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Industrial zones to shift strategies
The Government plans to tighten management and increase the economic effectiveness of economic zones (EZs), industrial zones (IZs) and industrial clusters (ICs). Legislators hope the new decree would also reduce pollution. Deputy head of the Central Institute for Economic Management (CIEM) Vo Tri Thanh talks about the issue.
The number of enterprises based in IZs, EZs and ICs is still relatively small. Why is that?
I don’t think that’s a major problem. The filling rate is noteworthy but does not necessarily reflect effectiveness. We should pay attention to the relative geographical advantages of each zone. Production networks and value chains including input, output and markets are obviously also important. The association is not only concerned with competition but also production, business efficiency and education and training. IZ, EZ and IC development will not be effective unless we connect all these factors. This is more important than the filling rate. We cannot be effective if we do not make use of our comparative advantages.
The Ministry of Planning and Investment has proposed that the Government suspend granting licences for IZs, EZs and ICs under the old model. What would a new model look like?
This is a provisional solution. It shows that we have recognised the problem of rampant development, a lack of association with production networks, value chains and suitable Government intervention policies. We must review and rethink what we want from these zones. However, there are a number of mechanics IZs that were built under the new model and which take into account production, business performance and education and training, such as electronics IZs in northern Bac Ninh Province and mechanics IZs in Ha Noi and northern Hai Duong Province.
Do you mean that we have to convert gradually from the old to the new?
It is not difficult to establish IZs under the new model. As I’ve said, we have already set up a number of IZs like this. We need to continue to minimise waste to help the new model develop. We should design policies on training, technology transfer and financial incentives. However, how these policies are applied depends on what level of development the IZ, EZ and IC is at. Support policies applied in the initial period will be different from those applied to a developed zone. In addition, these policies will also depend on governance and interaction between policymakers and those who implement these polices at central and local levels. The design of the new IZ model should also focus on competition.
Support industries in Viet Nam have not been adequaely developed, which has affected export turnover. Why is that?
I don’t think the situation is so desperate. In reality, countries which are in the early stages of development and integration typically take advantage of their cheap labour costs and natural resources. So it is perfectly normal during the development stages for support industries to lag behind. That said, we should now develop policies that encourage the development of support industries. During our integration into the world economy we have focussed on our cheap labour costs and abundant natural resources. We should now pay attention to production networks, value chains, the role of the market and State governance when developing support industries. This will be a decisive factor when moving from the old model to the new one.
We used to think that an IZ should focus on attracting businesses. However, if they focus on production networks, value chains and support industries, firms will come. The Government should also establish policies on education and training, technology transfer, taxation and finance to help this development.
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