Understanding Vietnam’s New Draft Decree on Industrial Parks and Economic Zones
Introduction
In May 2022, Vietnam’s government took a significant step towards enhancing its industrial landscape with the issuance of Decree No. 35/2022/ND-CP. This decree outlines the regulations governing industrial parks (IPs) and economic zones (EZs) in Vietnam, with an eye towards innovation and higher quality investments. Currently, the Ministry of Planning and Investment is seeking public input on a draft law aimed at elevating these spaces into high-tech zones and urban service areas.
The Context of Decree No. 35/2022/ND-CP
On July 15, 2022, the new decree officially replaced Decree No. 82/2018/ND-CP, marking a significant upgrade to Vietnam’s legal framework for investment in IPs and EZs. These updates aim to streamline administrative processes that have historically hindered investment activities.
Key Features of the Decree
New Industrial Park Models
The decree introduces two innovative types of IPs:
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Specialized IP: These parks are designed for a specific industry, requiring that at least 60% of the industrial land attracts projects related to that sector.
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High-Tech IP: These parks focus on high-tech and IT investments, with a minimum of 30% of industrial land allocated for such projects, as indicated in the Law on Investment.
Streamlined Infrastructure Development
A significant advantage of the decree is the reduction of bureaucratic hurdles in establishing IPs. Previously, obtaining an investment license could take up to 36 months, but the revised rules allow for the automatic establishment of an IP once an investment registration certificate is issued, expediting the process considerably.
New Investment Regulations
The draft decree includes detailed eligibility requirements for investors planning to develop IP infrastructure. Investors must meet the following criteria:
- Comply with the Land Law and Forestry Law for land leasing and usage.
- Demonstrate qualifications and past performance, technical skills, and financial capabilities for project completion.
Transforming IPs into Urban Service Areas
One of the highlight features of the decree is the provision allowing industrial parks to be converted into urban service areas. The transformation process involves:
- Compliance with urban development plans relevant to the local area.
- Meeting minimum eligibility criteria, such as a minimum 15-year lifespan from establishment to proposed conversion.
- Securing approval from both the investor and the majority of businesses operating within the IP.
Benefits for Foreign Investors
Time and Cost Efficiency
The streamlining of procedural requirements reduces both time and costs for investors. Simplified processes particularly benefit those looking to invest in eco-industrial parks, specialized IPs, and high-tech parks. The revisions also mitigate legal inconsistencies that previously posed risks to investment activities.
Incentives for Eco-Industrial Parks
The decree outlines specific criteria for the development of eco-industrial parks, promoting sustainable practices. By offering incentives to foreign investors, the Vietnamese government aims to encourage partnerships that elevate environmental standards within industrial projects.
Ongoing Challenges and Future Needs
Despite the advancements, the Ministry of Planning and Investment acknowledges that the pace of innovation in IP models is slow. The existing legal framework still requires significant improvements to ensure Vietnam’s IPs and EZs can compete effectively on the global stage.
Concerns have been raised regarding the sufficiency and coherence of investment incentives. Current policies are seen as complex and lacking stability, creating hurdles for attracting the necessary foreign direct investment.
The Path Forward
Vietnam’s industrial landscape is rapidly evolving, with the government taking proactive steps to modernize and innovate its IPs and EZs. As potential investors navigate these regulatory changes, they will need to align their strategies with the government’s commitment to sustainable development and technological innovation.
For investors aiming to understand the legal and regulatory environment in Vietnam, seeking expert guidance, such as from Dezan Shira and Associates, can provide invaluable support in making informed decisions in this dynamic market.