Decree regulates industrial parks

10:02 | 22/01/2014

On November 12, 2013 the Vietnamese government enacted Decree 164/2013/ND-CP regulating the development of industrial parks, export processing zones  and economic zones.

decree regulates industrial parksVu Dai Thang, head of the Ministry of Planning and Investment’s Department for Economic Zones Management analyses the new points of the decree.

The new decree has rectified some issues that created obstacles in existing mechanisms, policies and regulations regarding industrial parks (IPs) and economic zones (EZs), in addition to some new regulations in order to perfect the legal framework governing their operation.

Via the Decree 164, the government has rectified 16 clauses and added four new clauses compared to Decree 29/2008/ND-CP issued in 2008. A summary of the new content includes:

Firstly, the new decree contains tighter regulations on the establishment of IPs through more efficient licensing procedures on the establishment and expansion of IPs. According to the Decree 29 and investment laws, there are three steps to establishing an IP: (i) adding the IP to the planning scheme; (ii) granting an investment certificate to an investment project on building and trading IP infrastructure; and (iii) issuing a decision on the establishment or expansion of an IP.

Although the Decree 29 included the condition of adding a new IP to planning schemes, it did not make clear the conditions on granting an investment certificate and establishing an IP. Therefore, some localities, albeit still dropping the requirement that “at least 60 per cent of the total industrial land area of the IPs based in their areas are leased to investment projects”, have still honoured investment certificates to new projects on the establishment of IPs and took steps to recall the land for the construction of IPs.

To increase transparency and tighten control on the establishment of IPs, the new decree clearly regulates conditions on granting investment certificates for the establishment and expansion of IPs. Investment projects on IP infrastructure development shall be provided with investment certificates once they have satisfied the following conditions: they meet planning criteria and existing IPs in the area report an occupancy rate of at least 60 per cent. In cases of existing IPs seeking expansion, the conditions are that existing IPs report an occupancy rate of at least 60 per cent and have central waste-water treatment facilities.

To foster co-ordination among state management agencies in the process of appraising investment in the establishment of IPs, the amended decree requires the authority to grant investment certificates to seek comments from relevant government agencies when processing investment procedures on IP infrastructure development. This is because IPs are major scale investments so it is important to consult with state agencies, particularly specialist bodies, to ensure they provide sufficient information and a legal basis for government agencies to decide on whether to grant investment certificates to the projects.

decree regulates industrial parks
The new decree regulates industrial parks, export processing and economic zones

Regarding the procedures on the establishment and expansion of EZs, when an EZ is added to a planning scheme it is important to ensure it satisfies all the necessary conditions. The regulation aims to limit the development of EZs that fail to match the actual conditions and capacity in their localities.

Secondly, the decree outlines the rights and obligations of businesses operating in IPs, EZs and investors building and trading IP and EZ infrastructure.

The rights and obligations of IP businesses were not regulated in the Decree 29. Therefore, the amended decree was supplemented to cover the rights and obligations of businesses developing IP and EZ infrastructure to create a legal basis for businesses developing IP infrastructure and those based in IPs and EZs to fully exercise their rights and obligations.

Businesses developing IP infrastructure are obligated to register their land lease, sublease rates and infrastructure fee levels with the IP and EZ authorities. This will help state management agencies to collate land lease/sublease rates at IPs and avoid a situation where businesses set land lease/sublease rates at unreasonably high levels. Land and land acquisition issues at IPs need to be regulated by state management agencies, therefore the state controlling land rates and fees will allow for more effective use of national resources.

Thirdly, the decree amends and supplements some regulations covering export processing zones (EPZ) and EPZ businesses.

The operation of EPZs and EPZ-based businesses was regulated in the Decree 29 which specified the relations between EPZs, EPZ-based businesses and the domestic market, and products that could be sold on the domestic market. The Decree 164 carries more explicit regulations with some supplementary points:

(i) EPZ-based businesses can buy building materials, stationery, food and consumer goods in the domestic market for construction, administration and management and to ensure the living conditions of their employees based in the EPZs. EPZ-based businesses and those selling products can opt to handle or not handle import-export and customs procedures in relation to building materials, stationery, food and consumer goods bought in the domestic market;

(ii) EPZ-based businesses can sell in the domestic market liquidated assets of businesses and other products as per existing regulations on investment and trade. The exchanges of goods made in EPZs by EPZ-based businesses with other parts in the country, except non-tariff areas are regarded as import-export relations;

(iii) EPZ-based businesses acquiring licences to trade in goods and engage in trading activities in Vietnam are obligated to set up specific branches outside EPZ businesses and the EPZs to carry out these activities;

Through these regulations, EPZ businesses will benefit from more flexibility in buying goods to serve their essential needs; they can also sell liquidated assets in the domestic market. Establishing branches outside of EPZ businesses and the EPZs to directly trade in goods (as stated in their granted licences) is to take control of export processing activities by EPZ businesses.

Fourthly, the decree has added regulations on housing development for IP and EZ workers.

Developing housing for IP workers has been a hot issue in recent years. To spur the development of rented housing for IP workers, the prime minister enacted Decree 66 in 2009 presenting some mechanisms and policies on the issue. Some of the decision was revised and supplemented and applied to Decree 188 on social housing development and management which was enacted by the government on November 20, 2013.

In fact, many existing IPs have proposed using part of their areas for building housing for their workers. The move needs to be supported to improve living conditions for IP workers. Therefore, the new decree was supplemented with two new points: (i) IP development plans linked to housing and the responsibility of provincial people’s committees in planning the land area for housing development; (ii) revising the detailed planning for existing IPs to set a suitable space for businesses to build such accommodation.

Fifthly, the policy of increasing decentralisation and delegation of power was handled in the initial period of IP and EZ development with a view to turn IP and EZ authorities into single-window, one-stop bodies in IP and EZ management. Practice has proved that IP and EZ authorities have effectively performed their role, signalling the success of the administrative reform process.

However, the delegation of power to IP and EZ authorities varies from location to location and is regulated by diverse legal documents with overlapping contents. To tackle this, the new decree has: (i) clarified the direct functions and duties of these authorities in investment, oversight, management and supervision of IP and EZ operation in accordance to existing regulations; (ii) set unified regulations on IP and EZ authority functions and duties in trade, construction, labour, and environment under instructions and delegation of power from ministries, branches and provincial-level committees.

Generally, the enactment of the Decree 164 aims to satisfy the practical needs in IP and EZ operation, focusing on tackling some pressing issues of concern to localities and businesses. For enforcement of the amended decree, in the forthcoming time it is important to implement some of the following tasks:

Firstly, ministries, branches and provincial committee under their management purview need to rapidly issue instructions on the delegation of power for IP and EZ authorities to perform their management duties in regards to IPs and EZs. This must be handled following the spirit of the Decree 164 and Decree 29.

Secondly, IP and EZ authorities need to seriously follow regulations in the Decree 164, particularly closely in relation to the planning, investment and establishment of IPs and EZs, ensuring investment and land use efficiency, taking the initiative in executing their tasks, and strengthening ties with provincial people’s committees and government agencies.

It is vital to integrate regulations on IP, EPZ and EZ development into laws in order to aid the contributions made by IP and EZ management agencies to the development of the country.

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