Ho Chi Minh City attracts capital to invest in industrial zones

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Multinational FDI enterprises are exploring domestic enterprises specializing in the production of raw materials, components and accessories. Photo: T.D

Promoting investment attraction

According to information from the Management Board of Export Processing and Industrial Zones of Ho Chi Minh City (Hepza), in 2020, the total amount of attracted investment capital, including newly licensed and adjusted industrial parks in Ho Chi Minh City, reached more than $760 million, reaching 152% of the plan, up 17% compared to 2019.

Of which, the total domestic investment capital reached over VND9,000 billion, up 57%. Up to 67 projects were newly granted with a total registered investment capital of more than VND7,300 billion; focusing on factories, warehouses for rent of some infrastructure development companies and projects receiving transfer of land and factory lease rights from enterprises facingdifficulties in production activities.

The total foreign investment capital (FDI) reached nearly US$370 million, down 7.26% compared to 2019. The reason was due to the impact of the Covid-19 pandemic, which restricted the movement of investors and the economic decline of global economy.

However, in 2020, in the export processing zones and industrial zones of Ho Chi Minh City, there were20 newly licensed foreign investment projects, focusing on construction projects of factories and warehouses for rent. Capital increase projects of a number of major projects have been surveyed, feasibility studies, developed investment plans and negotiated for land lease.

In 2021, Vietnam is considered by analysts to have more advantages to attract foreign investment.

Mr. Hua Quoc Hung, Head of the Hepza Board, said that many international businesses and diplomatic missions in Ho Chi Minh Cityappreciate the pandemic prevention as well as the investment environment of Ho Chi Minh Cityand Vietnam. This has created favorable conditions in attracting investment tothe whole country in general and Ho Chi Minh City in particular.

However, the disadvantage of the city is that the clean industrial land fund is falling, so the refinement of projects is essential and the level is getting higher and higher.

Another difficulty is that the implementation of new industrial zones is slow due to problems of ground clearance compensation and delay in the handover of land for project implementation. This will significantly affect the investment attraction process of Hepza in the future.

Therefore, according to Mr. Hung, Hepza will advise Ho Chi Minh City People's Committee on legal procedures under its authority to establish and put into operation Pham Van Hai Industrial Park according to high-tech orientation and Hiep Phuoc Industrial Park (phase 3) focusingin port services and logistics.

Hepza also promotes investment restructuring in industrial parks, focusing on economic sectors with high science-technology content and added value based on industry,high technology foundation and digital economy.

In addition, Hepza will build 20,000 square meters of high-rise workshops; promotingadministrative reform. In particular, it is striving to implement the issuance of work permits via electronic level 3 network reaches 20%; 100% of the administrative procedures under Hepza's jurisdiction are eligible to perform level 3 and level 4 public services.

Enhancing ability to participate deeply in the supply chain

Ms. Le Bich Loan, Deputy Head of Ho Chi Minh City Hi-Tech Park, said that along with enhancing the capacity to supply supporting industrial products for domestic enterprises, the management board is promoting investment attraction of FDI enterprises to produce end products. This helps expand on-the-spot export possibilities for domestic firms, reducing the risk of a global supply chain breakdown due to the Covid-19 pandemic.

According to Ms. Loan, the preferential policies to attract investment in Ho Chi Minh City High-Tech Park have been completed. Specifically, the project is entitled to 10% corporate income tax incentives for a period of 15 years. Therefore, tax exemption for four years and 50% reduction of tax payable for the next nine years.

In addition, enterprises will be exempt from import tax on imported goods to create fixed assets, raw materials, supplies and components to implement investment projects. As for the land rent, the project will be exempted or reduced in accordance with the regulations allowed for each case. In addition, investment enterprises are also entitled to preferential loan interest rate support under the investment stimulus program.

Mr. Jeff Nessom, Vice President of Engineering, Techtronic Industries (TTI), said that the company is moving its factory from North America to Asia. Since the end of 2019, the company has spent US$650 million to invest in building a manufacturing plant, a product research and development center in the hi-tech park of Ho Chi Minh City. Currently, the factory export turnover in Vietnam has increased from US$300 million at the end of 2019 to US$1.5 billion at the end of 2020 and is expected to reach US$6 billion by 2025. The company has set a target to increase the rate of supplying supporting industry products in Vietnam toincrease to 80% in the future.

However,Vietnamese authorities need to accelerate the approval process for investment in factory construction in order to speed up the production of the end-product-manufacturing FDI enterprises in general. Procedures for importing raw materials and production technology must also be reformed towards making it simpler and more convenient for enterprises. As for domestic enterprises supplying supporting industry products, it is necessary to proactively cooperate with FDI enterprises producing terminal products to quickly access financial funds, and at the same time be supported to improve production capacity, provide high value products and solve the supply of raw materials.