HCM City IPs and EPZs - Attractive Places to Investors

3:26:29 PM | 7/8/2005

Tan Tao, one of the industrial parks (IPs) and export processing zones (EPZs) in Ho Chi Minh City, has become a successful IP with modern infrastructure facilities. In 2004, the IP attracted 26 more investors with a total investment capital of VND68 billion and US$4.8 billion. So far, 210 enterprises have invested in the IP with 138 operating factories and 22 others under construction. The IP has created jobs for 20,000 people. Along with Tan Tao, many IPs and EPZs and Ho Chi Minh City have changed for the better, becoming attractive places to investors.

Infrastructure upgrade and investment promotion efforts

IPs and EPZs in Ho Chi Minh City have made significant contributions to the city’s economic development. In 2004, domestic and foreign investment capital in the city’s IPs and EPZs saw an increase of 24.8 per cent against that of 2003. Domestic investment alone increased by 41 per cent. Infrastructure developers have made significant efforts to offer convenient support services, including electricity and water supplies, banking and telecommunications, thus helping local IPs and EPZs to attract more investors. In addition, the Ho Chi Minh City Export Processing Zone Administration (HEPZA) has boosted investment promotion activities, acting as the focal point in the relations between enterprises and the Government, ministries and authorised agencies. In 2004, 26 foreign projects were given licences and 170 projects applied for capital increase. These projects were capitalised at US$136.07 million, up by 0.7 per cent and equal to 23 per cent of total foreign investment capital attracted by Ho Chi Minh City. Domestic projects were valued at US$336.54 million, up by 41 per cent. Among new projects, many were high-tech with projects in graphic design, semiconductor research and development, circuit production by Renesas, a joint venture between Hitachi and Mitsubishi.

Enterprises in IPs and EPZs gained a stable growth rate. Enterprises in EPZs saw their export turnover up by 16.5 per cent while that figure for enterprises in IPs was put at 20 per cent. Their export value reached US$1.644 billion, up by 20 per cent while import turnover, US$1.015 billion. Textile, garment, electric, electronic, mechanic products and automobile parts earned high export value, totalling over US$1 billion, equal to 75 per cent of the total figure. Export markets of enterprises in IPs were stable with Japan (over 40 per cent), the EU (over 19 per cent), the US (around 14 per cent), Taiwan (eight per cent) and China (5.5 per cent). Almost all companies gained a high growth rate in their production. The Furukawa Automotive Parts Company in the Tan Thuan EPZ, manufacturing wires for energy and information transmission for automobiles, earned over US$91 million in export turnover, contributed US$410 million and gained a profit of US$2.6 million. Shibata Katsumi, general director of the company, said that after seven years’ investing in Vietnam, the company would promote the implementation of a high-tech project, which had been submitted to the Ministry of Science and Technology for approval, in 2005.

Major difficulties include slow site clearance and high compensation, leading to high land rent. To overcome these problems, some infrastructure developers like the Tan Tao Company have proposed that the city’s authorities develop projects for resettlement and land barter with local people, offering support policies for people who resettle. As a result, 200 hectares of the extended area of the Tan Tao IP have been cleared for developing infrastructure facilities, which will be given to 40 investors soon.

Other factors, including the piloting of function expansion at the Tan Thuan EPZ, policies on investment encouragement in high-tech, and administrative procedures have yet to be successfully implemented. Along with a lack of residential areas for workers and the development of infrastructure facilities outside IPs and EPZs, these factors have produced negative impacts on investment attraction and enterprises’ business and production activities.

IPs and EPZs - Strongest investment attraction tool

Le Thanh Hai, chairman of the Ho Chi Minh City People’s Committee, said that the city should increase the proportion of fundamental industries, and high-tech industries. The city will concentrate on calling for investment in three major planned industries, mechanics; electronics, information technology and telecommunication; and the chemical industry. In addition, a focus will be given to developing human resources for industrial development and Vietnam’s accession to the ASEAN Free Trade Area (AFTA) and the World Trade Organisation (WTO). The city will boost investment in the application of new technologies, diversify its products and increase the effectiveness of local enterprises. At the same time, the city will improve in quality, build trademarks and boost trade promotion activities, thus helping local producers boost their exports. In the 2006-2010 period, the city will not develop more general IPs. Instead, resources will be concentrated for the development of some specific IPs to attract and take advantage of high-technology applications.

To that end, IPs and EPZs should become the strongest tool for investment attraction, acting as the driving force for Ho Chi Minh City’s industrialisation, modernisation and integration. This is also the focal point in the city’s efforts to build its scientific and technological capacity with modern equipment and technology. IPs and EPZs will become training centres for skilled managers and workers. The Ho Chi Minh City People’s Committee will create favourable conditions for the perfection of the ‘one door’ of the HEPZA, helping it set up an assistance fund for IPs and EPZs. The committee will provide guidelines on site clearance and the setting of reasonable land rent, paying attention to investment in infrastructure facilities outside IPs and EPZs, including telecommunication transmission lines and high-speed Internet lines. Also, the city will focus on building residential areas for workers with high quality public services, thus helping improve their living standards.

In 2005, IPs and EPZs in Ho Chi Minh City will strive to attract US$480 million in domestic and foreign investment capital. Export turnover of enterprises in local IPs and EPZs should reach US$2 billion, up by 22 per cent. The city needs to recover 1,040 hectares of IPs and areas with developed infrastructure but leased 164 hectares. Seven IPs such as Vinh Loc, Tan Binh, Tan Thoi Hiep, Binh Chieu, North-western Cu Chi, Hiep Phuoc and Cat Lai 2 should complete the construction of their concentrated waste water treatment centres. Regarding human resources, the city will carry out projects on vocational training to provide 18,000 workers for enterprises in IPs and EPZs. Also, plans for residential areas of workers will be adjusted.