Tuesday, 19 Feb 2019

Special economic zone: Not just about the red carpet of tax incentives

Updated at Friday, 27 Apr 2018, 17:05
The Hanoitimes - The development of Phu Quoc, Van Don, and Northern Van Phong needs an innovative, outstanding business environment and institutions, experts said.
The increase of the term of land use from 50 to 70 years, even up to 99 years for special projects, is one of the land incentives set out in the draft law on the Special Administrative Economic Zones of Van Don, Northern Van Phong, and Phu Quoc to be submitted to the National Assembly for consideration and ratification at the working session in May.
An urban development corner in Phu Quoc
An urban development corner in Phu Quoc

In addition, the three special zones are also entitled to a number of tax incentives such as exemption from and reduction of personal income tax, corporate income tax, value added tax, special consumption tax, land and water surface fee. The draft also minimizes the administrative procedures, with the time limit for granting investment certificates reduced to half, within 5 to 10 days.
Some experts believe in breakthroughs brough by the new law.  Nguyen Van Phuc, former vice chairman of the National Assembly's Economic Committee, said that the bill introduced breakthroughs and special mechanisms for development that “could not be imagined” before. 
"These incentives are competitive and we must always change to create greater competition, which then will attract the world's large business groups’ investments," quoted Phuc as saying.
However, some other economic analysts think that what investors need when coming to the special economic zones is not only a series of tax incentives but also a truly open business environment, especially professional and transparent implementing institutions.
This is also the wish of investors from Korea such as Kim Dong Hwi. Kim shared that Vietnam's investment attraction policy has been basing on a lot of incentives, but it is now no longer a decisive factor for foreign investors. "The favorable business environment and open policies are truly sufficient conditions for investors to choose and stay with their investment," Kim said.
Similarly, an investor named Phong from Hanoi who is studying Phu Quoc also expects licensing procedures to outperform other localities. Phong said he had not yet decided to "put money" in Phu Quoc, partly because of the concerns that investment bottleneck issues would not be cleared.
Therefore, sharing with VnExpress, experts said that in order for special economic zone model in Van Don, Northern Van Phong or Phu Quoc to be successful, there should be a lot of other conditions rather than the simple “rolling out of a carpet" made from series of incentives.
Specifying the characteristics a special zone should possess, a specialist in public policy comments, the special zone should reduce the number of permits; its legal court should shorten the dispute settlement period to weeks or days instead of months or years. Beyond that, it should allow private participation in public governance at the special zone.
In agreement, Vo Tri Thanh, former Deputy Director of the Central Institute for Economic Management (CIEM) comments that the bill is still quite overwhelming and unclear as to whether "the special zone shall be a pilot institution or money maker."
"The level of liberalization in the circulation of goods and services is linked to the transfer of resources. In addition, the two prerequisites are (i) institutions need to be professional, transparent, and (ii) they have "power" in hand to handle disputes in the fastest, most convenient way. Financial and tax incentives are secondary," Thanh said.
Assuming that Vietnam needs to have special economic zones, Dinh Thanh Huong, Training Director of AVSE Global, assesses that Vietnam's special economic zone should be built as a "competitiveness cluster," thereby enhancing the competitiveness of the whole country, creating regional economic links.
"The special zone must be the place where creativity, new forms of knowledge and institution are initiated, then spread to other areas nationwide," Huong suggested.

Cam Anh
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