Downgraded infrastructure slows down FDI attraction in industrial parks

Foreign Direct Investment (FDI) attraction to industrial parks and export processing zones in HCMC has slowed down as businesses have blamed the issue of the downgraded infrastructure systems in the zones and surrounding areas.

Hiep Phuoc Industrial Park in HCMC (Photo: SGGP)

Hiep Phuoc Industrial Park in HCMC (Photo: SGGP)

Last year, investment attraction at these zones reached US$772.31 million, down 8.07 percent over 2017. Of these, FDI attraction value was US$290.83 million, a year on year reduction of 25.78 percent.
Explaining the fact, many businesses said that despite HCMC’s efforts in improving investment environment, there are many unsolvable knots including the serious downgrading of infrastructures in export processing zones and industrial parks. Most of them were established in the 1990s so their wastewater collection and treatment systems have run outdated. Environment inspectors have many times spotted violations at wastewater treatment systems.
The issue has raised difficulties for businesses operating in the parks and zones as they have to meet standards on sustainable development and social responsibility in strict export markets. Many enterprises are in the need of expanding factory scale and increasing production capacity but the area of land for lease at industrial and export processing zones have been filled up or rent is too high compared to those in surrounding areas.
From another angle, infrastructure outside the zones have been overloaded. That has increased production cost and reduced competitive ability of businesses. The most popular issue is flooding and traffic jam rocketing logistics costs. Infrastructures improving workers’ life such as schools, dormitories, housing sites and hospitals have not been invested appropriately. This has contributed to worker fluctuation and reduced businesses’ ability of taking the initiative in production.
A representative of Saigon Precision Company said that it was difficult to recruit workers especially after Tet holidays. Besides the scarcity in skilled human resource in information technology and quality management has resulted in unhealthy competitiveness among businesses.
Another problem comes from complicated administrative procedures. Currently, lots of businesses in industrial and export processing zones have not received land use right certificates and met difficulties in doing procedures to get loans for investment scale expansion.
A representative of Saigon Food Company said that its factory in an export processing zone has not been granted with land use right certificate. As a result, the company has greatly invested in the area but not received value added tax refund and bank loans for development investment.
According to businesses, HCMC should improve traffic infrastructure in general and the infrastructure system in industrial and export processing zones in separate as well as the living condition of workers to further lure FDI capital flow to HCMC. The city should improve training quality to both students and workers. Firms investing in industrial and export processing zones should quickly solve legal procedures to grant land use certificates for businesses to get loans and expand production investment.
Mr. Nguyen Hoang Nang, head of HCMC Export Processing and Industrial Zones Authority (Hepza), said that the board has worked with infrastructure investors to renew technology and improve infrastructure system to meet increasing demand of businesses and build dormitories, schools and hospitals in these zones.
So far, businesses have proposed to build 16 dormitories able to accommodate 21,417 workers and 21 nursery schools for workers’ children. HCMC People’s Committee has urged the Department of Natural Resources and Environment and the Department of Taxation to grant land use right certificates for eligible investors.
Among solutions to improve workers’ skills, Hepza has connected with universities and vocational schools to provide better training courses and curriculums.

By Ai Van – Translated by Hai Anh

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