Fdi inflows in industrial parks and economic zones in vietnam in the new context

Nội dung text: Fdi inflows in industrial parks and economic zones in vietnam in the new context

1. FDI INFLOWS IN INDUSTRIAL PARKS AND ECONOMIC ZONES IN VIETNAM IN THE NEW CONTEXT MSc. Pham Thi Phuong1 Abstract: Since the global outbreak of the COVID-19 pandemic, the world economy has been severely affected, so global foreign direct investment (FDI) flows have plummeted. In this context, foreign investors tend to be more cautious in their investment decisions and prioritize investment in developing countries. Therefore, Vietnam has potential to attract FDI inflows, especially in the manufacturing sector due to the production relocation trend of multinational companies. Industrial parks (IPs) and economic zones (EZs) are considered as one of important regional industrial policies to attract foreign investment in developing countries such as Vietnam. The objectives of this paper are to present the overview of FDI inflows into IPs and EZs in Vietnam in the new context and clarifies the potential factors of Vietnam to attract FDI into IPs and EZs. In this paper, the author divides factors affecting the FDI attraction of industrial parks and economic zones into 3 main groups including IPs and EZs policies, IPs and EZs infrastructure and IPs and EZs agglomeration economies. Keywords: COVID-19, FDI, industrial parks, economic zones, zoning policy. 1. INTRODUCTION Industrial parks (IPs) and economic zones (EZs) are widely used across most developing and many developed economies. As of 2018, there are nearly 5,400 IPs and EZs in 147 nations, more than 1,000 of which were established in the last five years (UNCTAD, 2019). In Vietnam, the number of industrial zones continues to rise as foreign investment pours in. As of February 2021, there were 370 industrial zones set up countrywide (Duc Trung, 2021), compared to 260 zones in 2010 (Nguyen Minh Ngoc, 2020). This is considered as a result of expanding FDI inflows. There are many different concepts of zones in the world such as free-trade zones, export- processing zones, industrial parks, economic and technology-development zones, high-tech zones, science and technology parks, free ports, enterprise zones, and others (Zeng, 2019). According to UNCTAD (2019), these zones are known as special economic zones (SEZs) that are geographically delimited areas within which governments facilitate industrial activity through fiscal and regulatory incentives and infrastructure support (UNCTAD, 2019). These zones are considered as one of the best options for an economy to have systematic structural transformation (Moberg, 2015). Naeen et al (2020) stated that economic zones have played a crucial role in boosting economies of developing countries globally. However, in Vietnam, SEZ is defined as an area with a definite boundary, larger than an industrial park or export processing zone in the national territory. In particular, this area is eligible for incentives on customs, foreign exchange, tax, and visa regimes to domestic and foreign investors. Meanwhile, in Vietnam, industrial parks and economic zones are the most common zones with a high proportion. 1 VNU University of Economics and Business; Email: phamthiphuong@vnu.edu.vn 660
2. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 661 According to decree No.82/2018/NĐ-CP of Vietnamese government, an ‘industrial park’ is an area enclosed by definite boundaries, specialising in the production of industrial goods and provision of services satisfying industrial production needs, and established in conformity with the conditions, procedures, and processes prescribed in this decree. Industrial zones are classified into different types such as export-processing zones, auxiliary industrial areas, and eco-industrial zones. An ‘economic zone’ is an area defined by geographical boundaries, including functional zones, and established to serve the purpose of calling for investment, promoting socio economic development, and maintaining national defence and security. Economic zones encompass coastal economic zones and border-gate economic zones, and are hereinafter referred to simply as economic zones, unless particular regulations otherwise apply to each classification. Industrial parks and economic zones are considered as one of important regional industrial policies to attract foreign investment in developing countries such as Vietnam (Dao & Nguyen, 2020). FIAS (2018) stated that zones can offset some aspects of an adverse investment environment by offering world-class facilities and best practice policies. Through an empirical study, Dao Ngoc Tien and Nguyen Quynh Huong (2020) gave novel non-parametric evidence to indicate the positive causal linkage between the zoning policies and the FDI attraction at district-level in the country during the period 2011–2015 in Vietnam. It showed that (i) domestic producers located in IPs and EZs have a denser distribution of customers (both FDI and domestic) than do FDI firms in IPs and EZs, domestic firms, and FDI firms not in IPs and EZs; (ii) FDI suppliers are better connected with FDI partners (both inside and outside IPs and EZs) than with domestic partners; and (iii) there is a higher density of districts with IPs and EZs obtained FDI investment in capital stocks than did districts without IPs and EZs. To enhance successful industrial strategic planning and attract FDI enterprises, it is essential for economic zones’s administrators to properly understand factors in the investment environment that influence firm’s intention to invest in IPs and EZs (Lu & Yang, 2007). This becomes even more imperative in the current new context with the negative socio-economic consequences of COVID-19 pandemic as well as increasing international trade cooperation and competition in the world market. In the new context with many parallel opportunities and challenges, the government of the host country needs strategic policies to maintain the attraction of FDI inflows into industrial zones. There are four sections in this study. After this introduction section, the next one presents an overview of the current situation of FDI inflows into industrial parks and economic zones in Vietnam in the new context and section 3 clarifies the potential factors of Vietnam to attract FDI into IPs and EZs based on the theoretical framework reviewed. Conclusions drawn from the research findings are discussed in the final section. The study uses qualitative methods to synthesize data and analyze problems. 2. OVERVIEW OF FDI INFLOWS IN IPS AND EZS IN VIETNAM IN THE NEW CONTEXT 2.1. Overview of FDI inflows in Vietnam With the impact of the COVID-19 pandemic, global FDI flows fell by 35 per cent in 2020, to 1 trillion USD from 1.5 trillion USD the previous year. It was well below the low point
3. 662 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI reached after the global financial crisis a decade ago. The epidemic has impacted on FDI flows in countries at different levels, in which the developed countries was affected more with a significant drop of 58 per cent. Meanwhile, the FDI inflows in developing economies experienced a decline by 8 per cent (UNCTAD, 2021). Figure 1. Total FDI inflows in the world 2010-2020 (billion USD) Source: UNCTAD (2021) According to the UNCTAD (2021), among the largest recipients of FDI inflows in South- East Asia (Singapore, Indonesia and Viet Nam), Vietnam was the least affected country from the COVID-19 pandemic to FDI flows with a 2 percent decrease, while the rest of the countries saw a decrease of more than 20 per cent. Besides, according to the report of the Ministry of Planning and Investment of Vietnam as of November 20th, 2020, capital generated by FDI projects was estimated at 17.2 billion USD, or 97.6 percent over the same period last year (MPI Portal, 2020). As of May 20th, 2021, the capital generated by FDI projects was estimated at USD 7.15 billion, up by 6.7 per cent over the same period last year (MPI Portal, 2021). It shows that despite the negative socio-economic consequences of COVID-19, Vietnam is one of the few countries that have remained resilient FDI inflows. Figure 2. FDI inflows in Vietnam 2010-2020 (billion USD) Source: UNCTAD (2021) During the period of 2010-2020, Vietnam recorded a steadily increasing trend in FDI inflows with an exception of the figure in 2020 that went down slightly, compared with a
4. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 663 significant fluctuation in the figure of the world. In particular, according to UNCTAD’s World Investment Report (2021), Vietnam ranked 19th among the top host countries receiving the FDI inflows in the world in 2020, compared to 24th place in 2019. This states the ability of Vietnam to keep investor confidence high in the new context. Firstly, the economy is becoming more stable and open with a strong global economic integration through 13 free trade agreements (FTAs) signed and ratified (Nguyen & Pham, 2020). This creates an attractive environment for investors to do business in Vietnam. Secondly, in this time, the government has effectively controlled the COVID-19 epidemic with strict measures. This demonstrates the ability to cope with major shocks that very few countries in the world can do (Nguyen & Pham, 2020). From 2016 to 2020, the manufacturing industry in Vietnam received around 91.5 billion USD in foreign direct investment, accounting for the largest proportion with 54.5 per cent. Therefore, this became the leading FDI sector in the country. This sector has an increasingly important role in the export-oriented economy of Vietnam. The domination of the manufacturing and processing sector indicates that foreign firms obtain the efficiency in the industrial field in Vietnam (Deshmukh, 2021). In the new context, MNCs tend to relocate production sites out of China or apply a “China + 1” strategy to reduce risks - in which, instead of just investing in China, MNCs will diversify production and business activities to other countries (Nguyen & Pham, 2020). Meanwhile, Vietnam is considered as a potential site to attract the wave of production shift from China. Therefore, FDI inflows in the manufacturing sector in Vietnam still have a huge developing potential in the future. In particular, IPs and EZs can be a useful tool to obtain these FDI inflows. Figure 3. Leading sectors for FDI in Vietnam from 2016 to 2020 (billion USD) Source: Ngoc (2021) 2.2. Overview of FDI inflows IPs and EZs zones in Vietnam Overall, along with the continuous growth of the number of industrial zones in Vietnam (as Figure 4), foreign investment capital pouring in IPs and EZs has experienced an upward trend through years with the notable exception of the figure in 2020 which decreased due
5. 664 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI to the huge impact from the COVID-19 pandemic. Annual share of FDI capital invested in industrial zones and economic zones accounts for 60-70% of the total FDI capital of the whole country (Tran Duy Dong, 2018). In addition, there is an outstanding point that the number of projects has declined while the registered investment capital per project has expanded over the time. Moreover, the quality of FDI inflows into industrial zones and economic zones has improved. This means that FDI projects in IPs and EZs has been more extensive in terms of scale and intensive in terms of quality. Figure 4. Number of industrial parks in Vietnam from 1991 to 2021 Source: Data from 1991-2016 in Ngoc (2020) & data in Feb-2021 in Duc Trung (2021) Firstly, foreign investment capital into IPs and EZs in Vietnam is high in both the amount of capital and the number of projects. According to the Vietnamese Ministry of Planning and Investment, by June 2018, IPs and EZs had attracted over 8000 foreign investment projects with the total investment capital reaching about 174 billion USD. In the period 2013-2017, the total additional FDI inflows in industrial parks and economic zones recorded 62 billion USD with the average amount of 12.4 billion USD per year. Compared with 2013, the figure of FDI and in 2017 rose by 1.6 times which means the 12% growth in attracting capital every year. Besides, the cumulative number of investment projects up to 2017 increased by 1.5 times with a growth of over 500 investment projects/ year (as cited in Tran Duy Dong, 2018). However, as a consequence of the COVID-19 pandemic, FDI inflows into IPs and EZs in the first half of 2020 plummeted by more than 30% compared to the same period in 2019, from 8.7 billion USD to 6 billion USD (Figure 5). Remarkably, FDI inflows in zones in 2021 have shown signs of growth again with the figure of only the 5 months of 2021 having surpassed the amount of additional FDI capital in H1/2020. This reflects the effective control of the Vietnamese government against the pandemic.
6. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 665 Figure 5. FDI inflows in IPs and EZs in Vietnam from H1/2019 to H1/2021 Source: Minister of Planning and Investment Note: Author collected data in annual Vietnam Industrial Reports of Savills from 2019-2021 Secondly, there is ample evidence that the quality of foreign investment capital pouring in IPs and EZs in Vietnam is enhancing over the years with the large-scale and high technology projects. In terms of scale, the average registered capital of FDI projects in IPs and EZs remained growing in the period of 2013-2019. In particular, the figure in 2013 was about 22 million USD per project (Tran, 2018), compared to 26 million USD per project in 2019. The average investment capital of FDI projects also witnessed a decrease in 2020 (18 million USD/project), but quickly increased again in H1/2021(21 million USD/project), similar to the trend of total additional capital inflows (Figure 5). According to preliminary statistics by 2018, there were about 500 FDI projects with the capital of over 100 million USD including some billion-dollar projects. For instance, Samsung (South Korea) invested in Bac Ninh, Thai Nguyen, Ho Chi Minh City with a total capital of 14.3 billion USD (as cited in Tran, 2018). It was one of the largest FDI projects in IPs and EZs in Vietnam. Besides, there were some other huge projects as steel project of Formosa Group in Vung Ang Economic Zone, Ha Tinh with the capital of 10 billion USD; LG Group investment (Korea) in Dinh Vu-Cat Hai EZ and PP plastic production project of Hyosung Group (Korea) with total investment of over 1 billion USD. In terms of technology, the number of projects with modern investment in industrial parks and economic zones has been gradually developing. Some typical high-tech projects are the Samsung Group’s (South Korea) project in Bac Ninh, Thai Nguyen and Ho Chi Minh City; Kyocera Group’s (Japan) project in Thang Long II Industrial Park, Hung Yen Province; automobile propeller production project of Robert Bosch Group (Germany) in Long Thanh Industrial Park, Dong Nai province; Investment project of Doosan Group (Korea) in Dung Quat Economic Zone, Quang Ngai province, . (Tran, 2018).
7. 666 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI 3. FACTORS ATTRACTING THE FDI INFLOWS IN IPS AND EZS IN VIETNAM IN THE NEW CONTEXT Several studies have indicated that environmental factors in different kinds of zones, such as free trade and export processing zones, have a catalytic effect on attracting foreign direct investment and a positive effect on investment choice location (as cited in Lu & Yang, 2007). They concluded that the attractiveness of an incentive might be a function of environmental factors such as market orientation, labor force, tax incentives, and host country infrastructure. Farole (2011) indicated that for developing countries, industrial parks and economic zones traditionally have had both a policy and an infrastructure rationale to attract foreign direct investment, mainly in the manufacturing sector to increase exports and generate employment. In addition, agglomeration economies are also an important factor in FDI location (Jones & Wren, 2011) since enterprises tend to cluster in close geographic proximity to each other to enjoy sharing benefits. Based on a detailed literature review, in this paper, the author divides factors affecting the FDI attraction of IPs and EZs into 3 main groups including IPs and EZs policies, IPs and EZs infrastructure and IPs and EZs agglomeration economies. These factors are used to characterize IPs and EZs in Vietnam to become a potential site to attract FDI inflows. 3.1. IPs and EZs policies In Vietnam, IPs and EZs policies, also known as zoning policies, are playing an important role in the policy framework facilitating regional FDI. In general, IPs and EZs policies are priority policies in three aspects including (1) fiscal incentives, (2) public services, (3) a special regulatory regime. On 22 May 2018, the Government issued Decree 82/2018 on industrial zones and economic zones in Vietnam. Decree 82/2018 replaces Decree 29/2008 as amended from 10 July 2018. New Circular No. 43/2019/TT-BTC issued by the Ministry of Finance on 12 July 2019, guiding Article 24.4 of Decree No. 82/2018/ND-CP. Key economic tools applied under these policies include (i) more favourable corporate income tax, land rent, and fees; (ii) better infrastructure; and (iii) the simplification of administrative management. Firstly, for fiscal incentives, the zone’s investors, particularly its anchor investors, often enjoy capital freedoms and certain levels of tax incentives and subsidies. Tax incentives include exemptions or reductions of Corporate Income Tax (CIT), Value-Added Tax (VAT) and import tariffs for specific periods, and are granted based on the business lines and location of the foreign investment enterprise. Regulated encouraged sectors include education, healthcare, sports, culture, high technology, environmental protection, scientific research, infrastructural development, and software manufacturing. Administrative divisions or locations with investment incentives include disadvantaged or extremely disadvantaged areas, industrial parks, export-processing zones, hi-tech zones, and economic zones (Shira & Associates, 2017). According to the provisions of the 2014 Investment Law, both IPs and EZs enjoy investment incentives. In the Law on Corporate Income Tax (CIT), investors in IPs and EZs are entitled to CIT incentives, namely: 2-year tax exemption for industrial zones and 50% CIT reduction in 4 subsequent years (except for industrial zones in stable socio-economic areas); investors in Ezs enjoy the highest tax incentives of 4-year exemption and a further 50% reduction in the next 09 years as well as 10% tax rate in 15 years. In addition to CIT incentives, investors are also entitled to preferential duties on imports for the creation of fixed assets of investment projects in IPs and EZs and other incentives such as land rents and investment credit (as cited
8. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 667 in Tran, 2018). Secondly, for public services, zones are normally serviced with efficient customs, fast- track registration and licensing, often through “one-stop-shop” services. Customs operations are carried out entirely in the industrial zone, which saves operating time for business. As a result, firms are able to enhance the levels of efficiency and responsiveness in their supply chain. Thirdly, for a special regulatory regime: zones normally operate under more liberal economic laws than those that typically prevail, regarding issues such as labor, land use, and foreign investment. Such incentives and exemptions depend on the industry and the location of investment. In the COVID-19 context, the Vietnamese government has responded to the situation with a range of tax relief and economic measures for businesses, including: (1) Directive No. 11/CT-TTg: On the 4th March 2020 the Prime Minister issued Directive No. 11/CT-TTg proposing taxpayer concessions to offset the economic impact arising from this outbreak; (2) Official letters No. 1046/TCT-TTKT and No. 1086/TCT-VP: On the 12th March 2020 the General Department (“GDT”) announced tax inspection and audit guidelines and directed all provincial tax departments to focus on ‘high risk’ taxpayers, while temporarily suspending tax audits for taxpayers adversely impacted by COVID-19; (3) Decree 41/2020/ND-CP: Has granted a tax payment extension Corporate Income Tax (“CIT”), Value Added Tax (“VAT”), Personal Income Tax (“PIT”) and land rental for specified months for eligible taxpayers who are economically impacted by the pandemic (KPMG, 2020). However, as a matter of practice, many measures are still at a policy level that are tough for businesses to enjoy government supporting measures. According to a survey of 10,197 enterprises nationwide, conducted by the Vietnam Chamber of Commerce and Industry (VCCI) in collaboration with the World Bank in Vietnam, among the supporting policies of the Government, surveyed businesses responded the tax extension policy is the most accessible, while the 0% interest credit loan policy to pay wages to employees is the most difficult to access (MP, 2021). In particular, FDI enterprises also have more limited access than domestic enterprises to these supporting policies. Moreover, in Vietnam, industrial zones and economics are considered as places with an extremely high risk of disease outbreaks due to the large number of workers. For example, the COVID-19 outbreaks in May 2021 in Bac Ninh province with 10 industrial parks and Bac Giang province with 6 industrial parks. Therefore, it is essential to issue more policies to support FDI enterprises in industrial parks as well as effective management policies to prevent and limit the outbreak of COVID-19 in industrial parks and economic zones. 3.2. IPs and EZs Infrastructure FDI investors consider infrastructure as one of the most essential factors impacting the location of an investment location because of its effects on the level of operational efficiency of enterprises and the connection between FDI firms both inside and outside IPs and EZs. The investors desire to enjoy benefits of concentrating industries in one geographical area such as increased supply and subcontracting relationships among industries, among others. Recognizing the importance of this factor, Vietnam has invested a lot to improve the quality of infrastructure in IPs and EZs to meet international standards. IPs and EZs are planned
9. 668 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI with a full system of transportation networks, communication systems, and energy and water facilities to ensure the needs of businesses. Many industrial parks are located near national highways that lead to airports, seaports, and rail stations for easy transport among other conveniences (Shira & Associates, 2017). According to ANZ Research (2016), many FDI firms had positive feedback about the overall business environment in Vietnam Industrial Parks’ Business Environment. In terms of infrastructure quality, about 50-70% respondents to ANZ survey were satisfied with the good and very good level in the scale. However, the internet connectivity in IPs was evaluated poorly by 15% respondents. So, it is essential to keep improving in order to create a better infrastructure for a better investing environment. Table 1. Vietnam Industrial Parks’ Business Environment (% respondents to ANZ survey) Very Good Good Average Poor Very Poor No Answer Quality of Infrastructure Reliability of Electricity 15 60 5 5 0 10 Water Supply 25 60 0 0 0 10 Internet Connectivity 5 45 20 15 0 10 Waste Disposal 10 65 5 5 0 10 Quality of Public Goods and Service Electrical Connection 10 55 15 5 0 10 Water Connection 10 60 15 0 0 10 Safety and Security 10 65 10 0 0 10 Consistency of Government Policies 5 45 25 10 0 10 Source: ANZ Research (as cited in Victorino et al, 2016) In terms of the transport system connecting key economic zones in Vietnam, the government has promoted plans to enhance quality. For instance, there are many new national expressways put into operation such as Haiphong - Hanoi, Thanh Hoa - Ha Tinh, Hanoi - Lang Son, Hanoi - Thai Nguyen, Noi Bai – Ha Long – Mong Cai, Hanoi – Hoa Binh, . This leads to significant time and cost savings in transportation cost for enterprise, especially for FDI firms in IPs and EZs. In addition, the Ministry of Transport is finalizing the draft road traffic planning for the period 2021 - 2030, with a vision to 2050. In the period 2021 - 2025, the consulting unit proposes to put into planning 31 expressways with a total expected investment of 483,848 billion VND, including the remaining 14 component projects on the North-South east route: Huu Nghi border gate - Lang Son city; Bai Vot - Ham Nghi (Ha Tinh); Ham Nghi - Vung Ang (Ha Tinh); Vung Ang - Bung (Quang Binh); Bung - Van Ninh (Quang Binh); Van Ninh - Cam Lo (Quang Tri); Quang Ngai - Hoai Nhon (Binh Dinh); Quy Nhon - Tuy Hoa (Phu Yen); Tuy Hoa - Van Phong (Khanh Hoa); Van Phong - Nha Trang (Khanh Hoa); Can Tho - Bac Lieu; Bac Lieu - Ca Mau; Ho Chi Minh City - Long Thanh; Hoa Lien - Tuy Loan (Da Nang). The above projects will connect with more than 10 ongoing North-South expressway projects, creating a smooth route from Huu Nghi border gate (Lang Son) to Ca Mau (Doan Loan, 2021).
10. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 669 3.3. IPs and EZs agglomeration economies Enterprises tend to cluster in close geographic proximity to each other to enjoy sharing benefits. Therefore, IPs and EZs are the appropriate option for FDI firms to select for investment. Meanwhile, there is an increasing number of firms shifting their manufacturing operations to Vietnam or adopting a China + 1 model. As of February of 2021, there are a total 370 industrial parks and economic zones operating countrywide. These zones are mainly clustered in the northern, central, and southern areas. When investing in IPs and EZs in Vietnam, the firms gain benefits of agglomeration economies. First is saving in transportation costs when FDI enterprises are located nearby their partners as suppliers and customers. When approached from the supply chain perspective of businesses, suppliers of inputs located in large clusters of downstream firms can exploit economies of scale while downstream firms themselves benefit from timely delivery, lower inventory costs and specialized inputs tailored to their needs. The result is higher profits for upstream firms accompanied by easier access to a broader range of inputs for their customers (Newman & Page, 2017). Secondly, the firms can access labor pooling in IPs and EZs in which there are a large number of workers (or managers) with skills relevant to their industry. This facilitates better matching of workers to jobs and makes it easier to hire new workers when labour demand increases. Thirdly, knowledge spillovers, in particular informal exchanges of ideas between workers and entrepreneurs, are more likely when firms are in close geographic proximity (Krugman 1991; Fujita et al. 1999). 4. CONCLUSION In the new context, especially with the serious impact of the COVID-19 pandemic on the global economy, the study analyzed the current status of FDI inflows into IPs and EZs in Vietnam as well as the potential of FDI attraction of IPs and EZs through the analysis of factors affecting the attractiveness of the investment environment. There are three main groups of factors including IPs and EZs policy, IPs and EZs infrastructure and IPs and EZs agglomeration economies. Among them, favourable tax incentives and consistency of government regulations within industrial parks and economic zones are considered as the most crucial determinants in assessing the business environment in Vietnam’s IPs and EZs. The Vietnamese government sees IPs and EZs as the most important source for future economic growth momentum and breakthrough institutional reforms. In addition, many bilateral and multilateral free trade agreements (FTAs) that Vietnam has recently signed, such as the The Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CTPPP) and the EU-Vietnam FTA (EVFTA). These FTAs have schedule to do the commitments removing tax, leading to a decline in tax revenue and a growth in public debts in Vietnam. Thus, setting up new economic enclaves presents a clear alternative to sustain the state coffers. However, the government’s policies to support FDI enterprises in Ips and EZs in the context of the COVID-19 pandemic are not indeed effective and there is still plenty of room for improvement. In the coming time, the government should have more appropriate supporting policies as well as industrial park management policies.
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