In this webinar, Dr Doan Thi Thanh Ha provides an update and evaluation of the state of industrial parks (IPs) in Vietnam, as well as discuss current government policies regarding IPs – their strengths, weaknesses and the way forward, taking into account recent developments in the global economy.
REGIONAL ECONOMIC STUDIES PROGRAMME WEBINAR
Thursday, 20 August 2020 – ISEAS – Yusof Ishak Institute hosted a webinar on “Industrial Parks in Vietnam” which was delivered by Dr Doan Thi Thanh Ha (Economist in the Economic Research Institute for ASEAN and East Asia (ERIA) based in Jakarta).
Dr Doan started the presentation with an overview of policies on industrial estates (IE) policy in Vietnam. She shared that IEs were created by the government in the 1990s with the goal of increasing domestic production to support exports. Since then, IEs have been key roles in Vietnam’s economic growth. Some of the benefits reaped include Foreign Domestic Investment (FDI) attraction, export promotion and job creation. Policies to support IE development include favourable tax conditions, and financial incentives related to land rent and fees.
In terms of the impact of IEs, Dr Doan shared statistics that showed the increasing number accumulated number of FDI projects and registered investment amount. She also illustrated the FDI firms’ satisfaction with the IEs by sharing the analysis of a survey on the experience of FDI firms located in IEs conducted by the Ministry of Planning and Investment. Dr Doan opined that there have been positive effects of IEs on economic growth as demonstrated by positive correlation between the existence of IEs and the high number of jobs created and increasing investment rate, occupancy rate and total revenue of the IEs.
However, Dr Doan opined that the achievement of some of the development goals of IE has been limited. In terms of narrowing regional development gap, IEs in remote areas continue to struggle due to unfavourable locations, lack of labour pool and required infrastructures. There is a positive correlation between large cities and growth of IEs driven by local human capital and endowments. Additionally, she opined that there is a lack of long-term vision and technical as well as socio-infrastructure in the planning of IEs. There is also insufficient action on strengthening the linkages between production and consumption within IEs’ geographical areas. Another crucial problem is the lack of skilled labour force which hinders local firms’ movement up the global value chain.
Given the global economic situation, Dr Doan shared that Vietnam has evolved as one of the attractive FDI destination due to the favourable conditions for foreign firms and active participation in important FTAs. The COVID-19 pandemic has also accelerated the development of the digital economy and induced innovation which have improved the country’s competitiveness and FDI attractiveness. However, Dr Doan cautioned that if left unmonitored, Vietnam may end up being the destination of low tech and environmentally unfriendly manufacturing establishments. Additionally, in the context of industry 4.0 and upgrading of the global value chain, Dr Doan commented that low labour costs and rich natural resources may no longer bring a comparative advantage for FDI attraction.
The webinar concluded with Dr Doan participating in a question and answer session. During which, she shared her opinions on issues such as the type of skilled labour and infrastructure that is lacking in the IEs, approaches to overcome the lack of local capacity, Vietnam’s reliance on exports for economic growth and the potential of e-commerce in Vietnam.