Industrializing with Industrial Zones
The history of industrial zones in Vietnam
There are hundreds of industrial zones, economic zones and processing zones in Vietnam. The Tan Thuan Industrial Zone in Ho Chi Minh City was founded in 1991 but prior to that, in 1957, there was a plan to make the city of Viet Tri (now in Phu Tho province) the site of the Viet Tri Industrial Zone, Vietnam’s first concentrated industrial zone. Five years later (in 1962), with support from the former Soviet Union and the Chinese, the Viet Tri Industrial Zone, which was to have paper factories, tea processing facilities and seasoning processors, was officially launched.
For a number of reasons, war being just one of them, the Viet Tri Industrial Zone never did get into full swing. Many factories and business did, however, locate there and at this time Viet Tri is an important industrial center.
Industrial development was the focus of planners after national liberation and reunification and, in December 1986 the sixth Party Congress adopted guidelines for economic renovation which called for increased attention to be paid to the formation of concentrated areas for factories and businesses that would be able to utilize available resources, stimulate production and increase exports. Almost a decade later plans to develop industrial zones, economic zones and export processing zones were presented in the sixth Legislature mid-term meetings of the Party Central Committee (1994) and later included in the ninth Party Congress’ 2001-2010 socioeconomic development strategy.
On August 6, 1996, the Prime Minister signed Decision 519/TTg which was a 1996-2010 Vietnam infrastructure and industrial zone master plan. The Prime Minister presented a list of 33 industrial zones and export processing zones that were to be created between 1996 and 2000. Later, Decision 713/TTg and Decision 194/198/QD added more to the list.
There were plans for 137 industrial zones and export processing zones in Vietnam by late 2003. Of these, 91 industrial zones and 3 export processing zones were established and they were to cover a total of 18,240ha, not including the 14,000ha Dung Quat complex and the Hoa Lac and Ho Chi Minh City hi-tech parks. In addition, 124 industrial groups or industrial parks for small to medium-sized enterprises that were to cover 6,500ha were founded by local governments.
By late 2008 there were 219 industrial zones that together covered 61,472.4ha in area. Nearly 40,000ha could be leased for industrial activities, 65 percent of all industrial land in Vietnam. The Ministry of Planning and Investment claims that by the end of 2008, 3,794 foreign investment projects with US$49.1 billion in total registered capital in industrial zones and economic zones across the country were employing more than one million laborers. In 2008 industrial zone businesses exported US$14.5 billion worth of goods, 34 percent more than that in 2007 and 24.7 percent of the country’s exports in value. Besides the industrial zones, there are 13 economic zones which together cover 612,229ha, two hi-tech parks and hundreds of industrial parks for small to medium-size businesses. The organization and operational structure of these zones and parks suit the socioeconomic development conditions of each region and the country’s general development targets.
Although there are problems related to industrial zones, they generally functions rather well and help the country reach its socioeconomic development goals. Any success related to the industrial zones indicates the correctness of the Party and the State’s economic development policies. Businesses in the industrial zones export a large amount of goods, they provide an opportunity for Vietnamese staff members to receive training and experience modern technology, and they show how production efficiency can be attained, such efficiency lowering production cost and therefore making products more competitive.
Industrialization and modernization - it’s inevitable
Industrial zone development helps eradicate hunger and alleviate poverty and it creates jobs, stimulates production and increases exports and domestic consumption. Industrial zones facilitate economic structure transformation, establish new urban zones, increase development in previously undeveloped regions and harmonize social and economic interests. In addition, industrial zones are an efficient use of land, they make use of local natural resources, they decrease traffic congestion and they reduce the need for housing and schools in urban areas. State policies are being revised to assure successful implementation of socioeconomic development targets with regards to industrial zones.
The completion of infrastructure in and around industrial zones stimulates local economic development and narrows the gap in living standards between rural and urban people, and it improves people’s spiritual and material lives. Industrial zone development also leads to improved infrastructure quality and leads to greater demand for services.
State, non-state and foreign-owned businesses that build infrastructure in industrial zones not only facilitate the operations of IZ companies, they also help attract more companies to the industrial zones.
While industrial zones attract new investment, they also help existing companies expand operations so that they can increase production and become more competitive. Industrial zones accept polluting industries that were previously located in crowded urban residential areas. It then falls upon local governments to deal with environmental pollution. The removal of these companies protects the urban environment and frees up urban land that can then be used for community development. IZ businesses, particularly those which are foreign-owned, often times train their employees to operate rather modern equipment and technologies, which significantly improves the ability of the Vietnamese labor pool as a whole. More Vietnamese people are holding management positions in foreign invested companies and they are exposed to modern business administration methods, modern marketing, financial management and human resource management skills. Working in a competitive environment helps Vietnamese laborers understand the need for industry modernization.
In response to the various difficulties experienced in industrial zone operations, the central and local governments have taken measures to revise IZ operations. IZ planning has been revised to accept a wider range of investors and attention is now being paid to matching type of business and location. In addition, the Government is making policies that are to increase business efficiency and improve manpower training quality. Some are suggesting that industrial zone authorities be given more decision making authority.
Recently the Government adopted a Vietnam industrial zone development plan to 2015 with a vision to 2020. An effort will be made to encourage businesses that have leased areas in existing industrial zones to follow through with their plans and another 15,000-20,000ha is to be made available by the end of 2010. Between now and 2015 steps are to be taken to establish 91 industrial zones that are to cover 20,839ha in total area and to enlarge 22 existing industrial zones by 3,543ha. There are to be a total of 15 economic zones on 80,000ha by 2020. Some believe that a centralized industrial zone administration system is needed and that this would facilitate national industrial development.
Vietnamese industrial zones have now been around for more than 20 years and it is hoped that they will continue to attract investment capital and cutting-edge technology which will spur socioeconomic development in the country
