Vietnam - Ideal Production Base for Multi-national Corporations

“Before investing in an industrial park or an economic zone, every foreign investor must carefully study the business environment of Vietnam in general, and the business environment of such industrial park or economic zone in particular. With its own advantages in geographic location, infrastructure and investment and business environment, Vietnam has become an ideal production base for multinational corporations,” said Mr Tran Duy Dong, Director General of the Economic Zones Management Department under the Ministry of Planning and Investment, in an interview granted to Vietnam Business Forum. Thu Ha reports.

Could you please tell us the remarkable results of economic zones and industrial parks in the country?
After more than 20 years of development, economic zones and industrial parks have produced positive results as follows.

Firstly, economic zones and industrial parks have attracted huge investment capital for technical infrastructure and production and business operations. Private and foreign funds account for nearly 90 per cent of total investment capital for technical infrastructure in economic and industrial parks. By the end of December of 2016, foreign investors invested US$3.48 billion in infrastructure development industrial and export processing zones. Economic zones also initially attracted private capital for technical infrastructure construction in the form of public-private partnerships (PPP). Furthermore, economic zones also contributed significantly to boosting external socioeconomic infrastructure investment.

As for capital investment for production and business, by the end of December 2016, industrial parks and export processing zones housed 6,947 projects with a total foreign investment capital of US$110.2 billion, of which US$66.8 billion had been realised or 60.7 per cent of total registered value. Coastal economic zones attracted 354 projects with a total registered investment capital of US$42 billion, of which US$20.2 billion was disbursed, or 48.1 per cent of the registered value. Border gate economic zones also drew more than VND1 trillion of investment capital for production, processing, service rendering and trade.

Secondly, economic zones and industrial parks boosted industrial production development. With the establishment of economic zones and industrial parks, Vietnam’s industrial production has made impressive changes as follows:

The level of industrial production technology has been improved, particularly with the presence of some high-tech production projects such as Samsung smartphone production project in Yen Phong Industrial Park, Bac Ninh province and Yen Binh Industrial Park, Thai Nguyen province; Intel chip production and assembly project in Saigon High-Tech Park. For the past three years, the number of high tech investment projects in economic zones and industrial parks has increased markedly.

Not only that, many giant production projects have been formed in economic zones and industrial parks, for example, Dung Quat oil refinery in Dung Quat Economic Zone, Quang Ngai province; and Posco Steel Mill (South Korea) with an annual capacity of 3 million tonnes of steel in Phu My I Industrial Park, Ba Ria-Vung Tau province. According to preliminary statistics, over 500 projects in economic and industrial parks have an individual capital of over US$100 million (VND2,100 billion).

With the formation of economic zones and industrial parks, Vietnam has the opportunity to develop cutting-edge industries, namely smartphone, oil and gas, steel and shipbuilding.

Besides, economic zones and industrial parks have made important contributions to socio-economic development. For the time being, they employ over million workers. At the same time, economic zones also provide a number of modes and environments for training and improving skills for workers.

Economic zones and industrial parks also have other contributions to the nation such as increasing budget revenue and economic growth.

From practical State management over economic zones and industrial parks, could you please tell us what the main driving forces are to push the development of economic zones and industrial parks and attract big investors, including multi-national corporations?
Before investing in an industrial park or an economic zone, every foreign investor must carefully study the business environment of Vietnam in general, and the business environment of the industrial park or economic zone in particular. They also have their own views on any advantages that Vietnam has. From the perspective of a State investment management agency, we think that main advantages and driving forces for the development of economic and industrial parks are as follows:

Firstly, Vietnam is geographically convenient for investment in production and business operations, as well as access to international markets.

Vietnam is a Southeast Asian country in the Asia Pacific region with dynamic economic development activities, lying close to important international maritime routes. In particular, we have a very long coast, including a number of seaports capable of receiving big vessels like Lach Huyen Port (Hai Phong City), Tien Sa Port (Da Nang City), Van Phong Port (Khanh Hoa province), and Thi Vai-Cai Mep Port (Ba Ria-Vung Tau province). These are favourable factors for investors to export their products to the world and import raw materials and semi-finished products for production in Vietnam at reasonable transportation costs. This is a comparative advantage that Vietnam needs to boost further in the future.

In addition, Vietnam’s population is comprised of over 90 million, while its labour costs are competitively relative to other countries in the region and China.

Secondly, Vietnam has been building and improving the quality of technical infrastructure such as roads, seaports and airports.

Recently, Vietnam has put some highways into operation such as Hanoi-Lao Cai, Hanoi-Hai Phong, Ho Chi Minh City-Long Thanh; and upgraded and expanded some seaports and airports to enhance connectivity of Vietnamese regions and markets with the international market. Moreover, the country has 325 industrial parks and 16 economic zones where investors can locate their projects when technical infrastructure is completed.

Thirdly, the business and investment environment is completed in a way that is favourable for investors as follows.

- Vietnam has taken drastic steps to reform administrative procedures in order to reduce paperwork and time for investors. The country has adopted a one-stop single-window mechanism at investment and business authorities. It expects to have its investment and business administrative procedures reach the average level of ASEAN 4 (top four countries in ASEAN) by the end of 2017. Currently, the time required to complete tax and customs procedures, business registration and access to electricity has shortened significantly. According to the World Bank's Doing Business Report 2017, Vietnam ranked 82nd out of 190 economies, with a score of 63.83 on a 100-point scale. Compared to the last rankings, Vietnam climbed nine places (in 2016, Vietnam ranked 91st with 61.11 points.

- The legal framework for business and investment has also been reformed in a transparent and favourable fashion with the adoption and application of the amended Law on Investment, the amended Law on Enterprises of 2014 and other important laws such as the amended Law on Real Estate Business 2015 and the amended Law on Corporate Income Tax.

- The investment and business environment in economic and industrial parks has improved considerably with the enforcement of the amended Law on Investment and other legal documents, such as Decree 29/2008/ND-CP dated March 14, 2008, Decree 164/2013/ND-CP dated November 12, 2013, and Decree 114/2015/ND-CP dated November 9, 2015. Authorities of economic zones and industrial parks are decentralised and authorised to perform specialised State management functions and tasks regarding land, labour, trade, environment and construction to facilitate the application of the one-stop single-window mechanism at their facilities, reduce administrative procedures required investors to complete when they do business there.

Fourthly, bilateral and multilateral investment and trade cooperation between Vietnam and other countries is increasingly open to provide a choice of market opportunities for investors.

Currently, Vietnam was a full member of the World Trade Organisation (WTO) as of January 11, 2007. Recently, the country signed the Vietnam-European Union (EU) Free Trade Agreement and Vietnam-South Korea Free Trade Agreement; and took part in free trade agreements like ASEAN-China and ASEAN-South Korea as well as many investment protection and encouragement agreements in Vietnam. In particular, the formation of ASEAN Economic Community at the end of 2015 created a basis for strong and comprehensive trade between Vietnam and Southeast Asian countries.

How do you assess opportunities for economic zones and industrial parks that APEC Vietnam 2017 will bring in?
APEC Vietnam 2017 is one of the important international diplomatic events in Vietnam expected to have a positive impact on the business environment in the country. I think that this is an opportunity to boost the business and investment environment in Vietnam in general, and in economic and industrial parks in particular.

Especially according to the Agenda of APEC Vietnam 2017, 11 member countries of the Trans-Pacific Partnership (TPP) are expected to meet to determine the future of the TPP. The restart of the TPP Pact is of great importance to create a new impetus to draw investment capital into economic zones and industrial parks, and confirm the determination of Vietnam and other member countries to global economic integration and global trade boost.

To further upgrade the performance of economic and industrial parks to their existing potential and attract more multinational corporations, what are tasks and solutions for economic and industrial parks in the coming time?
Improving the performance of economic and industrial parks is one of the important and long-term tasks of the Ministry of Planning and Investment. To accomplish this, there are many tasks that need to be implemented, including the following:

Firstly, promoting achievements, maintaining political stability and reforming the investment and business environment to enhance openness and convenience for investors. Economic and industrial parks will carry out the two main issues: (i) reforming administrative procedures and improving the efficiency of State administrative apparatus; (ii) perfecting laws on industrial and economic zones to ensure the attractiveness of the investment environment of economic and industrial parks to investors.
Secondly, investing and improving technical infrastructure of roads and ports, enhancing the infrastructure quality in economic and industrial parks, and providing quality services for tenants in economic and industrial parks.

Thirdly, raising the quality of human resources to meet investors’ demands for high technical skills, shift the competitive edge from low-skilled and low-cost labour to high-skilled, cost-effective labour. It is important to develop strategies and plans for human resource development; reform education and training programmes; incentivise foreign-invested firms to take part in high-tech labour training.

Fourthly, adding more competitive and efficient economic and industrial park models; carrying out tasks assigned by the Government and the Ministry of Planning and Investment to compile decrees to replace Decree 29/2008/ND-CP dated March 14, 2008, Decree 164/2013/ND-CP dated March 12, 2013, Decree 114/2015/ND-CP dated November 9, 2015 to propose three new industrial park models, namely supporting industrial parks, ecological industrial parks, and urban-service industrial parks. At the same time, to fulfil the guidance of the Politburo, the Government and the Ministry of Planning and Investment are studying the development of the Law on Special Administrative-Economic Unit. By adding new economic and industrial park models, the ministry believes that it will make positive contributions to boosting the performance of economic and industrial parks and achieving better results corresponding to the development potential of economic and industrial parks.