Mekong Delta Changes Image to Attract Foreign Investors

Mekong Delta Changes Image to Attract Foreign Investors 

The Mekong Delta region has so far attracted 161 foreign direct investment (FDI) projects valued at US$1,317 million, accounting for 3 per cent of the nation. Why does it attract such a small number of foreign investors?

Slow development of infrastructure

From 1998-2003, six industrial parks located in Long An, Tien Giang, Vinh Long and Dong Thap provinces and Can Tho city attracted over US$300 million of investment capital, equalling 20 per cent of total local investment capital. In 2003 alone, the Mekong Delta drew US$88.7 million in FDI, down US$29 million against 2002. Of this sum, Long An pulled in US$80 million, Can Tho US$4.7 million, Tien Giang US$2.3 million, the remainder belonging to other provinces.

The industrial production of FDI businesses reached VND7.5 trillion (US$477.7 million) in 2003, 6.8 and 187 times higher than the years of 1996 and 1990, respectively. FDI enterprises in Long An, Can Tho and Kien Giang took top positions. The figures showed great development of the FDI-led industrial sector in the Mekong Delta region. However, the FDI industrial production value took up only 13.8 per cent of the industrial output of the region.

The development of the Mekong Delta largely depends on local capital sources while FDI capital plays minor roles in the regional economic growth and structure. The region has survived mainly on food and aquatic products for the past 20 years.

Poor infrastructure, low educational qualifications and unskilled workforces are among the outstanding reasons for the slow development of the region. The Mekong Delta region has no international airport or seaport. It only has small-sized river wharves. The National Road No. 1A is now considered the only way to regional provinces and is being overloaded despite recent improvements while the system of waterways is under initial construction. As for the economic environment, the Mekong Delta region is weak in industry and service and lacks support industries mainly depending on food crops. The development of the potential fisheries industry has proved unpredictable. What's more, the region lacks skilled workers. Therefore, in spite of numerous investment incentives, only a few foreign investors have arrived in the 12 regional provinces.

Determined to progress

Besides speeding up industrial and service development, Mekong Delta provinces have also accelerated urbanization and infrastructure construction, including transport, electricity, water and telecommunication systems. They have hastened administrative reforms to facilitate investment-related activities, trade and investment promotion services and so on. Construction of many key projects such as Cai Cui Seaport, Ca Mau Gas-Electricity-Fertilizer Industrial Park, Bridges of Rach Mieu and Can Tho, and national roads has been started up. In the near future, the region will build Vam Cong Bridge, Ho Chi Minh City-Can Tho Expressway, and waterways linking Ho Chi Minh City with Kien Giang and Ca Mau, restore Ho Chi Minh City-My Tho railway, and put Tra Noc Airport into operation for civil purposes. Besides, Can Tho University will be upgraded into a national education pivot. Branches of the Fisheries University and Architecture University will be turned into university equivalents in Kien Giang and Vinh Long. Each province will have one vocational school and each district will have a vocational training centre. Universities of medicine and pharmacy, and teachers' training are under construction in Can Tho and Dong Thap.

Apart from abiding by State regulations on investment incentives, the Mekong Delta region also applies its own incentives for investors. FDI enterprises in Long An only pay minimum land rentals and enjoy land rental exemption in the initial 7-15 years. Land taxes will only be levied when putting their establishments into operation and for lease. Dong Thap offers free land rentals in the first five years for five first investment projects into the province. Enterprises moving into industrial parks will be supported with their moving expenses, 50 per cent of expenditure on worker training (which can reach VND1 million (US$64) a person). Can Tho levies land tax of VND150 (1 US cent) per sq.m per year. Soc Trang lets investors negotiate with landowners on rental rates. It provides site clearance and compensation fees. Firms building houses (under their investment projects), more-than-3-storey living quarters, or works to serve poor labourers will be free from the rentals. The investors in Tien Giang, who rent 20,000-50,000 sq.m or over 50,000 sq.m of land, will be offered rental discounts of 10 per cent or 15 per cent, respectively.

Regional provinces have recently focused on development of support industries and investment brokerage services. In particular, they have removed the "the-strongest-wins" habit and set up stronger regional cooperative ties and development strategies between the region and Ho Chi Minh City, the eastern part of South Vietnam and the southern part of Central Vietnam to boost trade with other provinces and nations.

• Thuy Tien