Tuesday 22 March 2011

Development Infrastructure Program to Support the Van Don Economic Zone

Infrastructure plays an important role in the economic development of Viet Nam and Economic zones. Since Van Don Economic Zone will focus on maritime tourism, financial and trading services unlike most of the Economic Zones which focus on industrial development, a wide range of economic activities are permitted in the VDEZ.

The development of utilities infrastructure is a principal prerequisite for the successful implementation of the Van Don EZ. Mr. Pham Van Thanh made a case study which objectives were to: (1) investigate and identify key infrastructure for developing Van Don economic zone; (2) determine the overall progress of the program and analyzing the feasibility of the program and the critical difficulties in capital investment; and (3) propose solutions and recommendations from the state authority’s point of view for developing infrastructure system.

Conclusion

The case study had analyzed the development of infrastructure at the Van Don economic zone, which is defined as dynamic economic development and regional areas. The analyses revealed that:
• Infrastructure development plays a decisive role in the development of economic zones in particular and economic sector in general.

• The investment in infrastructure construction needs a large and sustained fund, while the project has long life cycle, many risks, capital recovery is slow, and less attractive to investors.

• At the macro level, Government will play a major role in investment and development of public infrastructure, because the investment in infrastructure development is low financial benefit but high in Socio-economic benefits and security social welfare.

• State funding is not enough, thereby diversifying investments fund is necessary solutions for allocation of the risk of capital scarcity in the future.

Besides making uniformity of implementation planning, analysis to develop sustainable financial resources for infrastructure development is a critical condition. Diversify forms of capital to increase capacity to mobilize capital in the application of financial modeling is essential. Special issue of privatization, project finance, public private partnership should be carefully considered depending on the maturity level of the economy as well as the sustained commitment of the government through the mechanism management.

Advanced methods can be successfully applied in developed countries but by no means will succeed when brought into Vietnam without appropriate adjustments, there are reasons for differences in the provisions of policies and economic conditions - social, especially when developed countries already have experience and maturity level of the market economy.

The adoption and implementation of the program should have a general policy relating to all political system in which government plays a key role in forming the mechanism.

Recommendation for Improving Developing Infrastructure Program

Within the scope of research at the Van Don economic zone, the author proposes three other group solutions in policy mechanisms to ensure the viability of the programs such as:

1. Source of State Capital Financial Risk

• Government needs to approve the plan capital allocated for investment in infrastructure of Van Don economic zone in a 5-year cycle. This program needs to be passed by National Assembly.

• Government should allow Quang Ninh province actively planning and using land fund along the highway to create capital from land use fees for development infrastructure.

• Allows the Quang Ninh province to keep and use tax revenues in Van Don EZ to invest in infrastructure construction.

This policy will ensure the resources of the state capital and overcome the risks of capital investment.

2. Government Support Public Infrastructure investors

• Complete planning and publicizing a list of infrastructure projects, which required investment.

• Government should issue legal and Regulatory Framework of PPP, PF, Concession model, to ensure the objectives of attracting private sector capital in the country and foreign investment in developing infrastructure to provide public services.

• Governments should publicize the commitment when establishing forms of cooperation in Public-Private Partnership or Private public infrastructure project.

• Create all favorable conditions and methods to ensure the recoverability capital and interest of enterprise or SPV company.

3. Government Support Business investors

Development of infrastructure for economic and social development. Economic and social development, and business development are the keys to making business in public infrastructure a success. Thus, promoting business investment has an important role but might also the cause of infrastructure investment.

• Special tax incentives for investment projects in the VDEZ, profit repatriation and reinvestment incentives.

• Special land tax and leasing rates.

• Simplified and fast approval process for key development initiatives.

• Special incentives and simplified approval process for foreign skilled workers.

• Land allocation complete with infrastructural facilities provided to expedite development.

• A more liberal policy on housing ownership and lease arrangements for Vietnamese, Overseas Vietnamese residents, Permanent Residents and Foreign Investors.

• A preferential policy to regulate sources of revenue and increase reinvestment capital.

• To establish special development funds to promote development initiatives in Van Don.

His thesis abstract is copied and posted.

Abstract

Vietnam is developing country having population of about 90 millions. From 90s year of 20th century, After 20 years of renovation, Vietnam has achieved important milestone in economic development, politics, society as well as foreign affairs such as remaining sustainable and high development rate (average 10% per year), stable politics, attractive and potential market to foreign investors. Nowadays, Vietnam has become member of UN, WTO and many international organizations and forums, especially playing important role in ASEAN. Vietnam has never have great opportunities and challenges to develop country like now.

Vietnam also located in trading hub area and economical corridors of region. In order to utilize such advantages with consideration to importance of economical integration to provide equal development in country wide, Vietnam has established 15 costal economical zones in decision 1353/QD-TTg dated 23 September 2008. It will be cores and driving forces for economic development of Vietnam.

However, one of basic and key matter obstructing the development of Vietnam like other economies also, is the lack of financial capital to improve the shorted infrastructures Providing proper policies and directions to mobilize capital sources investing in infrastructure development in economic zones is the key of Vietnamese economic development policy to promote the effects of such economic zones.

This research focus study on Van Don economic zone of Quang Ninh province, which is one of costal economic zone established in year 2007 according to decision 120/QD-TTg dated 26 July 2007, and having administrative and natural area of 2171km2 and 553km2 respectively. It is northern costal economic zone having many potentials regarding to tourist, luxury recreational, industry and high-tech industry, and free trade. Study of mechanism, funding program of infrastructure development support for this economic zone is the objective of this research.

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