Clearing Obstacles for Industrial and Economic Zones

9:30:40 AM | 9/13/2022

Vietnam currently has 260 operational industrial parks (IPs) and 75 industrial parks under construction. Vietnam's industrial park system is a destination for thousands of companies from 122 countries and territories as the country has a geostrategic position in industrial estate development, stable political background, abundant labor resources and high economic growth.

Many shortcomings

Mr. Hoang Quang Phong, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI), said that more than 30 years ago, Vietnam officially initiated the opening period and integrated with the world economy. At that time, the formation and development of industrial parks (IPs) and economic zones (EZs) laid the foundation and driving force to bolster domestic production, attract foreign investors, create breakthrough stages, and improve the national economy, and elevate Vietnam's position in the international arena. To date, IPs and EZs are still magnets to investment flows and are considered a preeminent investment model to raise economic performance in many localities.

“Obviously, the formation and development of IPs and EZs is an important and strategic approach of Vietnam to attract foreign direct investment (FDI). Tenants in IPs and EZs play an increasingly important role in budgetary revenue collection, job creation, competitiveness improvement, speedier industrialization and modernization of the nation,” he said.

In order for IPs and EZs to operate in a professional and methodical manner, on May 22, 2018, the Prime Minister issued Decree 82/2018/ND-CP on industrial and economic zone management. Its specific and clear regulations have enabled localities across the country to have easier planning and development of IPs and EZs and provided favorable conditions for investors and enterprises to enhance business performance and better comply with legal regulations.

However, after nearly five years of enforcement, Vietnam has faced certain shortcomings and limitations in regulations on planning, technical infrastructure and social infrastructure of IPs and EZs due to the country’s rapid economic development and deep integration into the global economy. The expansive development of IPs and EZs has confronted numerous difficulties and ineffective use of resources. It has not ensured harmony of economic development with environmental protection and social security. Competitive advantages of IPs and EZs in terms of tax and land have tended to decrease. Production connectivity and cooperation in IPs and EZs remain limited.

In that context, on May 28, 2022, the Prime Minister enacted Decree 35/2022/ND-CP on industrial and economic zone management aimed to address the shortcomings and limitations of Decree 82.

According to Mr. Phong, Decree 35/2022/ND-CP is a practical, timely, and practical action toward building a legal corridor for the formation of specialized, modern, green, clean and complete industrial parks with full technical and social infrastructure. Despite being seen as a breakthrough, practical ruling that removed cumbersome administrative procedures, at present, the enactment of Decree 35/2022 has still met bottlenecks that need to be cleared.

Many obstacles to be ruled out

Mr. Tran Anh Vuong, General Director of Western Pacific, said, although Decree 35 is an enabling decree for infrastructure development in industrial parks, it has revealed a lot of shortcomings. For example, it stipulates investment phasing, which matters to investors.

Clause 4, Article 8 of Decree 35 clearly provides that not only investors must phase in their projects, but they must also phase in the whole process from investment agreement to investment licensing and to real investment phasing in situ. The decree also stipulates that, after the first phasing, the occupancy rate is below 60%, the second phasing will be entitled to another investor. Therefore, appropriate guiding circulars are needed to avoid confusing investors.

Mr. Nguyen Dinh Nam, CEO of IPA Vietnam, said that the decree regulates data of IPs and EZs (Chapter V), but what matters is where the data system is, as authorities do not have it either. Information about IPs and EZs is incomplete. Maybe it is in the early stages or seeking permission or conducting legal procedures or having no information. However, this is a matter of State administration while investment promotion must be transparent. All information about IPs that are ready for investment promotion and can have their land handed to tenants can be loaded into the investment promotion database. Only then will international investors look into the national database to find a suitable location. “I haven't seen that yet,” he stressed.

Lawyer Tran Dai Nghia, CEO of FII Vietnam Consulting and Investment Co., Ltd, said that Decree 35 is an important policy that shapes the development of Vietnam's industrial park infrastructure in the coming period, especially those related to supporting the development of specialized industrial park models such as supporting industrial parks, specialized industrial parks, ecological industrial parks and high-tech industrial parks.

Nevertheless, there are still obstacles to bring these regulations into practice. Therefore, it is necessary to clarify these hindrances for revision, supplement and perfection in relevant legal systems to create a groundwork for sustainable development of industrial zones.

The inconsistency of different legal provisions and the absence of revised regulations gave rise to a lot of difficulties, obstacles and even legal risks for organizations and individuals responsible for carrying out investment activities in industrial parks, especially accommodation for workers. Thus, the amendment and completion of these regulations on investment activities in industrial parks will help stakeholders to reduce time, cost and risks in law enforcement.

In addition, the current focus on economic development investment has posed potential risks to environmental pollution and created a large amount of waste and pollutants that may harm the environment and surrounding areas, and destroy the ecosystem and human health, said Ms. Dang Thi Kim Chi, Vice President of the Vietnam Association for Conservation of Nature and Environment (VACNE), former Deputy Director of the Institute of Environmental Science and Technology (INEST), Hanoi University of Science and Technology. For that reason, one of the requirements is to strictly control the activities of industrial parks by supervising waste sources, manufacturing activities, technical infrastructure operation, and environmental management toward green and sustainable industrial parks.

Quynh Anh (Vietnam Business Forum)