Parks to usher in greater FDI inflows

08:45 | 20/02/2012
Foreign manufacturers still have to choose IPs and EZs for building their projects because they are offered good infrastructure as well as government incentive policies - Hong Sun General secretary of the Korean Chamber of and Commerce in Vietnam

The development of industrial parks and economic zones has made a significant contribution to luring foreign direct investment to Vietnam in recent years. In November 2011, Kyocera Mita, one of the world’s leading manufacturers and providers of computer-connectable peripherals, begun construction of its second largest manufacturing factory in the world in Haiphong.

The new investment of the Japanese company is proof that Kyocera Mita considers Vietnam, along with China, as an important manufacturing base when it comes to meeting the rising global demand for office equipment.

Bridgestone Corporation, the world’s largest tyre and rubber company has also received an investment certificate to build a factory in the Haiphong-based Dinh Vu Industrial Zone. The decision was made as a result of the strong growth in global demand for radial tires for passenger cars and Bridgestone is expected to invest  approximately $497 million in the plant, which is due to start production in the first half of 2014. Plans call for a production capacity of approximately 24,700 tires per day after the production ramp-up is completed in the first half of 2016.

Wintek, a Taiwanese company manufacturing touch screen for Apple’s iPhones and iPads, built a factory in Bac Giang province in 2011. Other transnational companies including Nissan and Hyundai also expanded their manufacturing operations in Vietnam.

These companies selected industrial parks (IPs) and economic zones (EZ) to develop their investments in Vietnam. While Kyocera Mita is building its factory in Vietnam-Singapore Industrial Park in Haiphong, Bridgestone decided on Dinh Vu Industrial Zone in the same city. Nissan and Hyundai chose Chu Lai Economic Zone in Quang Nam as its manufacturing base.   

A Ministry of Planning and Investment (MPI) report shows that total foreign direct investment (FDI) committed to IPs and EZs nationwide during the first 11 months 2011 was nearly $6 billion, accounting for approximately 50 per cent of total FDI commitment in the country. The figure indicates IPs and EZs remain attractive to FDI inflow even though foreign capital inflow to the country is declining.

 At present, Vietnam has 267 IPs covering 73,000 hectares and 15 EZs. During the past 20 years, IPs have lured $57 billion in FDI, accounting for 30 per cent of total FDI into the country. Most projects  in IPs are in the industrial manufacturing sectors. Meanwhile, total FDI commitments to EZs is $25 billion, in the fields of property, manufacturing and energy.

Hong Sun, general secretary of the Korean Chamber of and Commerce in Vietnam, said IPs and EZs were playing a “very special role’’ in luring FDI to Vietnam. “Foreign manufacturers still have to choose IPs and EZs for building their projects because they are offered good infrastructure as well as government incentive policies,” said Sun.

Mai Duc Chon, director of Industrial Parks Management Authority in Hai Duong province, said the development of IPs was intended for FDI projects. “Most domestic companies do not build their factories inside IPs because they have the advantage of being able to acquire land outside IPs. But for foreign investors, IPs are always the best choice,” said Chon.

All IPs in Vietnam are provided with power and water to the fence in accordance with government regulations. And most of these parks are at locations with convenient links to national roads, seaports and airports.

Location is also an advantage of EZs to lure FDI projects. All EZs in Vietnam are coastal and border ones. That means it is convenient for investors to import and export products when they  set up factories in EZs. Furthermore, investors in EZs can enjoy special incentive policies offered by the government.

Another reason FDI projects choose IPs is the strong support of industrial park developers. Kyocera Mita is an example. With the support of Vietnam-Singapore Township and Industrial Parks Development Company, it took only two months for the Japanese firm to gain an investment certificate for its project.

According to the MPI, the relocation of FDI inflows from China to other countries will bring more projects to Vietnam’s IPs. Currently, average occupancy rate at IPs accounts for 65 per cent of total industrial land. The ministry forecasts by 2015 all the IPs will be full. And foreign manufacturers locating their factories in IPs have notched up significant achievements.

In 2011, the total revenue of enterprises operating in IPs is expected to hit $40-$42 billion. Predictions for total export turnover are hovering around $20-$22 billion, or 25 per cent of the country’s total export turnover. Vietnam’s IPs have also created 1.7 million jobs to date.

On average, each hectare of industrial park land has attracted $3.5 million of investment capital, earning $2 million of revenue and $1 million of export turnover as well as creating 80 direct jobs in 2011. The contribution of industrial parks to the state budget in 2011 is estimated at around $1 billion. This means each hectare will contribute $50,000 to the state budget in 2011.

“Overall, industrial parks are one of driving forces of economic growth in the country,” stated a report from CB Richard Ellis.

By Ngoc Linh

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