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Sunday, July 14, 2024

Reality and vision for industrial zones

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The media have recently featured industrial properties, especially industrial land, as a potential area to attract investment. Therefore, there are quite a few voices against the Ministry of Natural Resources and Environment’s proposal to the Prime Minister to reduce more than 18,200 hectares of industrial land in 15 localities after its revision of zoning in 24 localities.

What is the current situation of industrial zones and what is the solution associated with the long-term vision for socio-economic development in general and the industrial zone system in particular to properly handle the issue?

The Sino-U.S. trade war, especially the global spread of Covid-19, has forced many countries and multinationals to consider restructuring the supply chain. In Vietnam, attracting foreign direct investment (FDI) is selected by the Government as one of the five “spearheads” to spur growth in the current tough times of the economy. FDI is an important source of capital for industrial zones and economic zones, accounting for 60-70% of the total FDI capital attracted into the country. Therefore, industrial zones are becoming more attractive to local and foreign investors.

According to statistics, there are 374 industrial zones with a total area of 114,000 hectares in Vietnam; among them 280 with 77,000 hectares are operational and 75 are in the process of site clearance and compensation. The occupancy rate in the zones is 73.7%.

Statistics of the Industrial Zone Management Department under the Ministry of Planning and Investment show that some 37,000 hectares of land in industrial zones is under site clearance and compensation and not yet used. The 18,200 hectares of land that the Ministry of Natural Resources and Environment has proposed to reduce belong to those industrial zones. So, the area of unused industrial land is large and the area of land proposed for reduction is also large, accounting for nearly 50% of the area of unused land. However, to conclude that the area of 37,000 hectares of unused land is so large that whether it needs a reduction or not, it must take into account the development need.

Vietnam is gearing FDI attraction to large, hi-tech projects associated with R&D centers, training centers, services and related facilities to serve the production activities of the whole complex. With this orientation, it needs large land areas up to several hundred hectares. To attract investment in the development of intersectoral hi-tech complexes, several thousand hectares is needed. As an example, Indonesia is preparing thousands of hectares of land in suitable locations and developing infrastructure to welcome the international FDI movement due to restructuring of the global supply chain. Vietnam should also think of creating land funds large enough to attract this capital flow.

There are different opinions about the proposal to reduce the industrial land area. In view of reality and vision, it’s necessary to suggest a good solution to meet the development demand and at the same time to avoid wastage of land resources, as stakeholders, with their own positions and responsibilities, have different views and it’s not easy to reach consensus.

Leaders and economic experts have had discussions on the sidelines about sectoral development zoning in the local socio-economic development plans. During such discussions, many have criticized the frequent changes of and modification to sectoral development zoning in the socio-economic development plans of some localities. A final conclusion is naturally not available, as the discussions have not been held at official events. However, most stakeholders have often agreed that before a final decision for zoning is made, it needs surveys to have a correct assessment of the reality that must be changed, the pros and cons of the decision to be made should be defined, the decision must achieve the target for those subject to changes in the development zoning, and short-term benefits may be sacrificed to achieve long-term goals.

Regarding the proposal to reduce the area of industrial land, they have suggested things to do before a decision is made.

First, it needs a survey to have a correct assessment of the use and rent of land in industrial zones following some criteria, such as the year when the land is allocated, and why infrastructure development is not yet completed and the land is not yet rent. The reasons for this situation should be pointed out, for example lack of capital for development, site clearance failure, no tenants, or problems with procedures for conversion of land use purposes.

Second, to ensure the rationale before the decision to reduce the area of industrial land is made, it needs a suggestion for the use of the area to be reduced to ensure the effective utilization of this important resource. The complexity and the prolongation of the procedure to reduce the land area and transfer the reduced area to other developers should be considered. Also, it should take into account the interest of developers of industrial zones who have failed to rent land but the reason is not within their scope of responsibility.

Third, it needs to assess whether the reduction of the industrial land area will affect the land funds for industrial development of the country or the locality concerned over the long term. Is it necessary to set aside immediate benefits and spare time for things to do first to achieve the long-term target? If the purpose for the use of the reduced land area is not changed but is only aimed to transfer the land to new developers for more efficiency, the issue is simple, as those who have better conditions and bring more benefits for the country should be let to do the job. However, if the reduction is made for other purposes, such as residential or tourism property development, it’s a big issue which needs careful consideration.

(*) Representative of the Global International Business Consultants (GIBC) in Hanoi, former director of the Foreign Investment Agency under the Ministry of Planning and Investment

By Dr. Phan Huu Thang (*)

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