Welcome
to the park
Tax benefits for
foreign investors in an industrial park (IP)
or export processing zone (EPZ) |
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• Infrastructure is in place
• Licensing procedures are streamlined
• The IP management is in touch with
the local authorities and acts as a partner
that will take care of bureaucratic issues
for the company
• The IP is a partner with knowledge
of the local business and regulatory environment.
• Often the EPZ has customs, shipping
and other facilities on the premises
• IPs often provide for off-work environment
(housing for workers and expat managers, recreational
facilities etc.) and worker training together
with local authorities
• No need for Environmental Impact Statement
within the IP
• No need for construction license within
IP
• Tax incentives are better than outside
IP or EPZ
• Tax holiday for four years after profitability
(for a maximum of five loss-making years),
then four more years 50% tax rebate
• Four additional years of reduced tax
rate (20-25% outside, 10-15% inside, exports
over 30% of production or preferred categories
10%)
• Materials imported for manufacturing
and re-exporting enter the country duty-free,
even if sold to another company within the
EPZ
• No import tax for machinery that cannot
be procured domestically
• Profit repatriation tax 3% (outside
parks 7%)
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Seventy-six industrial parks and export processing
zones exist nationwide, but only about half have
at least 50% of their land under contract. As the
boom fizzles out, authorities are taking a second
look at licensing new developments. For the investor,
the good news is that it becomes easier to spot
the top performers.
It is not surprising that foreign companies prefer
setting up shop in an industrial park. These parks
are most often directly associated with or working
in close cooperation with the local authorities, allowing
one-stop-shopping for licenses, building permit, worker
recruitment and other activities the provincial government
may provide.
Moreover, the top parks have their own bonded warehouses
and even customs offices on the premises, and many
are associated with architectural and construction
contractors to allow an investor to come in, sign
a deal and get on the way within months rather than
years.
One advice U.S. firms frequently get from their legal
advisers or consulting firms is to set up in a park,
as most of all possible problems disappear through
this step alone.
But with competition among industrial parks getting
stiffer, the top addresses are going beyond the full-service
business park approach, and build entire cities for
their customers. This is particularly important where
the park is located relatively far from a major urban
center, and especially expat managerial staff require
entertainment, but also educational facilities for
their children.
“My business concept is to create added value
all the time,” says Dang Thanh Tam, the general
director of ITACO, a company that develops industrial
parks and runs Tan Tao, one of the most successful
parks in Ho Chi Minh City.
Tam is a self-made entrepreneur who took classes at
a British university while building his company, in
the understanding that he needed to stay ahead or
else would lose the race with the competition. Today,
aside from the usual services, he offers an on-site
Internet center with domain name, plans to link his
various parks as well as its tenants up directly with
each other and their overseas headquarters, and thinks
aloud about a private university. To show he is serious
about technology, his business card is a mini-CD.
Other parks play on quality living. Saigon South and
Amata are proudly presenting their luxurious living
quarters. Amata also builds a private university to
allow on-site training for management and eventually
for families of expats as well.
“I am a believer in “if you build it, people
will come,” says Lou Sims, president of Amata
Vietnam, one of the biggest developments in the country.
Amata’s hypermodern development just north of
Ho Chi Minh City goes beyond the business park model.
Not coincidentally, it is located in Amata City, a
planned community designed and built to American standards
by a U.S. contractor, Bechtel.
Similarly, Saigon South has become an extension of
the city of Saigon, with all the infrastructure an
urban community needs, from hospital to government
offices to driving range.
For investors simply looking for the cheapest possible
way of manufacturing widgets, there are a number of
quality parks that offer what in comparison would
have to be described as the bare-bones park: a place
to do business with the land and the physical plant,
the necessary infrastructure and the access to the
local authorities. Land cost in these parks, located
all over the country, is extremely low, often less
than $1 per square meter per year.
Vietnam is likely to remain a location for cheap manufacturing
for a time to come, and these parks continue to maintain
their niche. The top-of-the-line places, however,
are the ones that aim at attracting those kinds of
industries that the government wants to lure: high-tech
and value added. |
