Econ
Vietnam approved a plan to build three special economic zones
The Vietnamese Government has approved a plan to build three special economic zones (SEZs) to spearhead the country’s growth and exploit local advantages to impel growth there.
The SEZs, to be built in the coastal districts of Van Don (in the northern province of Quang Ninh), Van Phong (in the central province of Khanh Hoa) and Phu Quoc Island (in the southern province of Kien Giang), will pilot key new economic and administrative policies before they are applied nation-wide to develop the maritime economy.
They would be superior to existing economic zones - where mostly tax and lease incentives are offered - that have failed to attract strategic foreign investors with truly large projects and cutting-edge technologies.
Experts said a Law on Special Economic Zones (or the Law on Special Administrative-Economic Units) needs to be enacted quickly, and administrative and economic policies in conformity with international practices promulgated, to help these SEZs compete with existing special economic zones and free trade zones around the world.
The Ministry of Planning and Investment has been instructed by the Government to draft the law. Economic zones, while belonging to a country, have relatively independent status in relation to the outside, enjoy great autonomy, are run through modern and free administrative and economic management mechanisms and are integrated deeply into the global economy.
SEZ, as per the survey’s findings, appear to be enablers of structural changes through a combination of ‘linkages’ and demonstration effects. Infrastructure is the crucial input expected of any SEZ. In most of the Mekong economies, SEZs are perceived to provide significant insulation from the uncertain external/outside environment.
Vietnam, in particular, over the past year has emerged as the sub-region’s FDI magnet. In 2015 alone the country reported $14.5 billion in disbursed FDI. Looking at investments in new projects and extensions to existing projects, a further $22.8 billion has been promised over the same period.
As a result of the continuous flow of FDI, the number of industrial zones (IZ) in the country has risen to around 400 in mid-2015 from the 219 in 2008. Among the 47 provinces that reported foreign investment inflows, the provinces of Ho Chi Minh City, Binh Duong, and Dong Nai have attracted the most capital, making the Southeast region the top FDI destination.
Survey respondents were broadly positive about the overall business environment in Vietnam’s IZs. Among the factors that attract firms to IZs tax incentives, efficiency of customs clearance, and the consistency of government policies were considered the most important. Public goods and services were mostly assessed as average or higher.
On the other hand, there are infrastructure challenges, such as internet connectivity, which seems to be more of an issue than the unreliable electricity supply. The consistency of government policies has also emerged as an issue. There are concerns about the constantly changing legal requirements and the foreign exchange rate policy.
In terms of labour, low skills and high turnover are considered to be the biggest problems. Foreigners accounted for less than 5 per cent of total employees within the IZs and work only in non-production capacity. Vietnamese workers make up all of the production workers in both low and semi-skilled categories.
In conclusion, favourable tax incentives and consistency of governmental regulations appear to be the most import factors in assessing the business environment in Vietnamese IZs. While the local labour force carries out most of the production, a small share of foreigners is employed in non-production roles.
They would be superior to existing economic zones - where mostly tax and lease incentives are offered - that have failed to attract strategic foreign investors with truly large projects and cutting-edge technologies.
Experts said a Law on Special Economic Zones (or the Law on Special Administrative-Economic Units) needs to be enacted quickly, and administrative and economic policies in conformity with international practices promulgated, to help these SEZs compete with existing special economic zones and free trade zones around the world.
The Ministry of Planning and Investment has been instructed by the Government to draft the law. Economic zones, while belonging to a country, have relatively independent status in relation to the outside, enjoy great autonomy, are run through modern and free administrative and economic management mechanisms and are integrated deeply into the global economy.
SEZ, as per the survey’s findings, appear to be enablers of structural changes through a combination of ‘linkages’ and demonstration effects. Infrastructure is the crucial input expected of any SEZ. In most of the Mekong economies, SEZs are perceived to provide significant insulation from the uncertain external/outside environment.
Vietnam, in particular, over the past year has emerged as the sub-region’s FDI magnet. In 2015 alone the country reported $14.5 billion in disbursed FDI. Looking at investments in new projects and extensions to existing projects, a further $22.8 billion has been promised over the same period.
As a result of the continuous flow of FDI, the number of industrial zones (IZ) in the country has risen to around 400 in mid-2015 from the 219 in 2008. Among the 47 provinces that reported foreign investment inflows, the provinces of Ho Chi Minh City, Binh Duong, and Dong Nai have attracted the most capital, making the Southeast region the top FDI destination.
Survey respondents were broadly positive about the overall business environment in Vietnam’s IZs. Among the factors that attract firms to IZs tax incentives, efficiency of customs clearance, and the consistency of government policies were considered the most important. Public goods and services were mostly assessed as average or higher.
On the other hand, there are infrastructure challenges, such as internet connectivity, which seems to be more of an issue than the unreliable electricity supply. The consistency of government policies has also emerged as an issue. There are concerns about the constantly changing legal requirements and the foreign exchange rate policy.
In terms of labour, low skills and high turnover are considered to be the biggest problems. Foreigners accounted for less than 5 per cent of total employees within the IZs and work only in non-production capacity. Vietnamese workers make up all of the production workers in both low and semi-skilled categories.
In conclusion, favourable tax incentives and consistency of governmental regulations appear to be the most import factors in assessing the business environment in Vietnamese IZs. While the local labour force carries out most of the production, a small share of foreigners is employed in non-production roles.
