Disorderly planning in Ho Chi Minh City IPs discourages both FDI and domestic enterprises

According to Ho Chi Minh City’s Management Unit of export processing zones (EPZs) and industrial parks (IPs), by the end of 2017, IPs and EPZs HCM had drawn nearly 2,000 investment projects with a total capital of nearly $10 billion including 564 FDI enterprises with total investment capital of over $5.6 billion and 931 domestic enterprises with total investment of over $4.2 billion.

Ho Chi Minh City now has around 17 IPs and EPZs, however, most of them are disorderly planned and lack of competition.

The city’s authorities are seriously worried about IPs and EPZs that "surround" the city have not brought economic benefits as expected. To improve the situation, the city decided to intervene by policy, price management and others to increase the competitiveness of its IPs and EPZs. The first step is to transfer 26,000 hectares of agricultural land into a new IP with standard planning and reasonable rental cost.

"Most of the IPs in Ho Chi Minh City are disorderly planned. For instance, a food processing company is located close to the pesticide manufacturing company. There are few IPs which are well-planned and meet infrastructure requirements," said Chu Tien Dung, Chairman of the Business Association of Ho Chi Minh City (HUBA).

He added "Therefore, although the city’s IPs are available for lease, both FDI and domestic enterprises are indifferent." 

The main reason leading to the disorder planning in IPs is that most of IPs were built by private enterprises. The sooner an enterprise makes a payment for rental in IP, the sooner it gets the area. 

In addition, in order to fully exploit the capacity of IPs, the owners usually apply for a business license with more sectors as possible. For example, besides the automobile industry, there are many other industries in the Samco IP. It feels like IP owners are doing real estate business estate rather than investing in infrastructure in IPs.

Dr. Huynh Thanh Dien, member of the city's Support Industry Development Project Consulting Team, said the overloaded infrastructure and high rental cost in the city's IPs also reduce the attractiveness compared to those in the surrounding provinces.

Hang Vay Chi, Chairman of Viet Huong Group, who is currently operating three IPs in Binh Duong province, said: “In fact, EPZs are for FDI enterprises while IPs are for domestic ones. However, domestic producers cannot afford to IZs, we have to offer to FDI.”

The cumbersome administrative procedures of Ho Chi Minh are also a disadvantage to the city’s IPs compared to other IPs. It takes three times for Ho Chi Minh City to handle more than Binh Duong province does.

In addition, the new favorable policies of provinces such as Long An and Binh Duong also cause enterprises to move from IPs in Ho Chi Minh City to ones in these provinces.

Le Huu Nghia, Director of Le Thanh Company revealed: "If an enterprise moves its business from Ho Chi Minh city to Long An province, it will be exempted from tax for the first five and a half years."

Accordingly, if Ho Chi Minh City does not have strong administrative reforms as well as tax reduction for enterprises, even the city opens a few more new IPs, it will not be able to solve completely the problem, not to mention the old IPs and EPZs.