Eco-Industrial Parks in Vietnam: Establishment and Primary Objectives

The Vietnamese government is contemplating policies to promote the development of large eco-industrial parks and update incentive programs to encourage green investments. The proposal includes recommendations, pilot projects, and key objectives.

The Ministry of Planning and Investment has introduced a draft law on industrial parks, aiming to facilitate the growth of large ecological industrial parks and attract high-quality investments. The proposal encompasses incentive policies to support industrial park projects aligned with Vietnam's goals of industrialization, modernization, green infrastructure, digitization, and the circular economy.

The proposed law promotes specialized and smart industrial parks, encouraging investment in digital, green, chips, semiconductors, and innovative materials. It suggests preferential policies on taxes, fees, and capital investment to streamline administrative procedures.

Businesses are advocating for a comprehensive regulatory framework for EIPs to incentivize sustainable investment. The current complex and overlapping legal regulations and procedures have made investing in Vietnam's industrial parks challenging, hindering sustainable development prospects. The management of industrial parks is complicated by overlapping regulations and policies related to land, construction, and the environment.

The MPI expects the proposed law to serve as experimental measures to address current challenges and promote the development of EIPs effectively.

Overview of Vietnam's industrial zones

According to a report by the Minister of Planning and Investment, Nguyen Chi Dung, Vietnam has 425 industrial parks and manufacturing areas covering approximately 89,200 hectares of the country's industrial land. Of these, 299 are operational, attracting significant investments and playing a crucial role in the national and local economies. Additionally, a report from the Ministry of Planning and Investment indicates that 416 industrial parks and over 1,000 industrial clusters currently contribute around 50 percent of Vietnam's export turnover.

According to an MPI report, 416 industrial parks and over 1,000 industrial clusters currently account for around 50 percent of Vietnam's export turnover. In recent years, foreign direct investment (FDI) has significantly fueled the growth of industrial parks and economic zones in Vietnam, with FDI inflow into these areas accounting for 35 to 40 percent of the nationally registered FDI. In the processing and manufacturing sectors, industrial parks have attracted 70 to 80 percent of the total registered FDI projects, becoming hotspots for major national and international projects by renowned enterprises such as Samsung, LG, Canon, Foxconn, Lego, Gortek, and Hyosung.

The MPI's endeavors to advance eco-industrial parks.

Despite the economic advantages, the growth of industrial parks and increased industrialized manufacturing in Vietnam pose substantial ecological risks and social challenges. Deficiencies remain in the parks' services, social security, and industrial symbiosis between enterprises within a park or across different parks.

Consequently, Vietnam is dedicated to converting traditional industrial parks into green and eco-friendly zones that adhere to global sustainable development standards. With support from international experts and organizations, the Vietnamese government has successfully piloted several Eco-Industrial Parks.

Pilot Ethereum Improvement Proposal (EIP) projects conducted between 2015 and 2019

During the 2015-2019 period, the MPI and the United Nations Industrial Development Organization (UNIDO) piloted several eco-industrial park (EIP) initiatives in three provinces with funding from other international organizations. The three pilot EIP projects were located at Khanh Phu Industrial Park and Gian Khau Industrial Park in Ninh Binh, Hoa Khanh Industrial Park in Da Nang, and Tra Noc Industrial Park 1 and 2 in Can Tho.

According to Minister Dung, innovation in these pilot zones has helped 72 businesses save more than 22,000 MWh of electricity, 600,000 m3 of water, 140 terajoules (TJ) of fossil fuel, nearly 3,600 tonnes of chemicals and waste, and more than VND76 billion (US$2.99 million) each year. The private sector has contributed over VND207 billion (US$10.62 million) to these eco-industrial parks, helping to reduce 32 kilotonnes of CO2 annually.

From the year 2020 up to the current time.

With financial backing from the Swiss government, the MPI maintains its collaboration with UNIDO to replicate EIP models in Hai Phong, Dong Nai, and Ho Chi Minh City (HCMC). By the end of May 2024, this partnership had supported 90 businesses with 899 effective solutions for Resource-Efficient and Cleaner Production (RECP) in the industrial parks of Hiep Phuoc in HCMC, Amata in Dong Nai, Deep C (Dinh Vu) in Hai Phong, and Hoa Khanh in Da Nang.

The MPI plans to implement 62 industrial symbiosis and industrial-urban symbiosis solutions for three industrial parks, with 18 highly feasible cases, to optimize waste reuse and realize the circular economy. The ministry has also consulted the government on completing the legal framework to facilitate the development of the EIP model in Decree No. 35/2022/ND-CP, which builds upon and expands the regulations in Decree No. 82/2018/ND-CP.

• Support and cooperation policies for EIP development

• Criteria for determination

• Incentives

• Orders, procedures, and registration documents for the Certification of EIPs and eco-enterprises

• Re-certification, termination, or revocation of the Certificate of EIPs and eco-enterprises

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Upcoming collaboration: Between 2024 and 2028

Based on the successful implementation of EIPs in Vietnam, the Swiss government, in partnership with UNIDO, has committed to continuing its support for Vietnam's EIP development and circular economy initiatives from 2024 to 2028.

Additionally, the MPI has established several cooperation frameworks with other organizations.

• Assisting in the development of EIPs in Binh Duong in collaboration with the World Bank.

• Establishing water circulation networks for textile-focused industrial parks in Hung Yen and Thua Thien Hue.

• Encouraging efficient power usage to replicate South Korean models of EIPs.

• Enhancing cooperation with the EU Delegation and IDH to support the transition to a circular economy for businesses in industrial parks.

Factors to consider when selecting industrial parks in Vietnam

Favorable characteristics

When considering Vietnam's industrial parks as their next investment destination, foreign firms should take into account several positive aspects.

The Vietnamese government is actively developing eco-industrial parks, making the country attractive for sustainable investments. Industrial parks are strategically located near major transportation hubs, enabling efficient logistics. Vietnam is known for its affordable labor costs, with an abundant workforce and skilled technical professionals from educational institutions. The government offers various tax incentives and promotes investment in emerging industries. Industrial lease prices remain competitive, with Hanoi and Ho Chi Minh City having the highest rates, while Hai Duong and Ba Ria-Vung Tau offer the lowest.

Criteria for industrial parks

Investors should be aware that rental fees in Vietnamese industrial parks can vary significantly, with high-tech zones charging higher rates. Additionally, the typically large size of industrial parks may pose challenges for firms seeking smaller plots. While the government's focus on green, high-tech, and eco-friendly industrial parks limits the industry portfolio, the stringent standards and operational characteristics in these zones support certain sectors, reducing risk and enhancing growth potential for firms in those fields.

Vietnam's industrial parks offer foreign firms advantages such as sustainable development initiatives, competitive costs, a skilled workforce, and favorable tax policies. However, potential investors should thoroughly evaluate rental expenses, land accessibility, and industry alignment to make well-informed decisions.

Conclusion

Vietnam is moving towards more environmentally friendly industrial park models. As additional regulations are introduced to support the establishment of eco-industrial parks, businesses are encouraged to explore relevant opportunities in these zones, especially if they operate in high-tech and forward-looking sectors such as information technology, biotechnology, new materials technology, and automation technology.

Specific criteria related to the industrial portfolios or project sizes of undertakings in Vietnam's industrial parks can help reduce risk and accelerate growth potential for qualified businesses.