Development Infrastructure Program To Support For Van Don Economic Zone

The growth of project finance over the last 20 years has been driven mainly by the worldwide process of deregulation of utilities and privatization of public sector capital investment. This has taken place both in the developed world as well as developing countries. It has also been promoted by the internationalization of investment in major projects: leading project developers now run worldwide portfolios and are able to apply the lessons learned from one country to projects in another, as are their banks and financial advisers. Governments and the public sector generally also benefit from these exchanges of experience.

Private finance for public infrastructure projects is not a new concept: the English road system was renewed in the 18th and early 19th centuries using private sector funding based on toll revenues; the railway, water, gas, electricity, and telephone industries were developed around the world in the 19th century mainly with private-sector investment. During the first half of the 20th century, however, the state took over such activities in many countries, and only over the last 20 years has this process been reversing. Project finance, as an appropriate method of longterm financing for capital-intensive industries where the investment financed has a relatively predictable cash flow, has played an important part in providing the funding required for this change.

Infrastructure plays an important role in development Socioeconomic. It contributed greatly to the economic development of Vietnam and Economic zones. In recent years, infrastructure system in Vietnam has appeared more limited. This is a bad influence on the economy. This fact is determined by the following basic reasons:

• Planning and implementation of the plan lacks predictability, synchronization.
• The rapid growth of the economy leads to overloading of the system infrastructure. while capital investment is limited.
• The project was implemented by the state less effective. This is the cause of slow progress and quality of projects.

PHAM VAN THANH conducted a case study which objectives were to:

1. Investigate and identify key infrastructure for developing Van Don economic zone. Estimation general cost and soure of fund for infrastructure system.

2. Determine the overall progress of the program and Analyzing the feasibility of the program and the critical difficulties in capital investment.

3. Propose solution recommendations in field of fund and legal for performance the program 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 analysis shows 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 is long cycle life, many risks, capital recovery is slow, 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.
• But, state funding is not enough, thereby diversifying investments fund is necessary solutions for allocation 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 the all political system in which government plays a key role in forming the mechanism.

Recommendations

1. 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. The solution set to ensure the following objectives:

1. Source of State Capital Financial Risk

2. Government Support Public Infrastructure investors

3. Government Support Business investors

(Source of State Capital and Financial Risk)

• Government need approves 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 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 issued 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 publicly the commitment when establish 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, business development is the key to making business  in public infrastructure success. Thus promoting business investment has an important role and as a result but 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.

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.