Wooing investors through industrial parks

Thursday, May 03, 2007, The Jakarta Post

The Vietnamese government has, since the launch of its market-based reform in 1986, tried to woo foreign investment mostly through industrial parks, which in Indonesia are known as industrial estates.

The biggest advantage of such an approach is that industrial zones can be well planned and designed according to the spatial plan of each of the 64 provinces and cities across Vietnam.

But what makes these facilities exceptionally attractive to investors, especially those from overseas, is that a developed industrial park already has all the basic infrastructure in place.

Most helpful is that the licensing authority is centralized in the management board of each

industrial park, thereby making it virtually a one-stop licensing center for an investment venture, except for investment projects in "sensitive sectors" that have to obtain approval from the prime minister.

No wonder many foreign investors, including those from Singapore, Thailand and Taiwan, have been putting money into industrial park development.

It's different to Indonesia, where numerous infrastructure development projects are held up by land acquisition problems. The construction of industrial parks in Vietnam, with sizes ranging from 300 to 1,000 hectares, runs smoothly it is the local administration that is responsible for land acquisition.

Investment projects in industrial parks also are entitled to various forms of tax incentives and import duty relief for capital goods and materials, depending on the categories of industries in which they operate.

With lower minimum wages (US$45-55 a month) but higher productivity and a more expedient business licensing system than Indonesia, Vietnam ranked 98th out of 175 countries surveyed by the World Bank last year in terms of ease of doing business. Indonesia ranked 135th.

There are now more than 135 industrial parks in various stages of development across Vietnam, of which 15 are located around Ho Chi Minh City alone. No wonder this vibrant city accounts for almost 30 percent of FDI flows to Vietnam.

Take for example, the Vietnam-Singapore Industrial Park (VSIP) in Binh Duong province near Ho Chi Minh City, a joint venture between a consortium of five companies from Singapore led by SembCorp Industries and state-owned Becamex IDC Corp.

Less than ten years after its launch in 1996, the 500-hectare industrial park has been completely sold or rented to industrial investors, so that VSIP 2e with 345 ha is being developed to meet the increasing demand from new investors.

"About 300 foreign investors from 22 countries have or are establishing plants in our industrial parks with a total investment of $1.5 billion, generating more than 40,000 jobs," said Huynh Quang Hai, VSIP vice president.

Likewise, the Amata Group from Thailand has been developing a 700-ha industrial park in Bien Hoa in a joint venture with state-owned Sonadezi Bien Hoa. More than 90 investors have leased industrial plots in the park.

"We were attracted to this country 16 years ago by the policy consistency and decisive leadership of the government," noted Vikrom Kromadit, chairman of the Amata Group.

The CT & D Group from Taiwan entered Vietnam even earlier, in 1990, opening the first industrial park in Vietnam, which also serves as an export processing zone. It now hosts hundreds of industrial factories with a total investment of some $1 billion, creating more than 60,000 jobs.

"You should choose the market with the highest growth potential and the most understanding government to invest in," said Arthur King, chairman of the CT & D Group in reply to a question asking why his company had invested almost $1 billion in Vietnam in industrial parks, power plants and urban development centers.

King added he did encounter problems in Vietnam as investors did in most other developing countries. "But in my own experience, every time a difficulty arises, I have always found a helping hand here to guide us through the process."

-- JP/Vincent Lingga