Clearer legal framework needed to stimulate eco-industrial park development in Vietnam

The development of green industrial parks and economic zones proved an inevitable path in Vietnam following international success stories, but developers are asking for clearer regulations and guidance for long-term investments.

The point was comprehensively discussed at the Vietnam Industrial Park Forum 2023: Towards Green Growth” held by The Investor on Thursday in Ho Chi Minh City.

Shift to eco-industrial parks

Delivering opening remarks at the forum, Nguyen Anh Tuan, Editor-in-chief of The Investor, highlighted the critical role of industrial parks (IPs) and economic zones (EZs) in Vietnam’s socio-economic development over the past three decades. The country has seen 413 IPs established, of which 295 are operational.

Implementing the National Green Growth Strategy, a number of IP developers have been paying more attention to sustainable, green and smart factors. Outstanding examples include Phu My 3 Specialized Industrial Park (PM3 SIP) in the southern province of Ba Ria-Vung Tau, Nam Cau Kien IP in the northern city of Hai Phong, and other IPs that are going green such as Khanh Phu and Gian Khau in the northern province of Ninh Binh and Hoa Khanh in the central city of Danang.

Tuan, who is also standing vice chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE), noted that this transition is facing a number of hurdles, including limited green financing, a lack of incentives for interconnections between businesses at IPs, and cumbersome procedures for setting up IPs.

Addressing the forum, Vuong Thi Minh Hieu, deputy head of the Economic Zones Department under the Planning and Investment Ministry (MPI), said Vietnam has piloted the conversion of a number of IPs from traditional models to eco-industrial parks. These IPs have linked industrial activities with environmental protection, improving the quality of life for the surrounding communities.

In the long term, Vietnam aims to build new eco-industrial parks that meet relevant design and planning requirements for attracting environmentally-friendly projects, Hieu added.

Nguyen Cong Ai, deputy general manager of KPMG Vietnam, noted that continued robust foreign direct investment will drive up demand for industrial real estate and logistical infrastructure in manufacturing hubs in the country’s northern and southern regions.

Ai pointed out that developing eco-industrial parks will dominate in the country following global examples. In addition, foreign investors will favor urban-service IPs that meet necessary needs for workers, smart IPs, and IPs that integrate logistics, warehouses and wharfs.

In search of clearer guidance for IP development

During a panel discussion, Hieu from the MPI said Decree 25 dated May 28, 2022 has streamlined considerably paperwork for IP licensing and gives more powers to local governments to license IPs.

However, participants at the forum raised questions about the vague legal framework for new models of IPs, especially greener ones and business parks.

In response to such concerns, Ho Chi Quang, deputy head of the Zoning-Architecture Department under the Ministry of Construction, said local governments have demanded adjustments to existing zoning schemes for the development of urban-service IPs.

Can Van Luc, chief economist at Hanoi-based bank BIDV, cited a recent survey as saying that among the 10 major concerns of IP developers, vague and overlapping administrative procedures and legal issues are at the top.

Developers find regulations on urban-service IPs confusing and unclear, he noted.

Luc called for the early adaptation of a decree on land price valuation and relaxed regulations on approval and licensing of IP development, particularly of large IPs that need to be invested in several phrases.

A large number of investors need easier access to a playbook on investment procedures, both in Vietnamese and English languages, Luc said.

Phan Duc Hieu, a member of the National Assembly’s Economic Committee, informed that the draft of the new Land Law gives more powers to provincial governments to make plans for IP development and regulates the duration of land use rights for IPs.

“The most critical issue is a clear legal framework. I believe that manuals are of great importance, and instructions need to be both accurate and practical,” Hieu added.

Need for a set of criteria on green IPs, EZs

Kasahara Masayuki, chief representative of the Japan International Cooperation Agency (JICA) in Ho Chi Minh City, cited experiences in Thailand, Japan and several other countries as saying that government agencies and IP developers need to jointly build a set of criteria on greening IPs and EZs.

Vietnam needs such a set of general criteria to determine when an IP can be recognized as a green one, he said.

Nha Vinh Julien Nguyen, country director of WHA Vietnam, said that there exists a set of criteria in Thailand for green and smart IPs. Based on that, the Thai government sets regulations on taxes.

WHA will issue standards embracing environmental protection and energy use, among others, at its green and smart IPs, aiming to attract investment in sectors of high added value and electronics.

Nguyen Thi Thao Nhi, chairwoman of industrial real estate developer Thanh Binh Phu My JSC, said that her Phu My 3 Specialized Industrial Park (PM3 SIP) pays great importance to environmental protection. Its strategy is to accompany and ensure that investors follow green requirements. For example, PM3 SIP enforces a rule of cutting water supplies when investors break environmental regulations.