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What are incentives for special economic zones?

14:39 | 30/05/2017

VCN- The operation model, as well as a large number of special incentives for 3 special economic zones, including Van Don (Quang Ninh), Bac Van Phong (Khanh Hoa) and Phu Quoc (Kien Giang), have been proposed by competent authorities.

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Phu Quoc, one of 3 special economic zones will be established.

It is suggested that in addition to incentives, it is necessary to create the dominant institutions so that these special economic zones will effectively and dynamically operate for economic development.

More powers are given

According to the Ministry of Planning and Investment, the development of a special administrative-economic model in Vietnam with administrative innovation, economic mechanisms and policies, creating a model for new development motives is very necessary and urgent. By the end of 2016, the Government agreed on the principle of building a model of 3 administrative and economic units, especially Van Don, Bac Van Phong and Phu Quoc, towards special administrative-economic model to develop their own strengths so as to take advantage of the potentials, create new development motives, ensure the regional distribution of resources and create effects nationwide. .

Regarding the economic efficiency of special economic zones, the Ministry of Planning and Investment also reported some quantitative indicators when implementing the special economic zones. According to the evaluation results, after 2020, the special economic zones will contribute to budget revenues, GDP growth, and per capita income. For example, in the Van Don Special Economic Zone, the State will collect about $US 1.9 billion from taxes and fees, $US 2.1 billion from land revenue, and about $US 9.7 billion in 2021-2030 raising the per capita income to $US 5,000 by 2020 and $US 12,500 by 2030. For Phu Quoc, it is estimated that the State will collect about $US 3.3 billion from taxes and fees and land revenues, value added taxes of around $US 19 billion in the period 2017-2030. Per capita income will be also raised to about $US 5,300 by 2020 and $US 13,000 by 2030. The Van Phong economic zone is also expected to collect about $US 1.2 billion from taxes and fees, $US 1 billion from land revenues, and VAT of enterprises of about $US 10 billion in the period 2017-2030.

Regarding the organizational and managerial model, the administrative and economic units is the district-level administrative unit. The governmental organization will consist of the People's Council and People's Committee. In particular, the People's Council is organized into two levels, including the People's Council of Special Administrative Unit and the district-level People's Council. The People's Committee is also organized into two similar levels, which unify the title of Secretary and Chairman of the People's Committee. Notably, there will be rights and powers under the Government, the Prime Minister, Ministries, People's Councils, Provincial People's Committees and specialized agencies assigned to the special administration. The goal is to build the administration of the special zone with a streamlined administration appropriately, effectively and efficiently; to apply favourable administrative procedures, meeting the requirements of investors, organizations and individuals in accordance with international standards.

Regarding the administrative model of the special economic zone, Mrs. Luu Bich Ho - an economist said that this was a test to implement reforms at a higher level than the average. It was aimed at creating the most favourable condition for economic entities, especially foreign investors and people, to participate in economic activities and social development. However, Mrs. Luu Bich Ho also said that within the framework of our country, compared to the model of the special economic zones, the degree of autonomy and self-management were lower.

Attractive not only from taxes and fees

In order to attract investors, the Ministry of Planning and Investment has also determined the development of more favourable for economic policies in line with current laws and international commitments of Vietnam, ensuring superiority and international competitiveness.

With the budgetary and financial policy sector, the Ministry of Planning and Investment has proposed to allow all revenues of special zones to be retained in a timely mannen. In addition, the Ministry of Planning and Investment has strongly recommended the application of policies to establish monetary and banking institutions and diversify the types of transactions in line with international practices; liberalization of capital flows; use of vnd as the main currency of circulation, establishment of a separate financial center under the supervision of the State Bank. In addition, the Ministry has also proposed to allow the special economic zones to implement flexible salary policy and autonomy, signing contracts with officials and hiring foreign experts.

Recently, the Ministry of Finance has also proposed specific financial and budgetary mechanisms and policies for special administrative-economic units. Regarding corporate income tax for investment projects, the Ministry of Finance has proposed to apply a 10% tax rate for a 30-year period, a 4-year tax exemption and a 50% reduction in the amount of tax payable for the next 9 years. Particularly for investment projects eligible for investment preferences (excluding investment projects on mineral exploitation, production and trading of goods and services subject to special consumption tax, except automobiles) will be entitled to a 10% tax rate, 4 years of tax exemption and a 50% reduction of the amount of tax payable for the next nine years from the date the taxable income. Income from investment projects - real estate business is applied a preferential tax rate of 17% (not applicable time of tax exemption and reduction). Regarding fees and charges, the Ministry of Finance proposed to decentralize the special administrative-economic units to decide on charges and fees, according to the provincial People's Council.

However, the Ministry of Finance disagreed with the proposal to allow the establishment of a separate monetary and banking institution ... because this policy may conflict with the provisions of the Ordinance on foreign exchange control, affecting the monetary policy and exchange rate of the State Bank of Vietnam.

Commenting on the attractiveness and effectiveness of the special economic zones, Mr. Le Dang Doanh - an economist, said that if special economic zones were established 50 years ago, they would be very attractive, because the tax reduction at that time had not been yet available. Till now, Vietnam has signed a series of FTAs, tax incentives have become very popular, so we need other mechanisms. He also said that if there was no professional apparatus, quickly meeting the requirements of investors, the procedures will not be attractive to investors. The expert also emphasized that the special economic zones could attract some investors, for example, some Chinese investors may be dumping money into Van Don area near China.

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According to Mrs. Luu Bich Ho, higher levels of tax and fee incentives are important and a prerequisite for creating a business investment environment. But at the same time, this environment also requires the greatest convenience in administrative management and it is the dominant feature of this type that differs from existing industrial zones and industrial parks. In addition, the conditions of modern infrastructure, synchronization and high-quality human resources, social and environmental security and safety conditions in special zones should be much better than the normal economic zones.

By Van Khanh/ Hoang Anh