Economic special region must breakthrough for generating source of budget

Assoc. Prof. Dr. Vu Minh Khuong

Vietnam will focus on developing three economic special zones Van Don, Bac Van Phong and Phu Quoc, in the future. Could you tell me about your evaluation on this issue?

Vietnam currently has 16 coastal economic zones, 26 border economic zones and 328 industrial parks. Only counting at the end of 2016, the economic zones have attracted $US 153.7 billion of registered FDI fund, accounting for 52.5% of total foreign investment in Vietnam and 1.644 thousand billion VND of domestic investment capital registration; attracted more than 3 million workers ...

However, under the pressure of international competition and internal constraints, the attractiveness of these models is declining, lacking momentum for breakthrough development. Therefore, the special zones are not only attractive in terms of investment, but also in terms of technology, talent and place to affirm to the world that Vietnam is no less, because it is level with institutional strategic message. The zone will also be a place to connect with localities throughout the country.

Remarkably, with this particular model, there will be more resources poured into it. There is a shift in resources between localities, but in terms of overall growth in the long run. About 30 years ago, Shenzhen was a wild fishing village, but now it is a huge city, creating huge wealth and contributing to China's GDP. In particular, the model of Shenzhen has been shared and has gradually spread in China.

Dear sir, in the current context, would it be possible to give preferential treatment to investors in the economic special zones?

With the breakthrough policies, preferential and open, along with international competitive advantages, both domestic and foreign investors are excited about the prospect of investment in an economic special zone.

It should be noted however, economic special zones need to focus on attracting big investors from elite institution with a sustainable system, rather than focusing exclusively on incentives. Therefore, it is necessary to look at the incentives, especially tax incentives because it may exhaust the budget.

Take the example of Singapore, a country that has successfully developed its special economic zones. In that country, taxes are still levied and tax incentives are very limited. The state will use the money that is collected from businesses to support investors who have projects in the area to enjoy preferential policies such as infrastructure construction, labor training...

The State will assure to work with the investors in order to solve all the difficult problems. If we give lots of incentives while the country is already poor, it is very unreasonable. Moreover, the incentives, exemptions for many years can make the investors considering them as the default, which will lead to further tax collection to be more difficult.

As a result, tax incentives need to be flexible. In the first few years there will be some special support, but in the fourth year when special economic zones have taken off and become much more attractive to investors, there is no need for incentives or special assistance.

Compared with other countries, the incentives of Vietnam are quite high and only thinks of preferential incentives. This way needs to be reviewed. I think there must be a strategy. The economic special zones must be a breakthrough in order to create a budget source.

What do we need to do to develop the economic special zones in a sustainable and effective way?

One of the issues that needs to be addressed when developing economic special zone is the planning issue. Regarding this content, it is necessary to plan an economic special zone with vision and careful calculation.

There should be careful calculation of the amount of spending in the annual land fund in relating to benefits to people who actually contribute to the development, and people who live in an economic special zone. Thus it could avoid the problem that money could run into the pockets of decoys by taking advantage of the mechanism.

All the land planning projects must be clear, should not be like Thu Thiem project, lose the planning map. Vietnam is very open minded, very integrated and drastic, but they are not good at institutions, having strategy without vision so they would not step beyond.

According to the draft, based on the scale and nature of the investment project and the proposal of the investor, the Chairman of the People's Committee of the economic special zone shall decide on the duration of land use for production and business in the economic special zone for no more than 70 years. For the special cases, the land use duration may be longer but must not exceed 99 years and shall be decided by the Prime Minister.

In addition, we should not impose a time limit for 99 years because it is too high that could lead to speculation of land in the economic special zones from the investors.

Thank you so much!