Clearing bottlenecks to welcome investment capital flow

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IZs and EZs are still the focal point to attract investment and are considered as a preeminent investment model, bringing high economic efficiency to many localities. Photo: Nhat Nam
IZs and EZs are still the focal point to attract investment and are considered as a preeminent investment model, bringing high economic efficiency to many localities. Photo: Nhat Nam

According to the Ministry of Planning and Investment, the country currently has 335 IZs, with a total area of 97,840 hectares. IZs and Ezs nationwide have attracted 9,784 foreign direct investment (FDI) projects with a total registered capital of US$194.69 billion and 1,387 domestic investment projects with a total registered capital of VND1,461 billion.

In recent years, on average, annual FDI capital into IZs and EZs accounts for about 35-40% of total FDI into Vietnam. In the field of processing and manufacturing only, FDI in IZs and EZs accounts for 70-80% of the total registered capital of the whole country.

Cost reduction and investor orientation

In just over three decades of establishment and development, hundreds of IZs have been put into operation, Vietnam’s IZs and EZs system is the destination of thousands of businesses from more than 100 countries and territories. It can be affirmed that the formation and development of IZs and EZs was an important and strategic direction for Vietnam in attracting FDI capital. Enterprises in IZs and EZs have played an increasingly important role in revenue collection and job creation, contributing to improving competitiveness, and speeding up the process of industrialization and modernization of the country.

Up to now, IZs and EZs have been the highlight of investment attraction and are considered as a preeminent investment model, bringing high economic efficiency to many localities.

In particular, Vietnam’s IZs are expected to enter a new and more positive phase when the Government’s Decree 35/2022/ND-CP has many progressive amendments compared to Decree 82/2018/ND-CP on the management of IZs and Ezs.

It has solutions to many key problems, offers an open legal corridor, and has several policies to facilitate business development and investment. Simultaneously, it contributes to solving problems for IZ infrastructure investors, attracting investment, especially FDI, saving time to implement projects, and reducing costs for investors.

From the perspective of investors, speaking at the Forum “Implementing Decree 35/2022 on the management of IZs and EZs”, Deputy General Director of Sao Do Group Tran Thi To Loan said Decree 35 had many progressive amendments compared to the previous Decree 82 on the management of IZs and EZs. Accordingly, the Decree has classified specific types of IZ construction planning; the role of the Provincial People’s Committee and investors is also focused; and the local authority is more empowered. Additionally, Decree 35 also amends and supplements a number of regulations related to infrastructure investment.

“All these changes and modifications save project implementation time, reduce costs for investors, and orient investors. Especially, it helps avoid the complicated and lengthy process of adjustment, which is currently causing difficulties for investors when implementing the project, because in the process of implementation, there will be many problems that cannot be calculated at the time of project formulation,” said Loan.

Agreeing with this view, Dr. Han Minh Cuong, representative of Sgroup Group JSC, also said that the newly revised points of Decree 35 would remove the inherent bottlenecks of Decree 82 in the development of IZs and EZs.

Confused about the actualization

From the perspective of enterprises directly investing in the construction of IZ infrastructure, many businesses are still wondering about the implementation of the Decree. Tran Thi Thanh Hao, Legal Director of BW Industrial Development JSC, said that to implement the mechanism of converting IZs to developing urban-service zones, in addition to the relevant conditions, there must be a consensus between the investor of the IZs and over two-thirds of the enterprises subleasing land in the area expected to be converted. However, the businesses subletting the land that do not agree to the conversion are often the ones who are not ready to move their business to another place, or may not be financially ready to rent new premises.

According to Hao, there should be clear guidelines to protect businesses affected by the transition through a number of measures such as IZ investors and authorities must prepare new premises for the displaced businesses and compensate them for costs incurred related to relocation and disruption of their business.

According to Tran Anh Vuong, General Director of Western Pacific, Decree 35 has regulations on investment divergence. This is one of the problems for investors. Because doing an IZ of 250 hectares, when applying for an investment policy, we will have to separate, do two times of investment policy, two times investor selection, and two times site clearance. This can turn a positive into a negative because with the divergence, coupling will be very difficult for even an investor. The Decree also clearly stipulates that if the first phase has an occupancy rate of less than 60%, the second phase will be another investor.

Therefore, the General Director of Western Pacific said that there should be appropriate guiding circulars to avoid the current confusion of investors.

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In addition, some businesses are worried that after Decree 35 takes effect, land rental prices would be pushed up. According to Nguyen Thi Thu, Chairman of the Board of Directors and General Director of Anh Kim Food Production JSC, most of the companies operating in Tan Binh IZ have paid the land use fee once for 50 years. But for IZs where enterprises are paying land rent annually, the application of Decree 35 will increase the price according to the coefficient K (the land price adjustment coefficient) prescribed by the State. Moreover, Decree 35 specifies the type of IZ – urban – service. Therefore, when investing in more infrastructures, investors must ensure security. This will push the rent higher, and the business will not hire that service.

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