In the previous article, investors were partly explained about the key factors involved in investing in industrial parks in Ho Chi Minh City. In this article, we analyze the characteristics, economic advantages, and incentives that the government applies to export processing zones and high-tech parks. By definition, an export processing zone is an industrial park specializing in the production of export goods and providing services for production of export goods and export activities. It is established according to the conditions, regulations and procedures applicable to industrial parks specified in ‘Decree 82/2018/ND-CP’. At the same time, these areas are separated from the outside areas and regulated like a non-tariff zone to create favorable conditions for investors conducting import and export activities.
1. Linh Trung (1&2) Export Processing Zone
Linh Trung Export Processing Zone is a joint venture project between Vietnam and China. One party is China Gas Import-Export Limited Liability Company (China) and the other is Tan Thuan Industrial Development One Member Limited Liability Company (Vietnam). The export processing zone was established in 1992 with a total acreage of 123.7 hectares in both zones.
Linh Trung I Export Processing Zone is located in Thu Duc District in the northeast Ho Chi Minh City, with an acreage of 62 hectares. It is situated 16 km from the city center, about 11 km from the port, 20km from the international airport and is also close to the national highway. Linh Trung II Export Processing Zone started operations in May 2000 and is about 7km away from Zone I. It is spread over an acreage of 61.7 hectares and is also located in Thu Duc District.
It is one of the export processing zones with the largest foreign investment and was also established for a long time. Presently, the occupancy rate in Linh Trung EPZ reached 100%, hence no more land is available for rent.
This zone mainly has light industries like product processing and machinery with investors from Taiwan, Hong Kong, Korea, and Japan.
This export processing zone has a complete internal road traffic system, electricity supply, water supply and wastewater treatment systems. Land and factories come with lease terms lasting until 2050.
Some typical enterprises in Linh Trung export processing zone
Including New Toyo (Singapore), Freetrend (Taiwan), Vinawood (USA), and Theodore Alexander (BV Islands).
2. Tan Thuan Export Processing Zone
Tan Thuan Export Processing Zone (TTZ) was established in 1991, and is located in Tan Thuan Dong Ward, District 7, Ho Chi Minh City. It lies on a separate peninsula surrounded by the Saigon River.
TTZ is the first export processing zone in the country with a total acreage of 300 hectares, of which the area of land available for lease is 13 hectares. This area is considered to be the birthplace of the Vietnamese industrial revolution.
In terms of location
TTZ is 4 km from the city center, and about 1.5 km south of Phu My Hung new urban area. One of the largest international container ports (VICT port) is located right next to TTZ. It is also just 13km from Tan Son Nhat International Airport,making air transportation easily accessible. Investors in such EPZs can significantly save on domestic transportation costs and avoid traffic congestion during peak hours.
The land rental price
The land rental price in Tan Thuan EPZ is VND 5,917,600/m2 (equivalent to USD 260 /m2) for export processing zone land and VND 12,518,000/m2 (equivalent to USD 550 /m2) for commercial area land. The land lease period is until September 23rd 2041, and the minimum rental acreage is 3000 m2. In addition, TTZ also leases offices and factories with prices ranging from VND 125,180 ~ 147,940 /m2 a month (for factories) and VND 318,640 /m2 a month (for offices). Accordingly, the infrastructure in this area was completed with public utilities and there is an abundant workforce.
Investors investing in TTZ can avail financial incentives like:
- 0% VAT;
- Exemption from import tax on machinery, equipment and raw materials;
- Exemption from product export tax;
- Zero tax on remittance of profits abroad
- Exemption from corporate income tax for enterprises certified as high-tech enterprises for 4 years;
- Reduction by 50% for the next 9 years.
- Other enterprises receive a preferential tax rate of 10% for 15 years.
Currently, TTZ is transforming its model to accommodate high-tech, less labor-intensive business lines such as mechanics, electricity & electronics, manufacturing equipment and components, etc. for environmental reasons.
Enterprises operating in TTZ
Including Sanyo Semiconductor Co. Ltd. (electronics, tools, equipment & components), Yasuda Fashion Co. Ltd. (Vietnam) (garment production & trading), Nidek Tosok Co. Ltd. (Vietnam) (electric motors production & sales), and D & Y Technology Vietnam Co. Ltd. (plastic products).
3. Ho Chi Minh City High-tech Park
Located near the Northeastern gateway of the city, Ho Chi Minh City High-Tech Park (Saigon Hi-Tech Park – SHTP) was established on October 24th 2002. It is one of three National High-Tech Parks established by the government and is spread over a scale of 805 hectares.
SHTP is 15 km from the city center, 4 km from Cat Lai port – the largest port in Ho Chi Minh City, and 18 km from Tan Son Nhat international airport. It is next to the National University of Ho Chi Minh City, making high-quality human resources easily accessible.
SHTP focuses on four key groups:
- Microelectronics, information technology & telecommunications;
- Precision mechanics & automation;
- Biotechnology applied to pharmaceuticals and the environment;
- Renewable energy, renewable materials and nanotechnology.
Enterprises operating in SHTP
Statistics show that SHTP is the ideal destination for many high-tech projects in the world, many of which are by investments from multinational corporations such as Intel Corporation (USA – 1.04 billion USD), Nidec Corporation (Japan – 296 million USD), Samsung Group (Korea – 2 billion USD), and Nipro Group (Japan – 300 million USD). About 60% of the projects are in the field of high-tech manufacturing, and research & development.
Investors are entitled to corporate income tax (CIT) incentives for 15 years. For large-scale projects making significant contributions to the economic, social, scientific, and technological development of Ho Chi Minh City and Vietnam, the CIT incentive period is up to 30 years.
Exemption from import tax and zero VAT are applicable to imported goods to create fixed assets of the project and for scientific research and technological development. Exemption of export tax and zero VAT are applicable to high-tech products.
In addition, investors who take land for lease are exempt from land rental during the construction period (the exemption period does not exceed 3 years). After the construction period, investors are exempted from land rental for a period ranging from 15 years to 19 years according to regulations.
This area also has stable technical and social infrastructure making it an attractive destination for investment. Besides, SHTP also has technological potential for projects like laboratories, and SHTP-Microsoft Innovation Center (SMIC). It also has a “Factory Automation” workshop to attract foreign experts and overseas Vietnamese experts.
Find out Part 1 of series Overview of industrial parks, export processing zones and high-tech parks in Ho Chi Minh City at [Link]