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Copyright © 1999-2008 Vietnam Venture Group, Inc. All rights reserved.   March 1, 2004

Wanted: wealthy investors for central provinces

HANOI - The central provinces are giving their domestic neighbors a run for their money, trying to lure a greater share of domestic and foreign investment. Authorities want local industrial parks to upgrade their infrastructure and take the lead in funding capital into the relatively poor region.

Phu Yen, a coastal province at the southern end of central Vietnam, is taking the lead - showcasing its substantial investment in Hoa Hiep Industrial Park. The neighboring provinces of Quang Ngai and Binh Dinh have followed suit. But the region is still playing catch-up, with the bulk of investor funds still heading to the booming area surrounding the economic hub of Ho Chi Minh City.

Quang Ngai is home to the Dung Quat, Tinh Phong and Quang Phu industrial parks. Work started on Tinh Phong in mid-1997. The park now spans 141 hectares but by the end of last year was home to just four enterprises with a total investment capital of VND37 billion (US$2.5 million).

Quang Phu received its license in April 1999, when it already had 12 tenants related to the Quang Ngai Sugar Company. The company was not in a position to upgrade infrastructure and eight investors cancelled applications for tenancy, citing poor infrastructure and incompetent management. The authorities saw they had a problem and moved to set up the Management Board for Investment Projects (MBIP). The Hanoi Construction Company switched its ownership of Tinh Phong to the Ministry of Construction's IP and Urban Development Company (IDICO). This firm is slated to complete the first stage of Tinh Phong's infrastructure within three years.

Quang Phu industrial park is also set for an upgrade, with an MBIP-run economic unit set up to take care of projects engaged in investment, construction, development and use of the park's infrastructure. Investors are eligible for soft loans under the provincial plan for IP development. If the investors sustain business losses, the People's Committee will readjust the interest rate on their loans on a case-by-case basis.

Quang Ngai authorities plan to pour another VND135 billion ($9 million) into infrastructure development at the two industrial parks and offer more incentives. Provincial budget funds account for 56 percent of investment capital at the Tinh Phong park, with the remainder coming from infrastructure firms who took advantage of incentives.

Tenants who opt for a berth in the central industrial parks receive exemptions from land tax for the first eight years and are eligible for a 50 percent tax cut over the next 10 years. They are also exempted from paying compensation on land clearance and pay nothing for infrastructure use until 2005. These incentives have encouraged eight more investors to Tinh Phong and 10 to Quang Phu, with a total registered capital of VND870 billion ($58 million).

Industrial output from the parks accounted for 13.91 percent of the province's gross domestic product last year. It is tipped to rise to 19.2 percent in 2005, excluding Dung Quat's oil refinery output.

Binh Dinh Province is home to the Phu Tai industrial park, which just received the nod for expansion on its second and third stages - taking it to a total of 188 ha. The next development stage will see another 132 ha added in the park's southern region. In the past, many domestic firms had expressed interest in the park but could not get a foothold due to tardy land clearance. The authorities recently allowed prospective tenants to sign contracts with land clearance and construction companies to prepare the ground for individual projects.

So far, the rules have seen construction and assembly projects worth more than VND1 billion signed. Seafood producers, forestry and mineral enterprises have settled in the park, citing its easy access to sea ports, the road network, power supply and clean water as key advantages. To date, 62 projects have been approved across 102 ha: accounting for 42 percent of the total land on offer.

The Binh Dinh Provincial People's Committee has drawn up incentives of its own. These are to include exempting tenants from land rents and infrastructure fees for the first four years. In the first half of this year, tenants in the park turned in 31 percent of the province's export value. The park has also launched a website in a bid to promote e-commerce and exchange information with entities across Vietnam and throughout the world. 
(Asia Pulse)

[Note: For those not familiar with Vietnam's geography, the central coastal regions discussed in this article are not the central highland regions, where at the time this article is first published (September 2001) no foreigners are permitted to even visit without official approval due to civil strife caused by economic conditions forced upon the ethnic minorities, and their resulting expressions of discontent. US$1 = 15,000 VND; 1 hectare (ha) = 2.2 acres]

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