- Green Growth
- Your Consultant
What have IZs and EPZs contributed to the nation’s industrialisation over the past two decades?
Vietnam’s IZs and EPZs started to be built when the country embarked on the renovation process and opening the economy. Under the guidelines of the Party and the state, IZs and EPZs have been developed to create an enabling investment environment linked to specific geographical locations to attract investors into concentrated industrial production, particularly foreign investors in the initial stage of economic renovation, creating a breakthrough to industrial investment and proliferation.
IZs and EPZs’ striking achievements in the past two decades were mirrored by their contributions to national development in economic, environmental and social fronts. Since the establishment of Tan Thuan EPZ in 1991, the country is now home to 267 IZs and EPZs which are responsible for around 40 per cent of total foreign direct investment (FDI) registered in Vietnam, over 30 per cent and 20 per cent of the country’s total industrial production and export values respectively, and provide jobs to more than 1.6 million labourers.
The zones have contributed to building modern industrial-urban areas, modernising infrastructure systems, creating jobs, developing a skilled and qualified workforce, giving a facelift to rural areas and helping improve workers and people’ lives.
These achievements have verified the properness of the Party and state’s policies on IZ and EPZ development in Vietnam.
How do you observe the development and enforcement of policies on IZs and EPZs and the state management over the zones?
The development of IZs and EPZs is an integral part of the development of policies, mechanisms and models on investment management activities in Vietnam in general and in the zones in particular. The introduction of the EPZ statutes pursuant to Decree 322/HDBT dated October 18, 1991 by the Council of Ministers and Decree 192/CP dated December 28, 1994 by the government and the adoption of the Statute on IZ, EPZ and high-tech park management pursuant to Decree 36/CP dated April 24, 1997 have been significant milestones in the development of IZ and EPZ state management mechanisms and policies.
Decree 36/CP provides important stipulations on a broad rage of IZ and EPZ operations and management, including mechanisms on IZ infrastructure development, rights and responsibilities of IZ and EPZ authorities, and IZ and EPZ development regulations consistent to national planning and policies.
These legal documents manifested the policy on building IZs into a breakthrough model for national economic development through the application of new and particular investment incentives and the simplification of administrative procedures. The stipulations also are the first steps in authorising IZ and EPZ management boards to undertake state management functions in the zones.
Decree 29/2008/ND-CP dated March 14, 2008 on IZs, EPZs and EZs provides additional mechanisms and policies on IZs and EPZs. The decree succeeds in embedding relevant regulations on coastal and border EZs being mentioned dispersedly in various legal documents into a single document. Notably, the decree further devolves the power to provincial people’s committees and IZ, EPZ and EZ management boards in handling IZ and EZ state management in areas of investment, construction, labour, environment and trade in the spirit of investment laws.
To respond to new development requirements, IZ and EZ development mechanisms and policies will be further amended, particularly regulations on decentralisation, IZ and EZ management boards’ rights and responsibilities, and the planning, establishment and operations of IZs and EZs.
Could you elaborate on EZ development policies and operations?
Following the guideline of the Party and the state, coastal economic zones (CEZs) have been founded and developed since 2003. CEZs are very much different from IZs and EPZs in views of orientation, goals, sizes and operational mechanisms. A CEZ covers more than 10,000 hectares and comprises many functional sections such as industrial development and non-tariff areas, ports, airports, urban, administrative and residential areas. They are built in coastal regions to take advantage of marine economic potential, generate the motivation for regional economic development fortify national defense and security.
Since the debut of Chu Lai Open EZ in 2003, Vietnam has established 15 CEZs covering over 662,000ha of land and sea, with about 10 per cent being reserved for industrial and service developments and the remaining being residential, agricultural, forestation, hill and sea surface areas.
Some CEZs have started to operate efficiently and become growth engines in their regions. They have succeeded in attracting major projects in such key industries as petrochemicals, steel manufacturing, mechanics, ship building and electricity. They have also created some preconditions for further development, including the construction of roads, airports and deep-water ports.
However, CEZs are just at their first stage of development. Financing sources for CEZ infrastructure development need to continue to be diversified. CEZ planning, development orientation and operational mechanisms need to be completed so that the zones can contribute more significantly to national and regional socio-economic development.
Vietnam so far has established 28 border economic zones in 21 out of 25 land frontier provinces. Over the past 15 years of operation, these zones have played a role in developing economic and trade activities in frontier areas and fortifying national defense and security.
What will be the development guideline for IZs, EPZs and EZs?
IZs, EPZs and EZs have contributed actively to national development. However, they are also facing with shortcomings related to planning and investment quality, land use efficiency, capital mobilisation, environmental pollution and workers’ living conditions. Among many causes I think there are two fundamental ones concerning state management.
Firstly, despite policies and mechanisms on IZs, EPZs and EZs having been relatively completed, they still lack consistency and coherence. State management agencies’ responsibilities for collaboration remain unclear and their rights and responsibilities have not been closely monitored.
Secondly, there remain shortcomings in terms of human resources and organisation for IZ, EPZ and EZ state management. Some local authorities are still dependent on the central government’s funds. Especially, localism still exists and a long-term vision with sectoral and regional connectivity in IZ, EPZ and EZ development has not been in place.
These shortcomings can be solved with the following solutions.
Firstly, IZ and EZ planning quality must be improved. The zones’ development must abide by the approved plans and their construction should be properly phased out to be suitable with local realities and to increase land use efficiency. The Ministry of Planning and Investment (MPI) will produce a comprehensive report on IZ and EZ development according to the approved plans, based on which necessary adjustment measures would be proposed to the prime minister. Delayed and inefficient projects must be radically addressed.
Secondly, IZ and EZ infrastructure systems must be modernised and synchronised with technical infrastructure closely linked to public utility works. Resettlement of relocated people must be paid adequate attention. IZ and EZ infrastructure development funds need to be diversified. In 2012, the MPI will submit the prime minister criteria for selecting key EZs on which investment funds will be focused for development. These EZs will serve as the catalyst for the development of other EZs.
Thirdly, priorities must be given to attracting investment into hi-tech, high value-added and environment friendly industries, developing supporting industries, and boosting sector connectively in IZs and EZs to sharpen their competitiveness and enhance their contributions to regional economic development. The MPI will work out the development of IZs specifically reserved for Vietnam’s big investment partners. The IZs will be given particular incentives and mechanisms.
Fourthly, IZ and EZ development policies and mechanisms should be finalised with the zones’ performance efficiency and state management agencies’ collaboration to be centred. The decentralisation mechanism will be completed and Decree 29/2008/ND-CP will be amended in 2012 to provide an adequate legal framework for IZ, EPZ and EZ operations.