Vietnam Industrial Zone

Since its implementation of the open door policy in 1986, the government of Vietnam has been encouraging foreign investment by creating a favorable legal environment (Foreign Investment Law 1988) and infrastructure. The country’s first export processing zone came out in 1991. Since then, a series of industrial, export processing, hi-tech and economical zones have been established along with the increase in foreign investment.

As it is defined in Investment Law 2005, industrial zone is a place that is specialized in producing industrial goods and conducting services for industrial production. Export processing zone is an industrial zone that is specialized in making export goods and conducting services for export goods production and export activities. Hi-tech zone is the one that is specialized in research and development, application of hi-tech, bringing up hi-tech enterprises, training hi-tech human resource, production and trade in hi-tech products. Industrial, processing, and industrial zones are invested and managed by infrastructure developers of industrial zones. They have specific geographical boundaries and are established under the development planning approved by the Government. Investors in industrial, export processing and hi-tech zones enjoy particular incentives.

Economic zone is the place with separate economic space and especially favorable investment and trade environment for investors. It has defined geographical boundaries of more than 10,000 hectares and can potentially become a centre of industrial production, service, trade and living area. Economic zone with strategic locations (which is near seaports, airports, national and international roads and is easy to get approach to public infrastructure and human resources, etc.) is under national programming as a driving force to attract investment especially foreign one. It comprises of such areas as non-tariff, free-trade, industrial, export processing, hi-tech, seaports, airports, logistic ports, administration-office, urban, tourist spots, entertainment, etc. Economic zone enjoy highest State incentives for investors.

The advantages of industrial, export processing, hi-tech and economical zones include modern and consistent infrastructure, convenient transport, easy access to raw materials, professional human resource and favorable administrative procedures. Investment projects on industrial, export processing, hi-tech and economical zones enjoy incentives for both fields and sectors under investment encouragement policies enacted by the Government.

Enterprises in industrial, export processing and hi-tech areas enjoy preferential corporate income tax from 10% to 20% (compared to the normal 28%) for 10 to 15 years after starting its business. These enterprises are also exempted from corporate income tax from 2 to 4 years since having taxable income and enjoy reduction of 50% in the next 3-9 years depending on characteristics and fields of their investment projects. Export goods and services of enterprises in export processing zones; goods and services traded among export processing enterprises; goods and services provided by foreign organizations and individuals to these enterprises are exempted from valued added tax.

Goods and services supplied by domestic enterprises to export processing enterprises for production and trade, if having sufficient records and vouchers as regulated, are considered export goods and services enjoying 0% added valued tax (except for some goods and services that are not subjected to the tax). Enterprises in export processing zone do not have to pay import tax for goods imported from abroad for production and for export goods. Enterprises in industrial and export processing zones are exempted from import tax on some import goods following the same regulations on foreign invested ones.

Besides, for projects on infrastructure development of industrial, export processing, hi-tech and economical zones, the State considers to invest and construct social and technical infrastructure outside their boundaries. For some localities with difficult and especially difficult socio-economic conditions, the State provides them partial support to develop, together with investors, infrastructure system inside the industrial and export processing zones boundaries according to the government’s regulations

By the end of 2007, there were 148 industrial zones nation-wide (of which more than 90 industrial zones have been put into operation, the remaining ones are in the process of compensation on site clearance and civil construction), three export processing zones, two hi-tech zones with a total area of 32,325 hectares locating mainly in key economic areas in the North, the central area and the South (in which the Southeast part region account for 43% of the total number of industrial, export processing and hi-tech zones and 53% of the total area). By now, there have been 52,000 domestic and foreign investment projects in these zones. Total leased industrial land reaches 11,414 hectares, accounting for 53.4% of the total. Out of the investment projects, 2,433 are foreign investment ones with total capital of 21.8 billion USD. The number of laborers working in enterprises in these zones nation-wide are about more than one million.

Currently, the Government has schemes on 9 economical and commercial zones with total area of 342,766 hectares focusing mainly in central provinces (from Thanh Hoa province to Khanh Hoa province) in order to take advantages of the area’s strategic location and to foster its economic development. In addition, there are 28 border gate economic zones alongside the frontiers.

Tags: Vietnam economy environment, Vietnam Industrial Zone