment.
Most importantly, economic zones attract a humble amount of investment capital in relation to their scales. Until now, coastal economic zones have attracted more than US$ 31 billion of foreign direct investment (FDI) and nearly VND564 trillion of domestic investment. It is noted that these are just registered values, not disbursed ones.
The total leased area reached 20,000 ha, accounting for nearly 40 percent of total land area used for industrial production, tourism and services. Of this area, just 7,000 ha have leased to secondary investors or projects.
Companies in coastal economic zones made total turnover of US$8 billion, raked in export revenue of over US$1 billion and paid nearly VND20 trillion to the State Budget in 2011.
Hardship kills wisdom
According to the Ministry of Planning and Investment, due to limited experience, economic zones have exposed a number of operating problems.
Some economic zones fail to serve as driving engines for economic development in expected areas and operate for localised purposes, not for general national benefits. This resulted from the formation of economic zones in ‘disqualified’ areas. Local authorities asked for the establishment of economic zones because of their short-term local benefits.
While provinces and cities asked for the formation of economic zones, the State Budget funds investments. This leads to incomplete, non-synchronous and poor-quality infrastructure construction.
In fact, a coastal economic zone needs to have driving projects and locate near deepwater seaports and airports to develop well. Nonetheless, not all coastal economic zones have these three essential facilities; hence, they difficultly attract investors.
More importantly, economic zones lack strategies to attract sectors of comparative advantages, lack mutual cooperation and support for joint development.
Economic zones usually have similar investment orientations like building deepwater seaports and airports, attracting investment capital for shipbuilding, port services, marine tourism, seafood processing and thermal power. For this reason, they usually compete with each other.
According to the Ministry of Planning and Investment, all economic zones have huge scales and require concentrated resources for infrastructure development investment. Therefore, new establishment and expansion need to be carefully weighed up.
In the coming time, both central and local authorities need to look to the same direction. It is not necessary to set up new economic zones but create mechanisms, policies, and resources to improve the performance of economic zones. Established ones need to be categorised to be given investment priority. Some need to be developed before others, said the ministry.
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