VietNamNet Bridge – The poor infrastructure and the high land leasing fee in industrial zones (IZ) have kept investors away.

According to the Economic Zone Management Board, 184 out of the 289 IZs, or 97 percent of IZs, have become operational. By the end of 2012, the projects there had accounted for 50 percent of the total foreign direct investment (FDI). In the first 10 months of the year, 73 percent of FDI flowed to IZs, roughly $9.8 billion.

However, a problem exists that the occupancy rate in IZs remains low, just 60 percent. The IZs in the east of the southern region and Red River Delta have been fully occupied, while the ones in the Central Highlands and northwest can only attract few investors.

According to Tran Duy Dong, Deputy Director of Economic Zone Management Board, an arm of the Ministry of Planning and Investment (MPI), prior to 2009, IZs were considered the areas with difficult conditions and the investors there could enjoy preferential tax rates. However, later, the preferences have been removed, thus making it difficult for IZs to attract investment.

With the Decree No. 69 taking effects on October 1, 2009, the land prices to which IZ developers refer when compensating local people for site clearance is 1.5-5 times higher than the previous levels.

The developers of the IZs located in the advantageous positions in Hanoi, HCM City and Dong Nai, for example, have to pay $80 per square meters for the site clearance and infrastructure. Meanwhile, the land leasing fee in the areas around Hanoi has reached to $100 per square meter.

The poor infrastructure in IZs is also the reason why IZs cannot attract many investors. Except the IZs developed by joint ventures or foreign enterprises, others, which don’t have much money to spend on the infrastructure development, cannot attract investors or can only attract low quality projects.

Japanese investors, for example, would pay attention to the infrastructure conditions, the post-investment policies and the commitment fulfillment before they decide where to set their factories. They won’t make investment in the IZs punished for the violations of the environment laws, which would badly affect their business.

However, Dong still believes that IZs and economic zones in Vietnam are attractive to foreign investors.

After reviewing the 20-year IZ development, the government has applied a series of new policies to help IZs attract more investors.

The corporate income tax law has been amended, under which the enterprises in IZs, besides the preferences given to all businesses, can enjoy the tax exemption for two more years and the 50 percent reduction for the next four years.

In the areas with difficult conditions such as the Central Highlands, the northwest or the central region, MPI would develop the infrastructure with the money from the state budget, while it would organize the events to promote investment there.

The government has decided that it would budget VND70 billion for the infrastructure development in the central region and Mekong Delta, and VND100 billion for the infrastructure development in one IZ in the Central Highlands or the northwest. This would make the land leasing fee decrease.

The investors can only develop new IZs if their existing IZs have the occupancy rates of 60 percent and higher.

Xuan Mai