Foreign enterprises “cool” Vietnam’s traffic

Need more transport connections than need tax incentives

When talking with industrial park (IZ) owners, many foreign investors affirmed that they do not need high tax incentives from the Vietnamese Government, but what they need is a well-connected transport infrastructure system. Thereby, reducing the operating costs of enterprises.

The above information was shared by Mr. Phan Van Chinh – Deputy General Director of IDICO – at the “Vietnam Industrial Real Estate Forum 2022”, organized by VIR on the morning of May 24.

According to Mr. Chinh, in the structure of the enterprise including design, production and distribution, the production part is located at the bottom of the parabola, the rest design and cost account for the majority. Therefore, logistics costs greatly affect the performance of the company. Foreign investors want to have good transport infrastructure to keep logistics costs down to the lowest, helping to increase profits quickly. This is even more necessary than tax exemptions and incentives.

Obviously, the lack of synchronization in infrastructure connectivity between localities, leading to high logistics costs, is one of the barriers that causes Vietnam’s investment environment to lose points.

Another example given by the General Director of Cushman & Wakefield Vietnam – Ms. Trang Bui – is that some investors when introduced to infrastructure projects A or B to be completed in 2025, but they themselves also know the information, always say that the project will be behind schedule, plus 3-5 years to complete.

A representative of Cushman & Wakefield Vietnam informed that Vietnam is spending about 5.8% of GDP on infrastructure investment, but most projects are behind schedule. Traffic connecting points is not available, Vietnam’s logistics costs are ranked among the highest in Asia, so many investors do not dare to set up factories.

In addition to logistics bottlenecks, Mr. Nguyen Cong Ai, Deputy General Director of KPMG Vietnam, said that bottlenecks in investment procedures also need to be resolved for industrial zones to accelerate project implementation.

Clearing congestion, welcoming billions of dollars

According to statistics, at the beginning of 2020, Vietnam has 335 industrial zones with a total area of ​​​​about 100,000 hectares, of which 260 industrial zones have been put into operation with an occupancy rate of about 75.7%. By the beginning of 2022, the whole country has 291/395 IPs that have been put into operation with an occupancy rate of about 70.9%.

Thus, despite two difficult years due to the Covid-19 pandemic, Vietnam still established 60 more industrial parks, 31 industrial zones went into operation. Industrial real estate is enjoying great benefits in the context that Vietnam is increasingly becoming an essential link in the global supply chain.

The past 2 years have recorded many FDI projects with large capital flows “flowing” into Vietnam such as: Long An I & II LNG power plant project with a total registered investment capital of about 3.1 billion USD; LG Display Hai Phong project 2.15 billion USD; Polytex Far Eastern Binh Duong project 1.37 billion USD; O Mon II Can Tho thermal power plant project $ 1.31 billion or more recently Lego Group’s project in Binh Duong valued at $ 1 billion.

To remove logistics bottlenecks, Ms. Somhatai Panichewa – General Director of Amata Vietnam – said that Japan is a country with low transportation costs due to its very high speed on the road, fast moving.

The Japanese rarely use road transport by trucks, but use railways a lot. One tractor can carry a train of many containers at a low cost. Road transport is just a radiating branch while mass transport is based on the main axis which is railway.

Then, some products such as electronic components want to be transported by air, but the connectivity in Vietnam is poor, slow speed, traffic jams, how fast to go from industrial parks to airports. . Therefore, the authorities need to solve the traffic connection story between the production centers and the port, if the railway option can be used, it is good in the current context.

Amata General Director affirmed that FDI inflows into Vietnam are very strong, what is needed is to keep the house clean and tidy to welcome guests. The “cleanup” here is a metaphor for the story of the law and the legal basis. The central government needs to guide local authorities to have consistency in the interpretation and enforcement of the law when implementing projects at localities. Consistency is important to catch the cash flow of foreign investments.

Mr. Pham Hong Diep, Chairman of the Board of Directors of Shinec Joint Stock Company, the investor of Nam Cau Kien Industrial Park (Hai Phong), wants the state management agency to properly appreciate the difference between real estate and industrial zones because real estate Industry must be associated with infrastructure such as highways and traffic. The investment in industrial zones also helps the local socio-economic development.

This position is waiting for the decisions of the National Assembly to come out quickly, integrating laws such as the Law on Investment, Planning, and Environment … to help industrial real estate developers deploy projects quickly, but cannot. Waiting for a long time to apply for a project, slow supply of premises for foreign companies looking to find production locations.

Tran Chung

More than 10 years of struggle, the $ 2 billion project ‘revived’The Thai Binh 2 thermal power project that once caused the Vietnam Oil and Gas Group to have a headache has officially “revived” when generating the power of unit 1 running oil on the national grid.