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HO CHI MINH NATIONAL ACADEMY OF POLICTICS

VU NGOC THANH

ECONOMIC INCENTIVES OF THE STATE FOR
INDUSTRIAL ZONE IN VIETNAM

SUMMARY OF DOCTORAL THESIS
Study field: Political Economy
Code: 62 31 01 02

HANOI – 2018


THE THESIS WAS COMPLETED AT
HO CHI MINH NATIONAL ACADEMY OF POLICTICS

Supervisor(s): Assoc. Prof., Dr. Pham Quoc Trung

Reviewer 1: ..................................................
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Reviewer 2: ..................................................
.. ..............................................

Reviewer 3: ..................................................
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This thesis shall be defended in front of the thesis Committee at
Academy level at Ho Chi Minh National Academy of Politics
At ......hour ...... date ...... month ......year 20......

The thesis can be found at: The National Library and
The Library of Ho Chi Minh National Academy of Politics


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INTRODUCTION
1. The necessity of the thesis
There have been 325 industrial zones (IZ) constructed in Vietnam for
the last 25 years, and these IZs have significantly contributed to the local
economy in terms of the economic and social development. IZs gradually
showed their important roles in Vietnam Economy and Industry on aspects
of scale, capacity and production level, and kept the core role on improving
the country competitive ability and increasing GDP. In addition to these
achievements, the IZ development progress shows a number of emerging
issues such as how to fully operate 220 IZs of 325 ones available? How to
mobilize investment into the remaining of 105 IZs in the progress of land
clearance? How to construct the complete systems of waste treatment and
environmental protection for all IZs? That is because, so far, there have
been 189 IZs installed and operated their own fully central system of waste
treatment and environmental protection. These are questionable for the
governance of IZs in the coming years?
The governance of a Socialist-oriented Market Economy integrating
deeply and widespreadly into the world economy, requires the sound
policies and economic incentives. In fact, the economic policies of the
Government become increasingly important and suitable with operating
rules, international standards, bilateral and multilateral commitments in the
management of the economy in general and the management of IZs in
particular.
Therefore, the PhD candidate selected the topic “The economic

incentive of the State for industrial zone in Vietnam” as the PhD study
subject in the field of the political economy as the necessity, the practical,
and theoretical signification.
2. Research purposes and research tasks
2.1. Research purposes
Systemization and clarification of practical and theoretical issues of
economic incentives of the State in the present practical condition to
analyze and appraise the practice of the State’s economic incentive
performance for IZs, to propose directions and solutions to the State’s
economic incentive performance for IZs in Vietnam to year 2025.
2.2. Research tasks
+ Systemizing and clarifying some practical and theoretical issues of
the State’s economic incentive performance.
+ Clarifying some existing problems of IZs related to the State’s
economic incentive performance in the period 2011 - 2016 in Vietnam.


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+ Analysing and appraising the practice of the State’s economic
incentive performance for IZ.
+ Proposing directions and solutions to the State’s economic incentive
performance for IZs in Vietnam to year 2025.
To implement the above tasks, the thesis focuses on clarifying the
following things:
1/ What are economic incentives of the State? What are the similarities
and the differences between the economic incentive and the State’s
economic policy?
2/ What is the practical picture of the State’s economic incentive
performance for IZs in Vietnam in the period 2011 – 2016? What are the

achievements, limitations, and issues of performing the State’s economic
incentives to year 2025?
3/ what are the directions and solutions to the State’s economic
incentive performance for IZs in Vietnam to year 2025?
3. Research subjects and research scope
3.1. Research subjects
Based on the topic of “Economic incentives of the State for
industrial zones in Vietnam”, the thesis focuses on the issue of economic
incentives implemented by the State for IZs – means to study the issue that
economic policies are used by the State to be incentive tools for IZs in the
process of the State’s management functions in order to increase the
investment attractiveness and to promote the IZs development. Based on
that economic incentives mentioned in the research scope of the thesis are
commonly used economic policies that belong to the fields of finance;
currency – credit; trade; foreign currency management; land, natural
resources, water surface and infrastructure; income, living house, job
training, environment, energy,....
3.2. Research scope
To be suitable with the research subject and the topic requirements, the
thesis focuses on studying economic incentives being enforced by the State
for IZs.
+ Temporally, the thesis approaches to the research subjects from the
enforcement of the Decree no. 29/2008/NĐ-CP on date 14/3/2008 of the
Government of Vietnam about IZ, Export processing zone, and Economic
park to the present time. As the research into directions and the solutions
proposal of the State’s economic incentive performance for IZs, the time
will be limited to year 2025.
+ Spatially, the thesis focuses on clarifying economic incentives
implemented by the State in the whole country of Vietnam.

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+ In terms of information, the thesis uses the secondary data officially
published by the State’s organizations; the official national/international
organizations such as ADB, IMF, WB, ....
4. Theoretical basis and research methodologies
4.1. Theoretical basis
The thesis research is based on the methodology of Marxism –
Leninism, the theories of market economics, institutional economics,
sustainable development economics, and the systems of the Party’s views
and theories on the State’s roles and functions into the field of industrial
development management in Vietnam. Especially, for the incentive
function of economic policies, the thesis prefers to the approach that the
State is the economic subject which has got the establishing function.
4.2. Research methodologies
The thesis uses the methods consistent with the political economy
research, such as: statistics, scientific abstraction, combination of analysis
and synthesis, logic and history, of which the thesis prefers to the practical
research method including the practice of IZs development; the practice of
the State’s economic incentive performance for IZs.
5. The new contributions of the thesis
Systemizing the scientific basis of implementing the State’s economic
incentives for IZ; developing the economic incentive concept of the State;
clarifying the role of the State’s economic incentives for IZ and the factors
affecting the State’s economic incentive performance for IZ; summarizing
the useful experiences and withdrawing the valuable lessons leant for Viet
Nam. To complement a newly scientific approach based on the political
economy for the research into economic incentive for IZ.
Systemizing the existing economic incentives in period 2011 - 2016;

specifying achieved results, limits and issues emerged from the present
status of the State’s economic incentive performance at present. Clearly
recognizing effects of the international and country context on the State’s
economic incentive performance for IZ. Determining point of view and
orientation of the State’s economic incentive performance for IZ in Viet
Nam to year 2025.
Studying the synchronous solutions to the State’s economic incentive
performance for IZ in Viet Nam to year 2025, of which the solution of
combining variously economic policies including new policies, to establish
a set of economic incentives synchronous, homogeneous is.
6. Structure of the thesis
Apart from the introduction, conclusions and references, the thesis
contents 4 chapters, 12 sections.


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Chapter 1
OVERVIEW OF RESEARCH SITUATION RELATING TO
THE THESIS
1.1. RESEARCHES IN FOREIGN COUNTRIES
The collection, analysis and appraisal of the research reports published
by foreign person(s) and organization(s) related to the thesis topic show
the research of economic incentive issue including: the financial incentives
of taxes, fees, rents, direct subsidies from the State budget; the credit
incentives of capital, lending interest, lending time; the incentives of
income, salary, labor training, and housing for people working in IZs; the
incentive of foreign currencies; the incentives of trade were studied by
some organizations and persons, and they achieved the certain results such
as the mention of almost economic incentives, of which the most was the

financial and credit incentives;
The majority of these studies illustrated the important role, the
necessity, of economic incentives, especially the financial incentives based
on exemption, and reduction, of taxes and fees; some researches went
further as considered the impacts and efficiency of the financial incentives
increasing the investment attraction to IZs or the certain industry or place.
However, the overall and comprehensive research of the State’s
economic incentives for IZs in order to appraise the certain level of
successes, limitations and causes of the limitations, as well to know the
scope and level of impact, efficiency and effectiveness of the State’s
economic incentives for IZs, up to date, this issue was just done partially
but not fully implemented.
1.2 RESEARCHES IN VIETNAM
The data collection for implementing the thesis contents shows that
almost the research reports related to the thesis topic focused on the
proposals that the State performs some economic incentives which are the
policies of exemption and/or reduction of taxes, fees and rents; direct
subsidies from the State budget; credit capital supports (lending interest and
level); supports and priorities of land use, water surface, infrastructures, and
public services supply; supports of purchasing machines, equipments and
inputs as well as outputs market development through trade promotion,
foreign exchange use; supports of workers training and full-skill-workerforce development working in IZ, as well as other policies to achieve the
objective of increasing investment attraction to IZ, but not clearly explained
the scientific basis of those proposals, also not analyzed and forecasted the
impacts as well as results, efficiencies of performing those economic
incentives in the research case.


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In addition, there are not any research related to the topic that the State
performs its economic incentives in general and for IZs in particular,
especially in terms of the field directly related to the thesis topic. This is the
one of big difficulties and limits related to this section, therefore partly
affecting the task of synthesizing, analyzing and appraising the theoretical
development and the practical experience of the State’s economic incentive
performance in Vietnam.
1.3 RESEARCH GAP AND NECESSARILY FURTHER STUDIED
ISSUES
Based on the findings and conclusions withdrawn form the researches
in Vietnam and foreign countries on the topic of economic incentives of the
State for IZs, it is said that the research of economic incentives of the State
for IZ, up to now, still has got the following “gaps”:
Firstly, the IZ development was appeared in the context of widely and
deeply international integration, many international commitments and
consistent obligations required to be compliance, the economy depends
much on the outside world; the fourth industrial revolution and wireless
technology with internet have been strongly developing more than ever in
human history; the new macro-economic management tools appeared, to
make the economy management and operations of the State have become
much more complex, what shall the issue of the State’s economic incentive
performance for IZ be? in the above complexly changing development
context is the existed gap and the significantly important issue which needs
to research and fill up.
Secondly, the role, impact, efficiency, effectiveness, affecting factors,
achievement, limit, of the incentives in terms of finance, credit, trade, land
use, resource, environment, labor, infrastructure, public services, of the
State for IZ withdrawn from the practice in the last recent years in the
context of economic development and widely and deeply international
integration of Vietnam to the year of 2025.

Thirdly, the combination of variously economic incentives (tax, fee,
rent, direct support of the Stat budget; lending capital level, supported
interest, lending and supported time period; foreign exchange rate and
supports of foreign currency purchase, and profit and capital transference to
home/foreign country; labor training, regulations of minimum salary levels,
housing and social services for workers; infrastructural services and other
supports into the field of policy performance in order to achieve the
efficiency of investment attraction into IZ.
Fourthly, up to today, the research of economic incentives of the State
for IZ in Vietnam mainly focused on the issue of seeking and proposing


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solutions for treating a certainly specific problem in practice, but there was
not any full and comprehensive research which has studied systematically
in order to contribute to the reduction of the research gap into the research
field of economic incentives of the State for IZ, based on that to find
directions and solutions of the State’s economic incentive performance for
IZ to year 2025.
The thesis focuses on the research of the following issues: Firstly,
establishing basically theoretic framework of the State’s economic
incentive performance for IZ in the context and conditions of the IZ
practical development in Vietnam; Secondly, to study the practice of
economic incentive performance for IZ in some countries and to withdraw
lessons learned for Vietnam; Thirdly, appraising and clarifying the
achievements, limits and causes of the limits, of the progress of performing
the State’s economic incentives for IZ in Vietnam; Fourthly, finding out
directions and solutions for performing the State’s economic incentives for
IZ in Vietnam in year 2025.

These are the four issues which have not been studied, also is the
research problem or “gap” in the theory of the State’s economic incentives
for IZ in Vietnam that need the continuation of additional researches. These
issues are related to the thesis topic, therefore, will be analysed, appraised
and explained into the following chapters.
Chapter 2
SCIENTIFIC BASIS OF ECONOMIC INCENTIVE
PERFORMANCE OF THE STATE
2.1. SOME THEORETICAL ISSUES OF ECONOMIC INCENTIVE
OF THE STATE FOR INDUSTRIAL ZONE
2.1.1. Overview of industrial zone
2.1.1.1. Concept of industrial zone
Based on the thesis scope, the IZ concept is defined as the area of
producing industrial products and performing services of industrial
production, which has got the specifically geographic bound, established by
the regulations of conditions, progresses, and procedures.
2.1.1.2. Some basic characteristics of industrial zone
In Vietnam, an IZ has got some the following characteristics: Only the
government or the Prime Minister just has the decisive power of IZ
establishment and the establishment must follow the legal regulations in
terms of conditions, progresses, and procedures; An IZ has got the
specifically geographic bound and location, means an IZ must has got the
full information of establishment document such as name, square, date of
the establishment, functions and other basic details; and a concentrating


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place of enterprises producing industrial products and performing services
of industrial production or processing the export products and performing

services of export processing and export performance (the case: an IZ is an
specially processing zone); An enterprise operates in an IZ, called an IZ
enterprise, inherited the privately supporting policies on many aspects
according to the legal regulations for IZ enterprises, and differs from
enterprises not in IZs. All enterprise types are without distinction; In an IZ,
maybe there is a living area. This is the characteristics appeared since 2008,
up to now, so a big change of IZ characteristics, to be suitable with the new
context and the requirement of IZs sustainable development.
2.1.1.3. Role of industrial zone
IZ plays the important role on the country development, shown at the
following basic contents: Absorbing investments from different sources to
meet the economic growth and socio-economic development; Contributing
to improve levels of technology capacity, management capacity, human
source; Contributing to develop and complete the technical infrastructure;
Contributing to enhance the competitive capacities of enterprises and the
country; Efficiently controlling and treating wastes to protect environment;
Contributing to use land resource efficiently.
2.1.2. Commonly economic policies and tools of the State
2.1.2.1. Financial policy and tools
Financial policy is the economic policy that this policy’s main content
is about the State’s revenue and expenditure (in Vietnam it is the State’s
budget revenue and spending) and called budget revenue and spending.
Tools that help to make financial policies in terms of budget revenue are
taxes, fees, rents,..., and budget spending is the State’s expenditure.
2.1.2.2. Monetary policy and tools
The main content of monetary policy is the operation of the Central
Bank in terms of management, controlling monetary supply and interest,
managing circulated money quantity in the economy through tools such as
monetary supply level, interest, open market operation, and the rate of
reserve requirement. In the field of monetary management, for regarding to

the operation of credit capital supply, interest and borrowing level are two
basic tools of capital lending policy.
2.1.2.3. Foreign exhange policy and
The State can select to implement one of three policies on foreign
exchange rate management as follows: the fixed foreign exchange rate
policy; the floating foreign exchange rate policy; and the flexible foreign
exchange rate policy. This policy can strongly affect to export, import and
investment activities, therefore, to GDP growth, production, consumption,


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job and other aspects of the economy. The important tool of foreign
exchange management policy is the foreign exchange rate.
2.1.2.4. International trade policy and tools
International trade policy is the economic policy designed and
performed by the State in the international trade field and which for
controlling and managing import and export activities. Beside the known
tools such as taxes, fees, the State budget spending of the financial policy,
other tools such as quota are used to establish the international trade policy
of the State.
2.1.2.5. Salary, income, house, training policies
Salary policy for labors is performed by the State to aim protecting the
labor benefit in terms on income, social benefits and to prevent from
exploiting labors through too low salary payment that is not equal to labor’s
losses in terms of time and energy. The minimum wage is the economic
tool performed by the State to establish the national wage policy in each
concern time period, suitable with the socio-economic development.
2.1.3. The economic incentive of the State for industrial zone
2.1.3.1. Concept of the economic incentive of the State for industrial zone

In the thesis, the concept of economic incentive of the State for
industrial zone in Viet Nam is defined as the State’s economic policy of
encourage, support such as exemption, reduction, return, or delay, of taxes,
fees, rents of land, resources, water surface, energy and infrastructure
service use; supports in terms of credit capital borrowing, trade promotion,
market development, labor training, social housing support to workers,
environmental protection, foreign currency use, profit and capital
transference to other country; and other economic encourages, supports of
the State to increase investments attraction into industrial zone.
Types of economic incentives: incentives of finance; credit; trade;
foreign currency; income – housing – labor training; and land, resources,
water surface, energy and infrastructure.
2.1.3.2. Role of economic incentives of the State for industrial zone
The economic incentives performed by the State for IZ have six roles
as follows: management tools of the State for IZ; Instruments for increasing
investment attraction into IZ; Economic growth promotion, additional job
creation, the State budget increase and enterprises development support;
Environmental protection enhancement; Factor to increase efficiency and
effectiveness of energy and resources uses; And improvement of policy
making capacity, and policy performance, of the government.


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2.1.3.3. Factor affecting economic incentives of the State for industrial
zone
There are six factors affecting economic incentives of the State for IZ,
including: Natural conditions; Development context and integration level;
Strategic objective of socio-economic development of the location in which
IZ built; Policy making capacity, and capacity of policy management,

control and performance of the State organizations in practice; Resources;
and technology and science development.
2.2. EXPERIENCES OF THE STATE’S ECONOMIC INCENTIVE
PERFORMANCE IN SOME CONTRIES
2.2.1. Experiences from some countries
The thesis studied experiences from some countries such as
Singapore, Malaysia, Thailand, India, Taiwan and Mexico to find out the
practical basis and lessons learned for writing the thesis.
2.2.2. Lessons learned for Vietnam
Based on the international experiences, 05 lessons were found out for
Vietnam, including: Creation of the synchronized economic incentives; For
regards to the design and issue of economic incentives of the State for IZ,
it’s necessary to study preconditions of the IZ location carefully in terms of
all aspects; Avoiding from the abuse of financial or credit incentives;
Combining various economic incentives in the progress of performance;
And it is necessary to do monitoring and appraisal of economic incentives
performance in practice.
Chapter 3
ACTUAL SITUATION OF ECONOMIC INCENTIVES
PERFORMANCE OF THE STATE FOR INDUSTRIAL ZONES IN
VIETNAM IN THE PERIOD 2011 - 2016
3.1. OVERVIEW OF INDUSTRIAL ZONES IN VIETNAM
3.1.1. Overview of the actual situation of industrial zones in Vietnam
More than 25 years of the development, IZs contributed and are
contributing to the country’s socio-economic development importantly.
Annually, IZs attract a large amount of investment capital from the country
and foreign countries to meet the capital demand for the country’s
industrialization and modernization, of which, FDI capital achieved 35 –
40% of the additionally registered total capital of the whole country;
particularly the industrial area occupied upper 80%; created a synchronized

infrastructure system; significantly contributed to the growth of industrial
production, increased the export value of the national economy; kept the
important role for changing the economic structure of IZ locations and the
whole country on the modern way.


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To the year 2016, the whole country had got 325 IZs established, and
their total area of natural land accounted for 94,9 thousands ha, of which
67% available area for lease; among 325 IZs at present, 220 IZs have been
in the performance, while 105 IZs remained are going in the progress of
land clearance; the leasing rate per 325 IZs estimated 51%, if per 220 IZs,
the leasing rate was 73%.
Therefore, a number of results achieved and specific issues, as
follows:
+ Spatially, 325 IZs at present locates unequally between 03 regions
of the country. The South-East area has got 111 IZs, achieved at the largest
number of IZs (34%); The Red River Delta area has got 85 IZs, at the
second (26%); and the South-West area has got 52 IZs, achieved the
smallest number of IZs (16%).
+ The situation of IZs infrastructure construction: according to the
statistics, to the end of the year 2016, the country had got 325 investment
projects of IZ infrastructure development with the totally registered capital
of 318.5 thousand billion VND, of which the total performance of
investment capital achieved 132 thousand billion VND, accounting to
41.5%.
+ FDI attraction: To the end of year 2016, IZs had attracted 7,013 FDI
projects with the totally registered capital of 111.4 billion USD, of which
the performed capital was 67 billion USD, accounting to 61%.

+ The investment attraction from the domestic: To the end of year
2016, IZs had attracted 6,504 projects with the totally registered capital of
710,6 thousand billion VND, of which the performed capital was 358
thousand billion VND, equal to 51%.
+ The situation of waste water in IZs: To the end of year 2016, 186 of
325 IZs had got the central waste water treatment system constructed fully,
now operating, achieved about 86% of 220 operating IZs, but achieved only
58.15% of 325 established IZs at present.
+ The situation of solid waste and dangerous waste: the registry of
dangerous discharge sources was implemented fully and checked, urged at
IZs. Solid wastes and dangerous wastes created from the process of
production and business of each enterprise were collected, transported, and
treated by functional enterprises according to the law.
3.1.2. Issues required to the State’s economic incentive performance for
industrial zone
Addition to achievements, existing shortcomings and limitations are
included: (1) the fully filling issue of operating industrial zones; (2) Land
clearance, Accelerating the building progress of IZs approved to


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implement; (3) The quality of workers working in IZs; (4) Incomes, houses
and social infrastructure providing public services for workers working in
IZs; (5) the issue of pollution prevention and environmental protection. To
solve these existed inadequacies, the State needs to have
synchronous/comprehensive solutions, of which the solution of economic
incentives combined with other policies and incentives is essential.
3.2. ACTUAL SITUATION OF ECONOMIC INCENTIVE
PERFORMANCE OF THE STATE FOR INDUSTRIAL ZONES

3.2.1. Economic incentive of finance
3.2.1.1. Incentives of tax, fee, and rent
- The incentives of enterprise income tax and personal income tax are
the State’s policies of exemption, reduction, return of these two tax types.
At present, there have 17 incentive types of enterprise income tax and 01
incentive type of personal income tax that achieve the largest number of 48
incentive types of tax.
- The incentives of tax, and land and water surface rents are the State’s
policies of exemption, reduction, return and delay of tax, and land and
water surface rents. At present, the State have been implementing 10
economic incentive types of tax, and land and water surface rents in
practice, of which, 05 economic incentive types are the State’s exemption
policies of land and water surface rents; the one type of tax exemption of
non-agricultural land use; the one type of 05 percentage reduction of land
use rent; three remained types were the encouraging and supporting policies
of land use rent, tax of land or infrasture uses.
- The incentive of natural resources: are the State’s exemption,
reduction and return policies of natural resources tax performed in some
cases. At present, in practice, only have two economic incentives of natural
resources tax been performed by the State. Natural resources include the
land resource exploited at the location on the land area allowed.
- The incentives of value added tax (VAT): are the State’s exemption,
reduction and return policies of VAT. At present, in practice, the State
regulated to apply the VAT rate of 10 % for goods and services except the
particularly regulated case; and very few VAT incentives existed, only two
types of deduct and preferential VAT tax; and very limited application
scale.
- The incentives of special consumption tax: at present, in practice,
only two types of economic incentives of special consumption tax that
promulgated and performed by the State, including: the one type was the

reduction policy of special consumption tax with the supporting rate that is


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not higher than 30% of the tax value payment; and the remained type is the
policy of returning the tax value paid.
- The incentives of import and export taxes: The State’s exemption,
reduction and return policies of import, export taxes. At present, in practice,
the State performed 08 incentive types of import and export taxes to attract
more investment of enterprises into IZs in Viet Nam, of which, only one
economic incentive of tax return; three economic incentives of exemption,
and two economic incentives of reduction, of import tax; one economic
incentive of exemption, and another economic incentive of reduction, of
export tax; the remained economic incentives are of preferential taxes of
import and export in each specific case.
Economic incentives of exemption, reduction, return or preferential
policies of import and export taxes have been performed by the State for
each specific area, objects, for example import goods are equipments,
vehicles, machineries, technologies to create the fixed assets of export
product producing projects; environmental protection projects;
development research projects of energy saving technology or
equipments....
- Economic incentives of fees: are exemption, reduction policies of
fees for specifically contributory fee payers. At present, economic
incentives of fees are performed limitation in the country.
3.3.1.2. Incentives of the State budget
These are economic policies of the State budget’s spending, performed
by the State at present to support IZ development. Specifically, 08
economic incentives performed to support the aspects of IZ development,

such as the construction of completely technical infrastructure in and out of
an IZ fence; the support of business and production base movement into an
IZ; the support of projects in preferential fields for example energy,
environmental protection, waste water treatment, land approach,
development research, and equipment, technology renew or improvement
of enterprises in IZ with the support maximum of 100 billion VND.
3.3.2. Economic incentive of credit capital
3.2.2.1. Economic incentive of credit
The State promulgated and performed economic incentives of credit to
support enterprise to make investment projects into IZ, especially
infrastructure development projects in and out of an IZ fence in areas of
difficultly socioeconomic condition or specially difficult condition.
Preferential, supporting specific contents include: the supporting maximum
for each project equals 70 % of the total investment capital (not including
available capital); the capital lending term is not more than 12 years;


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particularly, for the projects of group A, the capital lending term is the
maximum of 15 years.
3.2.2.2. Economic incentive of preferential capital for environmental
protection and energy saving
Economic incentives of preferential capital are the State’s policies of
preferential capital lending from special funds such as Viet Nam
Environmental Protection Fund, local environmental protection funds and
other credit organizations. For investment projects of energy saving product
production, production line, production capacity expansion based on energy
saving technology, the State performed some particularly economic
incentives of variously preferential capital sources, in specific, enterprise

was lent capital from the Development Bank, the Preferential Fund of
Technology and Scientific Development, the National Fund of Technology
Renew, the Environmental Protection Fund and the National Program of
Advanced Technology, the National Program of Energy Saving and
Efficient Use.
3.2.2.3. Economic incentive of preferential capital for housing
construction to workers in industrial zone
For the lending level: i) Regards to house building for lease only, the
maximum lending level equals 80% of the total project investment capital
or the borrowing proposal and not exceeds 80% the mortgaged asset value
of the loan; ii) Regards to social house build for rent, purchase, the
maximum lending level equals 70% of the total project investment capital
or the borrowing proposal and not exceeds 70% the mortgaged asset value
of the loan.
For the lending term: i) Regards to house build for lease only, the
minimum lending term is 15 years and the maximum term does not exceed
20 years from the date of the first capital loan disbursement; ii) Regards to
house build for buying rent, the minimum lending term is 10 years and the
maximum term does not exceed 15 years from the date of the first capital
loan disbursement; iii) Regards to house build for selling, the minimum
lending term is 05 years and the maximum term does not exceed 10 years
from the date of the first capital loan disbursement of the project.
For the interest of preferential loan: i) The preferential lending interest
of the Social Policy Bank was decided by the Prime Minister in each term;
ii) The preferential lending interest of credit organizations was decided and
published by the State Bank of Viet Nam based on to assure the principle
that does not exceed 50% of the average lending interest of banks on
market at the same term.

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3.3.3. Economic incentive of trade
These incentives are the State’s economic policies of encourages,
supports in the field of trade, such as the policies of supporting market
development, information provision; supporting research and development.
At present, 04 groups of economic incentives of trade are performed by the
State, but various at the aspects of the State’s preferential policies for
enterprises to invest into IZ in terms of buying, selling, price subsidy to
some products, goods and services.
3.3.4. Economic incentive of housing, job training and social
infrastructure for worker
At present, 08 the State’s economic incentives of housing, job training
and social infrastructure for worker are the preferential, supporting policies
of finance (exemption, reduction of some taxes, rents, the State budget
supports, ...), preferential credit capital (interest, limit, and lending term),
land, site plan, infrastructure, deducting the cost of worker’s house and
social works construction to the production cost of enterprises and other
policies that are performed by the State.
3.3. ASSESSMENTS OF THE PROGRESS OF THE STATE’S
ECONOMIC INCENTIVE PERFORMANCE FOR INDUSTRIAL
ZONE IN VIET NAM IN PERIOD 2011 – 2016
3.3.1. Achieved results
The first, the set of the State’s economic incentives for IZ was the
relatively large quantity scale; various at the preferential and supporting
levels in the research period of the thesis. Specifically, as follows: there
were 42 economic incentives of taxes, fees and rents; 06 types of the State
budget spending; economic incentives of the preferential capital; 04
economic incentives of trade; 08 economic incentives of social house, job
training and social infrastructure for workers.

The preferential, supporting levels were various and copious, such as
04 year tax exemption, 50% reduction of the enterprise income tax of
several incomes for the period of the next 9 years; 50% reduction of the
personal income tax for workers involving both Vietnamese and foreigners
who work in IZ; returning duty paid in case of temporary import goods to
re-export; imported materials to produce, process export goods; import tax
exemption of goods used to create fixed assets; materials and components
to implement the investment project or to process export goods; export tax
exemption of good used to produce import goods
The second, the type of the State’s economic incentives for IZ was
relatively various: exemption, or reduction, or return, of taxes, fees, rents;
reduction of lending capital interest; increase of lending capital limit; to


15

extend the debt payment period of loan; to extend the period of grace; direct
or indirect support from the State budget; account some of non direct
business-production costs into the enterprise’s total operation cost; to allow
an enterprise to account the business loss from this year to the next year
into its tax payment income; support the lending capital interest for
enterprise in a specific period.
The third, the performance and impact area of the State’s economic
incentive set was relatively wide: the financial area; the credit – monetary
area; the trade area; the use area of land, natural resources, infrastructure in,
and out, of IZ; waste discharge management and environmental protection;
energy saving and efficient use; social house and beneficiary works
management; job training and creation for workers.
The fourth, the economic incentives of finance were used very popular
and many more than others: 48 various types of financial incentives

including the incentives of taxes, fees, rents and the State budget spending
in comparison with the incentive quantity of credit or trade (04 types) or 08
types of social house, job training and social infrastructure for workers.
The firth, the State’s economic incentives in the pass time created the
new direction of operation and management of IZs in Viet Nam.
3.3.2. Limitations and reasons
Beside the results achieved, the State’s economic incentives set for IZ
in the pass time also showed some limits, as follows:
The first, no distinction among the local areas in designing,
promulgating, and performing the set of, economic policies in general and,
economic incentives in particular in the pass time was inadequate and did
not meet the practical requirement.
The second, the efficiency and effectiveness of the State’s economic
incentives set were not achieved as expected – reflected by the present
picture of IZ development with existing problems that presented in
Subsection 3.1 of this chapter, in which the largest problem is how to fill
the whole available IZs quickly in order to minimize the social loss.
The third, the quality of the existing policies was still low and did not
meet the practical requirement of IZ development.
The fourth, the State’s economic incentives set available for IZ
deflected to abuse the financial tools.
The firth, the advantages of other economic incentives were not fully
exploited in the progress of designing and promulgating a synchronous set
of the State’s economic incentives for IZ. Lack of the economic incentives
of foreign currency, especially in the context of globalization and
international integration that are happening as much strongly as nowadays


16

or the quantity of economic incentives of fees, value added tax or natural
resources use tax is very limited.
The sixth, no new tool beside the conventionally economic tools are
used.
The seventh, so far, the monitoring and evaluation of arranging and
performing the State’s economic incentives for IZ have been neglected
and/or not been realized periodically and frequently.
The eighth, the full, synchronous and updated IZ database has not been
established to serve the State management of IZ and other socioeconomic
activities related to IZ.
3.3.3. Issues asked for the State’s economic incentive performance for
industrial zone in the next time
In the new context of development, the requirement of IZ development
in the next time in Viet Nam, the following issues are asked for the State’s
economic incentive performance for industrial zone:
The first, the economic incentive, in performing combination with
other policy tools of the State, must meet the requirement of efficiently
solving the problem of fully filling 220 operating IZs, along with 105 IZs
that are in the progress of, land clearance, and infrastructure construction.
This is the urgent and the long-term issue, also and necessary to the State’s
economic incentive performance for industrial zone development in the
next time.
The second, the feasibility, the completeness, the comprehensiveness,
the stableness and sustainability of the State’s economic incentives set for
IZ must be considered the research doing to obtain the full assessments
objectively in order to assure the economic incentives set can operate as the
requirement of promulgating.
The third, the issue of effectiveness and efficiency of the State’s
economic incentives set for IZ in terms of the financial, economic and
social aspects must be more considered to assure that the existed limits and

problems in the pass time can be solved comprehensively. Therefore, in the
next time, the State’s economic incentive performance for IZ needs to be
analysed and appraised fully, objectively, scientifically and
comprehensively on all aspects.
The fourth, the research of applying the newly economic tools, beside
the inheritance and efficient exploitation of conventionally economic tools,
the addition of the State’s newly economic incentives for IZ is needed and
plays the specially important role in the new context of development – the
deep and wide integration of Viet Nam into the World; the increase of


17

connection, exchange and the dependence of Viet Nam Economy and
partner economies becomes higher with every passing day.
The firth, the issue of controlling, monitoring, appraising and
summarizing lessons leant from the implementation also are required to be
paid attentions to acquire the performing situation of the economic
incentives set in practice, to help the State makes efficient interventions
towards the expected objective of the economic incentives set.
Chapter 4
ECONOMIC INCENTIVE PERFORMANCE OF THE STATE FOR
INDUSTRIAL ZONE IN VIET NAM TO YEAR 2025
4.1.
THE
CONTEXT
OF
ECONOMIC
INCENTIVE
PERFORMANCE OF THE STATE FOR INDUSTRIAL ZONE IN

VIET NAM TO YEAR 2025
4.1.1. International context
Science and technology develop faster in the 4th Industry Revolution.
The information technology continues to develop strongly, to foster the leap
development in many fields, to bring back the both opportunity and
challenge to every notions. The world economy continuously meets many
difficulties, challenges and unpredicted changes. The Asia Pacific area
involving The ASEAN continues to be the smart development center that
has got the more important with every passing day position of the ecogeography and politic strategy on the world.
At the same time, this is also the strategically compete area between
the large countries, therefore hiding many unstable factors. Nations
participate the more profound with ever passing day in the production net
and the global value chain. The world price change, the unstableness of
finance, currency and public debt issue continues to cause negative effects
to the world economy. Surely, the world context in the next time shall make
the appearance of certain conveniences and challenges.
4.1.1.1. Advantages
The world economy has been changing significantly, profoundly and
comprehensively on the aspects of economic institution, technology level
and product structure. Science and technology really came in the 4th
Industry Revolution. The trend of development and global linkages with
many various types and the newly linking term in each field and each
region shall appear. These global trends will bring large opportunities for
Viet Nam, and firstly, the globalization shall bring the opportunity of
increasing the internationally economic cooperation to make activities of
investment capital attraction, goods and technology trading,…etc. more


18

active. That long-term and strategic effect shall bring into play Viet Nam’s
role in internationally and regionally economic organizations, to support the
development cooperation.
4.1.1.2. Challenges
On the world, the unstableness is still existing, wars continuously
happen in some areas, conflictions of religion, politic, economic benefit are
waiting for breaking out; the world economy, although re-grew, but still
meets many difficulties and lacked the stableness. Market, price are
unstable, continuously appeared changes unpredicted exactly.
4.1.2. National context
In Vietnam, the position and power, and the general power have been
increased, the international prestige of the country has been improved,
creating the important preconditions for performing the socioeconomic
missions to achieve the determined objectives. The country’s economy has
been gradually escaped from the downturn and regaining the growth
momentum, but still facing with many difficulties and challenges. The
stability of the economy is not steady; the public debt has grown fast, the bad
debt has been decreased gradually, but still at high level, the productivity, the
quality, the efficiency, and the competitive capacity of the economy are still
low. The national context included both the convenient and difficult factors, at
the same time many new issues appeared.
4.1.2.1. Advantages
The institution of the market economy is more perfect with every
passing day and enters into living, the base and also the motivation of
socioeconomic development. The modification and addition of the
economic law promulgated, the writing of guide legal documents to the
law implementation, mechanisms and policies aiming to establish the legal
corridor and framework which check with the global playground of
socioeconomic activities had been performed. The progress of the
country’s economy re-structure, which has been performed, generated the

new vitality of the economy. The result obtaining implementation of
solutions for restricting negative effects of the financial crisis and
economic depression. The politic stableness and the continuously
economic growth have achieved for many recently passed years as well as
the widely and deeply international integration of economics day by day.
4.1.2.2. Difficulties
The first, to become a country which has got the developed industry,
beside it has got many industrial products with the high rate of capital and
technology, compete capability on the world market, the export products


19

structure has to move from the high labor rate to the high ratio of capital
and technology.
The second, a country, considered as a developed industry country,
must have moving steps from the capital import to the capital export, at
least according to the net capital export criterion, it means maybe that
country still imports capital but mainly exports capital. To achieve that,
Viet Nam must have many domestic companies strong enough to do its
investment in foreign countries and the annual investment flow is bigger
than, or equal to, the FDI flow to Viet Nam.
The third, the issues faced by the State management of IZ in the new
context are that the State management of IZ and the performance of
economic incentives became much more complex than those in the
previous period, therefore, the issues of management and the role of
economic incentives have to research carefully on aspects of quantity,
purpose, role, objective, level, timing and time as well as some other
issues before choosing and performing policies in practice.
4.2. ORIENTATION OF THE STATE’S ECONOMIC INCENTIVE

PERFORMANCE FOR INDUSTRIAL ZONE IN VIET NAM TO
YEAR 2025
4.2.1. Point of view of the State’s economic incentive performance for
industrial zone to year 2025
Firstly, necessarily, to comply with view’s points, and directions, of
Viet Nam Communist Party and State on establishing the synchronized set
of the State’s economic policies to serve the Socialist Oriented Market
Economy in Viet Nam. This helps the performance of the State’s economic
incentives set for industrial zone not been deflected and deviated from the
lead, the governance, of the Party and the State on establishing the method
and the level of the State’s intervention with policy tools to business and
production activities, such as the activities of, IZ construction and
development, organizing business and production in IZ in Viet Nam in the
next time.
Secondly, the State’s economic incentive performance for industrial
zone must meet the requirement and does not violate commitments of the
international integration of Viet Nam signed with foreign countries in the
bilateral and multilateral agreements effective in the next time.
Thirdly, the State’s economic incentive performance for industrial
zone needs to base on the orientation of the economy’s growth model with
the matters of creating the convenient business environment; promoting
industrialization and modernization; accelerating industries restructure
progress; promoting renovation, improving operational efficiency of


20

enterprises, to boost the country soon become, basically, a modern directed
industry country as the objective which was planned in the 12th Congress of
Viet Nam Communist Party (2016).

Fourthly, the State’s economic incentive performance for industrial
zone must the objective practice. Studying, fully appraising every real
factor are the basic base to create the precondition of the location to attract
the investment into IZ. This is the important base to promulgate the
economic incentives which are the most suitable with condition of the
location which has got IZ, IZ management and governance, and increasing
investment attraction, especially FDI, into IZ.
Fifthly, the State’s economic incentive performance for industrial
zone must assure the basic requirements of, maximally exploiting new
modern tools, assuring the synchronization and the consistency in
performing combination, of incentives together and, between incentives and
other management policies of the State for IZ; focusing on the practical
follow-up, giving prominence to the feasibility in performance
arrangement, the effectiveness of the State management; the objective
determination of achieving the highest efficiency in terms of finance,
economics and sociality is the highest requirement of policy.
4.2.2. Orientation of the State’s economic incentive performance for
industrial zone to year 2025
The first, firstly to start from the practice necessarily, on the basis of
preconditions to create the advantage, attraction for to attract investment
into IZ in the location which has got IZ; to have to be based on the natural
condition and the situation of socioeconomic development in the location
which has got IZ, because of the impossibleness to synchronize the set of
the State’s economic incentive performance for industrial zone in all 06
socioeconomic areas due to the natural condition, the potential and the
socioeconomic development are various and inhomogeneous.
The second, to start from and to base on each issue or each issue group
existing need to be solved efficiently, and to assure the principle of the
highest practice follow-up.
The third, to follow the orientation of the maximum strong-point

exploitation, and the minimum weak-point limitation, of each economic
tool, concurrently have to assure the conflict situation, and/or the kill, of the
positive effect of other economic incentives in the operation; assure the
highest quality of the set of economic incentives and have to follow the
stable and sustainable orientation in operation; and have to assure the active
control of the State, especially risk in the governing progress of policy
operation.


21

The fourth, have to follow the orientation of minimizing the State’s
direct support for investment attraction to develop IZ through the State
budget spending to aim minimizing the negative effect to the State budget
deficit and the high public debt of the country at present.
The fifth, have to follow the orientation of maximally transferring the
active right in the research, proposal of the State’s economic incentives set
to the local government that has got IZ, based on the national framework of
economic policies on investment attraction into IZ; transfer the highest
right of performance to the local government in terms of implementation
arrangement, control, monitoring and evaluation, of the operation of the
State’s economic incentives set for IZ.
4.3. SOLUTION OF THE STATE’S ECONOMIC INCENTIVE
PERFORMANCE FOR INDUSTRIAL ZONE IN VIET NAM TO
YEAR 2025
4.3.1. Solution of performing the law of industry and perfecting the
management institution of industrial zone
To assure the sustainable development of IZs in Viet Nam, the State
needs to do the research and to perform the law of industry in the soonest
time, because of doing as so to create a set of management policies, of

which they include economic incentives for IZ in Viet Nam.
From today to the year 2025, to go abreast with completing the law
industry, to base on the existing problems due to no law of industry as
analysed above, the immediately performed necessary solution shall be that
the State needs to adjust the present IZ management institution soon, to
solve the problems, limits and weaknesses of the operation of the IZ State
management, especially the problem of overlapping function, mission, and
inadequate power, of the various state bureaus.
4.3.2. Solution of enhancing the monitoring and evaluation system of
the State’s economic incentive performance for industrial zone
At present, the issue of monitoring and evaluating the operation of the
State’s economic policies for IZ is not fully taken into consideration. The
annual monitoring and evaluation of the practical operation situation of
performed economic policies is not arranged and realized effectively.
Therefore the relevant authorities/agencies have not known about the
overall picture of the consistent, feasible, effects, effectiveness and efficient
levels as well the other existing problems of the State’s economic incentive
performance for IZ in practice. The solution is that the enhancement of the
controlling, monitoring and evaluating system of the State’s management
policies for IZ needs to be mentioned and performed immediately to aim
solving the existing problems and limits.


22

4.3.3. Solution of strengthening and correcting the national information
and data system of industrial zone
Strengthening the national system of IZ information because it has not
met the present requirement of the State’s practical management of IZ. The
problem of lacking information, database has been negatively affecting the

activity of researching to promulgate and arranging to perform, the policies
in general and the State’s economic incentive in particular, for IZ in the
country at present. This shows that the need of soon strengthening the
national system of IZ information and data. Well performing this issue shall
facilitate the activity of re-checking, and assessing, of the operation of the
State’s economic incentives set for IZ in the next time, based on that the
State shall make its adjustments of the economic incentive performance for
IZ to improve the efficiency of the economic incentive set for IZ.
4.3.4. Solution of enhancing capacity for staffs preforming the State’s
economic incentive performance for industrial zone
As presented in the part of factors effecting to the State’s economic
incentive performance for industrial zone, the staffs implementing the task
of arranging the policies performance in general, economic incentives in
particular, of the State for IZ directly affect the practical results achieved
and the proposed objective, therefore, once is the set of the State’s
economic incentives for IZ promulgated and performed, it needs to focus
on teaching specialty, and training professional skills to build the capacity
of the staffs implementing policies, making policies go into the living
practice, concurrently, they directly receive feedbacks from enterprises
related to the performed policy in general, of which they include economic
incentives.
4.3.5. Solution of strengthening research and seeking new tool for
designing the State’s economic incentives set for industrial zone
The research, and the promulgation, of the State’s economic policy in
general and economic incentive in particular for IZ, on one hand, need to
use the conventionally basic economic tools of the policies of finance,
money, trade, land and natural resources, wage and some others, and an
other hand, need to research the maximum use, and role promotion, as well
strong-points, of some new tools, of which the tools of stocks (shares,
bonds,…) and the stock market role must be paid attention enough in the

research and design of economic policies and economic incentives of the
State for IZ, especially in terms of the capital attraction on the stock market
for new projects or projects of expanding the factory scale, or of upgrading
the capacity, an enterprise can be supported by the suitable type of the


23

State, to allow an enterprise issues its bond or share to attract the capital on
the stock market.
This is the explicit, public and efficient way of the investment capital
attraction from various sources in the society for enterprise, concurrently,
helps to reduce the burden for the State budget because of the obligated
support in some specific cases and the pressure derived from increasing the
debit balance of the State’s preferential capital sources for enterprises, to
keep the preferential capital for other projects.
4.3.6. Solution of improving the feasibility, synchronization,
consistency and flexibility of the State’s economic incentives set for
industrial zone
The design of economic incentives in this case must base on the
assuredness that local factors such as the natural condition, geographic
position, the present situation of socioeconomic development, potential,
strong-point, as well as weak-point, limit, and development demand were
carefully examined, to ensure the practical follow-up and feasibility of
economic incentives performed in the next time.
In fact, in the past period, various economic incentives were
implemented by the State, this shows the diversification of the economic
incentives set. However, the economic incentives performance in practice was
not synchronized and discontinuous, not achieved the expected result.
Therefore, the determined requirement of the State’s economic incentives for

IZ from today to the year 2025 shall acquire the highest level of feasibility,
synchronizing, consistency, and flexibility of the State’s economic
incentives set for IZ.
CONCLUSION
The State’s economic incentive, typically the State’s economic
incentive performance, is the new approach to the impact of the State’s
policy tools in the regulation of the economy in general, and management
of industrial zone in particular. So few research reports of this topic were
published up to date. Therefore, this studies faced with many difficulties.
Even though, many issues and points of view should have been
continuously researched and discussed. With my own capability, effort, and
the restrictive conditions allowed, the doctoral presented the basic issues of
this topic, as follow:
+ The overview of industrial zone and issues appeared in the existing
and developing process, challenges and requirements for the State
management; building and issuing conception, role and effecting factors of
the State’s economic incentive performance for industrial zone;