Central upgrades entice investors
Central upgrades entice investors
For many years, inadequate infrastructure network has deterred foreign companies from investing in the central coastal region, but things are changing with progress reported in many infrastructure projects in the region.
Vietnam-Singapore Industrial Park (VSIP), a leading industrial park and township developer in Vietnam, this week will start the construction of an industrial park and township complex in the central province of Quang Ngai. The project, costing $337.8 million, comprises a 600-hectare industrial park located within the province’s Dung Quat Economic Zone (EZ) as well as a 520-hectare commercial and residential area near downtown Quang Ngai city. This is VSIP’s fifth project in Vietnam and its first factory in the central region.
Once completed, the project will contribute notably to improving the infrastructure system not only in Quang Ngai, but also in the broader central region as well, which is expected to attract more foreign investors in the future.
VSIP expected its infrastructure project would lure foreign manufacturers from the fast moving consumer goods sector as well as electronics producers and service providers.
Industry growth
Inadequate infrastructure is a major concern of many foreign investors in the central coastal region. Since the Vietnamese government opened the economy to foreign investors in 1987, most chose to set up shop in the north and south of the country where the infrastructure system is better.
But as foreign direct investment (FDI) to the central coast started increasing in 2005, the central region has emerged as a popular destination for foreign firms in Vietnam. For example, in 2004 there were only 28 FDI projects in the region with the total capital of $112 million, including those in Thua Thien Hue, Danang, Quang Nam, Quang Ngai, Binh Dinh, Phu Yen and Khanh Hoa. But one year later, that number hit 60 projects worth $460 million, an increase of 400 per cent compared to the previous year. Last year, this region lured 54 FDI projects worth $478 million.
During the first eight months this year, foreign investors registered 32 new projects and expanded investments at eight other ongoing projects, with the total registered investment of $1.1 billion.
“Better infrastructure is key for drawing more investments in this region,” said Ho Ky Minh, director of the Economic and Social Research Institute in Danang.
In 2005, the Vietnamese government decided to develop six EZs in the central coastal region: Chan May-Lang Co in Thua Thien Hue, Chu Lai in Quang Nam, Dung Quat in Quang Ngai, Nhon Hoi in Binh Dinh, South Phu Yen in Phu Yen and Van Phong in Khanh Hoa. These EZs are aimed at more private investments, especially FDI to boost the regional economic growth.
Investors in these EZs will enjoy tax incentives offered by the Vietnamese government and the local authorities. In addition, 51 industrial parks (IPs) have been built in Danang and eight provinces to offer industrial-use land for manufacturers.
These EZs have been positively affected by FDI inflows to this region. Some leading international investors like South Korea’s Doosan Group and Canada’s Rio Tinto Alcan have built manufacturing factories in Thua Thien Hue and Quang Ngai.
The Doosan Vina plant in Dung Quat EZ, worth $300 million, produces major components and equipment for Doosan Heavy Industries & Construction’s flagship power and water businesses, including boilers, heat-recovery steam generators, seawater desalination evaporators, and material handling equipment.
At the nearby Dung Quat EZ, the Vietnamese government is planning to develop Chu Lai EZ as an automotive industry hub. Truong Hai Auto Corporation last year broke ground on its auto engine manufacturing project in the zone. The project, with the total investment capital of $250 million, will manufacture 20,000 engines each year under a technology transfer agreement signed with South Korean’s Hyundai Motor Company.
Korean Aerospace Industries Ltd, South Korea’s airplane builder, is planning to build a manufacturing facility in Vietnam to make equipment and components for Airbus. The facility will be built in Danang Hi-Tech Park in Danang.
Doan Hung Ngoc Anh, deputy general director of Danang Hi-Tech Park Management Authority, said the Korean investor was undergoing administrative steps to get an investment certificate for this project.
Transport moves along
The Ministry of Transport (MoT) on May 19 broke ground on a project to build a national expressway from Danang to Quang Ngai. The 140-kilometre expressway will boast four lanes designed for vehicles travelling at a maximum speed of 120 kilometres per hour. It extends from the Hoa Vang district of Danang to Quang Ngai province with more than 100 small and large bridges and one tunnel along the way.
This is part of the cross-country expressway route and is being built by Vietnam Expressway Corporation at the total cost of nearly $1.47 billion in loans from the World Bank and official development assistance from Japan.
With completion expected within the next four years, it will reduce the transport time between Danang, Quang Nam and Quang Ngai. It also facilitates transport between Laos, Vietnam and Cambodia via the East-West Economic Corridor to seaports in central Vietnam. The expressway will help create investment opportunities in central provinces and ease the traffic overload on the National Highway 1A.
Also in May, the MoT kicked off construction of the Phuoc Tuong and Phu Gia tunnels which are the final tunnels needed on the National Highway 1A. Both tunnels are in Thua Thien-Hue.
According to the MoT, Phuoc Tuong tunnel is 345 metres long plus approach roads measuring 3.4km, while the 497m Phu Gia tunnel has a linking road of 2.4km.
After completion, the two tunnels will shorten travel time, contribute to the socio-economic development of those central provinces, meet the increasing transport demand and reduce traffic congestion and accidents in the region.
“Travelling to the central region from the south and the north has never been better than now. That makes investors feel better about doing business here than in the past,” said Minh from the Economic and Social Research Institute.
Airport projects are also boosting the region as foreign investors will have easier access. At present, this region is home to six airports Ninh Thuan, Binh Thuan and Quang Nam are the only areas to not have their own airport. However, Quang Nam could see residual trade and effect from Danang international airport and Chu Lai airport.
In December 2011, a new terminal was put in operation at Danang international airport, easing the overload because of growing passenger demand.
Just last week, the MoT inaugurated a new terminal at Tuy Hoa airport in Phu Yen and is planning to reopen Phu Bai international airport in Thua Thien Hue on September 20 after closing it six months ago for renovation.
In addition, there are at least five deep-seaports in the central region offering the potential for highly prosperous import and export activities.
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