Building industrial zones solution to economic development in rural and mountainous locations of Dong Nai province

1.1.1 Role of Industrial Zones, Export Processing Zones in the Process of International Economic Integration and International Labor Arrangement 6 1.1.2 Viewpoints of Vietnamese Communi

Firstly, I’d like to express my great thankfulness to all directors, professors, tutors, and coordinators of the MMVB program

And to Dr Tran Thanh Xuan, who has devotedly counselled me to finish this thesis

And also to all organizations and individuals enthusiastically help me during my course and especially in

my time to fulfil the thesis

Although I have already made my all efforts, the thesis may still have some shortcoming I do hope to get advices from the Examiners’ Board, from professors and from all classmates,…in order to well better my thesis

Finally, I’d like to wish healthy, happy and successful

to all of you

Ho Chi Minh, Feb 2007

1.1.1 Role of Industrial Zones, Export Processing Zones in the Process of

International Economic Integration and International Labor

Arrangement

6

1.1.2 Viewpoints of Vietnamese Communist Party and State on developing

and managing Industrial Zones, and Export Processing Zones

9

11

1.2.1 Socio-economic Development requires the balance, and harmony

between Cities and Rural Areas

11

1.2.2 Specific characteristics of Dong Nai Province and Economic

Development Model in rural areas

12

1.2.3 Objective factors for Industrial Zones Development in rural

mountainous districts of Dong Nai Province

13

16

31

2.2.1 Development situation of Industrial Zones in rural mountainous areas 31

46

3.1.1 Focal Industrial Zones Development is indispensable trend in the

process of industrialization and modernization

3.2.3 Forecast of Labor Demand in Industrial Zones in Dong Nai Province 51

52

3.3.1 Solutions to plan, site clearance, compensation and finding out the

capital for infrastructure investment

52

3.3.2 Link the enterprises in the Industrial Zones with local materials – the

solution of Industry-Agriculture-Forestry-Fishery

53

3.3.4 Solution to train and enhance human resources quality in rural

- Vietnam has been, in recent years, continuously in its process of

“Industrialization and Modernization” in which agricultural modernization in rural areas is the issue attracting remarkably the concerns of the Government This was emphasized again in the Document of Tenth Vietnamese Communist Party Congress: “Our policy is to further speed up industrialization and modernization

of rural agriculture, solves synchronously problems related to agriculture, rural areas, and farmers We have to develop agriculture comprehensively, and transform effectively the agricultural structure and rural economy in the direction

of making more and more added value This development must be suitable for processing industry and market; ”

- Dong Nai belongs to the focal economic region of the South-East Vietnam Dong Nai, together with Ho Chi Minh City, Binh Duong, and Ba Ria-Vung Tau made up the “motive force” implementing the process of industrialization and modernization in the South Vietnam and nationwide in general For this reason, developing, and transforming the economic structure in the direction of increasing the portion of industry and service as well as developing in comprehension and balance between cities and rural areas are urgent missions of the Province

- In reality, economic development in Dong Nai is not synchronous The gap of living standard and infrastructure between cities and rural mountainous areas is quite wide Dong Nai also has the largest potential of agricultural land compared with other provinces in the South-East Vietnam Therefore, developing Industrial Zones in rural mountainous areas is the effective solution to make

balanced development in the areas; this is the way to further promote economic potential as well as exploit effectively the local resources

- Based on the Central Party’s Solution, Chairman of Dong Nai Province People’s Committee issued Decision No 4832/QÑ.CT.UBT dated December 30,

2002 on establishing Center for Developing Rural Mountainous Industrial Zones under Dong Nai Industrial Zones Authority (DIZA) The major mission of this center is to develop infrastructure and attract investment to rural industrial zones among which Industrial Zones of Xuan Loc, Tan Phu, Dinh Quan are very first examples

- The purpose of developing industrial zones in rural mountainous districts

is to transform economic structure, further promote the industrialization through infrastructure development, investment attraction, especially foreign investments From this process, we enhance the effectiveness of land use, generate more stable employment for local laborer, transform local economic structure in the direction of increasing the labor portion in industry and service

- In addition, the research will contribute to the effective and sustainable development of these Industrial Zones

- Development of industrial zones in rural mountainous areas of Dong Nai

to attain the planned goal of Economic, Political and Social mission

- The research scope is the industrial zones areas of Dong Nai Province, especially industrial zones already approved by the Government This proposed solution is available to 2010, vision to 2020

- Methods used in the research are to make statistic, analyze, compare, summarize; evaluate the reality from some programs, projects related to the research; as well as inherit the available documents

- First of all, I make statistic data, map out the plans, analyze and evaluate the real figures From this result, I conclude and suggest necessary solutions

- Supplement backgrounds on development of industrial zones in rural mountainous districts

- Assess the current status of planning, and development typical mountainous industrial zones

- Suggest the necessary proposals to the sustainable development of industrial zones based in rural mountainous areas of Dong Nai Province

- During this research, some terms should be fully understood as follows:

(IZ) are focal industrial areas established according to the Decision of the Central Government with the definite borders These IZs, without inhabitants, provide supporting services for production (Regulated in Decree No.192-CP of Central Government dated December 25,1994)

refers to the people living in a certain geographical or administrative area, having civil administration relationship in that area, receiving benefit directly from service provided by the Central Government

refers to a certain group of people living in a definite locality (hamlet, village ), where the economic condition, language, culture are similar When we mention Community, we refer to the inhabitant relationship The inhabitant and Community are unseparated

According to Constitution 1992 of Vietnam: The Socialist Republic of Vietnam is a State of the people, by the people, and for the people All State power belongs to the people and is based on an alliance between the working class, the peasantry, and the intelligentsia Nature of Vietnamese State is for the people, consider serving people the highest goal; The State manages the national economy by means of laws The local governments have the mission of guiding and organizing the Law implementation in their localities

“Environment consists of natural and artificial material elements, which have the close relation, surround human being, influence on living condition, production, existence, and development of human being and nature” (Law on Environment Protection)

“Any economy guarantees the growth and social reproduction These indicated in comparison of the two different periods and calculation in percentage”

“Economic development is economic growth with the assuarance of goal, balance and effectiveness”

Preface

Chapter 1 Backgrounds on Industrial Zones Development in general, and

Industrial Zones development in rural mountainous Districts of Dong Nai province

Chapter 2 Present status of Industrial Zones development in rural mountainous

districts of Dong Nai province in recent years

Chapter 3 Solution to Industrial Zones development in rural mountainous

Districts

Conclusion

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- At any countries, Capitalism economy or Socialism economy, the economy transforms inevitably from smaller to larger scale, and the economic structure transforms in the direction of decreasing agricultural portion and increasing service and industrial portion For this reason, industrialization and modernization are globally necessity

- In the background of the world economic globalization, with several breakthroughs in science and technololy, many countries have the tendencies of global economic integration to attain higher and more stable growth rate Facing process of integration process and international labor arrangement, Vietnam, in its industrialization and modernization, has to quickly integrate and keep up with the world’s advancement Among various synchronous solutions, Industrial Zones Development is an important and effective remedy, suitable for model of economic development of Vietnam in current situation

- Industrial Zones Development is the way to make Vietnam develop in the tendency of concentration and specialization By this, Vietnam has the opportunity to effectively exploit human and natural resources, manage capital, technology;

apply world advanced management to production, business and other areas of society

- To maintain the stable political security, Vietnam must be active in different fields, in which economic activity is extremely important The purpose

of this is to ensure the national specific development and effectively exploit the national advantages, to keep the economy strong and independent from other nations To reach that goal, Industrial Zones Development, and production background establishment is extremely necessary In addition, concentrated production helps save expense for infrastructure development, be convenient in management, protect the environment and natural landscapes, minimize production costs, reduce production cost, enhance competitive capability in international market

- In recent years, Industrial Zones have received and applied effectively technological achievement, experience and international management ability to production process Only in industrial zones, investors can be granted incentive policies, have condition to maximize the advantages Investors know clearly what products need to be made, where to sell, and how to produce ,then, he can coordinate with others to apply technological achievement in the most effective way The reality shows that receiving and applying technological achievements of enterprises inside industrial zones is superior to the outside ones By this way, industrial zones have produced many products for export, high quality products replacing imported ones The enterprises in those industrial zones use local materials and recruit local workers, set up the new position for the economy

- Industrial Zones are good environments to train human resources for long-term service in the process of industrialization and modernization With the

coordinate with relevant agencies to enhance the capability of workers, promote their skills and practical abilities, especially for the people in charge of production and management Therefore, industrial zones are the places where the workers have the opportunity to master modern production technology, advanced management technology In those places, the workers realize that they themselves have to participate in training and retraining process to meet the development demand of the enterprises May I say that by the experience of different countries and even in the reality in Vietnam, we realize nowhere has the better human resources than in industrial zones The working forces with the high management ability and skill will be the motive power helping the country succeed in industrialization and modernization

- Generally speaking, Industrial Zones Development is the process of social labor arrangement in the high level, to restructure the economy in the direction of concentration, to maximize available forces and advantages, to enhance competitiveness and speed up the national economic development That

is also the best way to implement the idea of taking a shortcut to economic development

- For the above reasons, in all aspects, industrial zones show day by day their indispensible priority in the process of industrialization and modernization First of all, industrial zones have produced a certain amount of products for export and consumption with a high economic value, generated jobs for a majority of laborers nationwide, especially unskilled laborer in remote areas; increased export turnover and national income, stabilized national socio-economic situation

- In addtion, industrial zones play an important role in the process of mastering technology, transforming structure and rearranging labor in the society,

in accordance with integration tendency and international competition; making use of and exploiting effectively the potential of land, material and human resources, in order to set up new position for Vietnamese economy

- Last of all, through development of industrial zones and export processing zones, a new infrastructure system for both of economy and society has been rapidly established Infrastructure of economy and technique effects the process

of establishing and developing social infrastructure Social benefit from development of industrial zones, export processing zones helps improve the spiritual and physical living standard for the local people We can affirm that the most important achievement is that Vietnam has a generation of new laborers who are self-confident, active, sensitive and creative They are pioneer force in developing hi-tech, key economic sector, apply new management method meeting to international standard, make Vietnam more active in integration process

- Since Vietnamese Communist Party Congress VI (1986), role and important economic effect of Industrial Zones and Export Processing Zones Development has been clearly determined by the Party and State in the important Document on socio-economic development policy of the country This is also the important direction of the Party and the State to speed up process of industrialization and modernization The guidance in the report of Executive Board under Party Central Committee, Term VIII at the National Congress IX of The Party on Strategy for Socio-economic Development in the period 2001-2005 affirmed again that: “Planning and Zoning properly the industry nationwide,

Hi-tech Parks, establishing lager industrial clusters and open economic zones”

(Communist Party of Vietnam: Document of National Congress IX)

- In recent years, Industrial Zones and Export Processing Zones have indicated their roles of being strong industrial forces, contributed more and more

in the process of socio-economic development of the country That has proved the sound leadership of the Party in economic development policy Guidance of the Party and Management of State for Industrial Zones, Export Processing Zones are extremely important

- To specify and institutionalize the Party’s Resolution, the Central Government, through its macro management tools, manages and directs agencies from Centre to Localities to implement consistently the spirit of the Resolution Under the leadership of the Party and State, the institutionalizing of policy, issuing and implementing of regulatory documents related to Industrial Zones and Export Processing Zones have been seriously applied The State’s agencies step

by step institutionalize the sound leadership of the Party on development of Industrial Zones and Export Processing Zones, issue the regulatory documents, set

up the legal framework for the development of Industrial Zones and Export Processing Zones, as well as Hi-tech Part The Central Government issued Law

on State owned Enterprise, Law on Foreign Investment Encouragement, Code on Labor, Law on Land, Law on Trade and Law on Tax These help to set up quite clear legal environment for not only operation of enterprises but also management of the State

- To help the Central Government manage the operation of Industrial Zones and Export Processing Zones based in Provinces or Centrally-administered Cities, the Central Government, in addition to Ministries, Central agencies and Provincial People’s Committee, decided to set up Industrial Zones Authorities at

provincial level They are 32 Authorities managing directly industrial zones within the territory of a certain province, implementing the mechanism of “one-stop, on site”

- Developing quickly, effectively, comprehensively and in a sustainable manner the economy in the process of industrialization, and modernization is the way to attain planned socio-economic goals, improve spiritual and physical living standard of Vietnamese People Vietnam is now striving to speed up the urbanization, developing rural areas, narrowing the gap of living standard between cities and rural areas because in the socio-economic development, we must assure the equality in various regions and classes of people

- To exist and develop in the tendency of integration and fair competition, cities, rural localities, and other regions have to cooperate closely to promote the mutual strength Agriculture, Industry and Service must be cooperated Enhancing the agricultural effectiveness must be in line with process of rural modernization

- The balance in development between cities and rural areas will reduce the population in the city, make balance urbanization portion between investment capital and capability of creating employment for Vietnamese Preventing the wide gap in living standard between cities and rural areas is a criteria of proper economic structure

- The guidance by the Central Government for the focal economic region

of the South Vietnam is: “Exploit absolutely, effectively the internal powers, and external powers, facilitate the South-East Vietnam, including focal economic region of the South Vietnam to quickly develop, stabilize, play the role of

“motive force” in the process of industrialization, and modernization in the South Vietnam and nationwide To strongly transform the structure of economy and industry to meet high demand of socio-economic growth, based on infrastructure

of economy, society, sustainable development environment and maintain the stability of national security and defense To strive for advanced development in various aspects compared with countries in the region and in the world ” For the above guidance, we need to properly organize the administrative territory, in the

a eventful and harmonious space to maximize the management of the provincial government, while Dong Nai Province belongs to focal economic region, an economic and financial center as well as the province where international relations have been established in recent years By the above solution, we can minimize over crowded population in the cities The development of Industrial Zones in the rural mountainous districts help develop these districts The relationship between cities and rural areas are organized properly The municipal system will be managed properly according to the plan Setting up municipal development corridors connecting Bien Hoa City and neighboring districts to reduce the population density in the city Dealing with the worsen environment; and prevent breakdown of the eco-environment

- With the competitive advantages and the current condition, Dong Nai needs to be one of leading provinces which make the openess-ratio of Vietnam

economic increase on the background of setting up the modern infrastructure system, modern technology Development must be in the comprehension and balance between cities and rural areas

- In the situation of city land in Dong Nai is narrowed down, more and more people in rural areas move to the city that makes the city is now facing problems of accommodation, traffic, employment, environment , while a huge countryside land has not yet made use of For this current status, the province has

to map out the economy development to develop the economy in rural areas In some chosen solutions, Building and developing Industrial Zones in rural areas is

a proper one

- Dong Nai is in the focal economic region of the South Vietnam, one of the leading provinces in terms of foreign investment attraction to Industrial Zones However, the investment attraction in North-East rural mountainous localities encounters various difficulties The reasons are poor infrastructure, inconvenient traffic, limited human resources, being far the marketï The poor investment attraction has directly effected local economic development, resulted in imbalance in planning and development of the Province The gap between rich and poor in districts remains wide

- Development of Industrial Zones in the rural mountainous localities will

be the motive for infrastructure development, investment attraction, as well as service development In addition to economic development, it transforms the local economic structure

- Development of Industrial Zones in the rural mountainous localities helps save costs for site clearance, compensation compared with the cities Besides, unusefull agricultural land will be made used of for creating income for localities

- When Industrial Zones in the rural mountainous areas are developed, a majority of local people will have the job, they no longer flock into the city More people who left rural areas for the city in the past will be back their countryside This helps the cities reduce the over-crowded population, implement the policy of

“leave agriculture, not leave homeland” In addition to the development of industry and service, the spiritual and physical living standard of the rural people will be improved and that the gap between cities and rural areas will be narrowed down, too

- Industrial development in rural areas does not reduce capacity of agricultural production On the contrary, it brings industrialization to there, thanks

to industrial development to develop agriculture such as using machine instead of human power; applying technological achievements, advanced management, medicine, breeding animal, fertilizer, intensifying cultivation, and increasing productivity On the other hand, because Industrial Zones developed only on the solid land background where the land does not meet the standard for agricultural production and industrial plant, the development of industrial zones still not only keeps the land vacancy for agriculture and forestry but also helps increase the productivity of agriculture and forestry many times than in the past

- In addtion, industrial development has much influence on environment The idea of Industrial Zones development in the rural mountainous areas is extremely suitable, because the waste treatment areas for solid, liquid and air waste are located far from residential areas Ventilation and the green

eco-plant in rural areas also help diffuse air waste after being treated, and minimize the influence on the eco-environment, keep the local people healthy and meet the criteria of global environmental law

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- Dong Nai Province belongs to the center of the focal economic region of the South Vietnam, bordered with provinces of Lam Dong, Binh Duong, Binh Phuoc, Binh Thuan, Ba Ria-Vung Tau, and Ho Chi Minh City

- Dong Nai has 11 administrative units They are Bien Hoa City, Long Khanh Town and other 9 districts: Tan Phu, Dinh Quan, Xuan Loc, Cam My, Nhon Trach, Long Thanh, Vinh Cuu, Trang Bom and Thong Nhat Dong Nai covers an area of 5,862 km2 (accounting for 1.76% national area) The population

in 2004 was 2,174,600 (female accounted for around 51%) The ethnic minority are: Vietnam, Chinese, Khmer, Xtieng, Ma, Cham, Ede,…

- Dong Nai located in the national traffic network of waterway, highway, and railway It assumes strategic position in terms of development of the focal economic region of the South Vietnam, links the South-East with the Central Highlands of Vietnam

- Being the focal economic region of the South Vietnam, Dong Nai has made use of the comparison advantages of the region as well as the province in its renewal process, and scored remarkable achievements especially in the period

1995 up to so far

- In 1990 Dong Nai had 838,000 people in working age, and in 2004 the number was around 1,100,000 In the economic development condition, with the rapid increasing of industry and service portion, Dong Nai has generated so many

jobs for workers: while in 1990 created more 12,000 laborers, in 2004 the number was 75,000

- According to the current statistical document, the city dweller of Dong Nai is around 700,000, approximately 31% of the province’s population, while the average national percentage is 23.5%

฀ : Despite the fluctuating in land use in recent years, Dong Nai is still the top province of the South-East Vietnam in terms of agriculture land using

Agriculture 292,611Forestry 174,762Speciality 70,286Living 10,975

(Source:DongNai People’s Committee)

- By February 2007, There have been 21 Industrial Zones in Dong Nai approved by the Central Government:

6 Long Thanh Industrial Zone 510.00 352.00

16 Nhon Trach Textile-Garment

Industrial Zone

184.00 121.00

(Source:Dong Nai Industrial Zones Authority)

-By the end of December 2006, Dong Nai had 820 FDI projects from 31 countries, and territories with the total capital of more than USD 8 billion, created 258,000 jobs for workers from Dong Nai and other provinces

- Investment attraction to Industrial Zones in Dong Nai, especially foreign investment, has stably increased in recent years In the first half of 2004, due to the issuing of amended Law on Value Added Tax and Law on Income Tax of Enterprise, and the abrogating some favor for foreign enterprise, the foreign investment has decreased in some localities However, in Dong Nai province, investment attraction to Industrial Zones has continuously increased in recent years, not only on new projects but also on existing projects for expansion their production scale

฀

- For many years, Taiwan has continuously been the No.1 investor in terms

of capital in Dong Nai In 2004, the capital was USD 2,053 million, accounting for 125% compared with 2003 In 2005, the capital was USDø 2,300 million, accounting for 112% compared with 2004

- The second investor among countries have invested in Industrial Zones of Dong Nai is Korea, with the capital in 2005 was USD 1,300 million, accounting for 106.5% compared with 2004, and 119% compared with 2003

- Japan is the third investor with the capital in 2005 was USDø 940 million accounting for 110% compare with 2003

- Asian countries (except Taiwan, Korea, Japan and Vietnam) have quite high invested capital In 2004, the total capital was USDø 1,458 million, accounting for 105.5% compared with 2003 In 2005 total invested capital to Dong Nai was

FDI 83%

USDø 1,600 million, accounting for 110% compared with 2004 and 116% compared with 2003

- The capital of European countries invested in Dong Nai was not high To the end of 2005, the total capital of these countries was around USD 560 million, accounting for 107.7% compared with 2004, and 116% compared with 2003

- The capital of countries in American continent invested in Dong Nai was the lowest Total capital in 2005 was USD 340 million, accounting for 123% compared with 2003 Total invested capital of American continent was quite small, only 5% of the total foreign capital invested in Dong Nai

Latest data in 2006 shows that the above portion is not so fluctuant However, according to forecast from economic experts, since 2007, when Vietnam officially becomes 150th member of WTO, with the removing of quota and non-quota barriers, the new investors from strong economic countries will enter Vietnam This will result in the changes in the above pie chart

Taiwan 29%

American countries 5%

Korea 16%

EU 8%

Vietnam 6%

Japan

14%

Other Asian Countries

22%

฀

- At present, there are 820 projects invested in Dong Nai with the total registered capital of USD 8,000 million Bien Hoa City is No.1 administrative unit

in terms of investment attraction with 04 Industrial Zones: Bien Hoa I, Bien Hoa

II, Amata, Loteco which infrastructure is well invested and these industrial zones are convenient in traffic as well as administration Next ones are districts of Nhon Trach, Long Thanh…

- However, based on development orientation, while the land area for rent

in suburban districts is still so large for attraction new more investors, the possibility of portion changing in investment attraction in localities will be inevitable

- In terms of industry of investment, textile is No.1 sector with highest investment portion in Dong Nai, accounting for 27.45% of total invested capital in Industrial Zones of Dong Nai, food industry accounts for 14.58%, ranked the second, and shoes industry accounts for 7.14%, ranked the third

฀

Among 200,016 laborers working in Industrial Zones of Dong Nai Province (at the time of statistic), shoes making is the leading in terms of labor attraction with 74,784 workers, the second is garment: 22,389 workers, production of equipment and spare parts for vehicles ranked the third: 16,794 workers, textile

(Source: Department of Statistic of Dong Nai)

6 Wood Processing and Products from Wood, Bamboo, 41 7,100

20 Production of Products from Tobacco and Pipe Tobacco 1 587

(Source: Department of Statistic of Dong Nai)

Regarding the above diagram about the activities of investment attraction and labor arrangement in Dong Nai, we can see most of enterprises invested into Dong Nai are of industries or technologies that use many laborers but create low added value So in order to develop an economy in both creating high added value and effectively using resources, the development of Industrial Zones in rural mountainous areas of the Province is the strategy of attracting less benefit

Added Value

Stages from designing - producing - selling a product

projects to the rural mountainous areas Firstly, the projects will create jobs for

local inhabitants and solve the matter of unemployment there; secondly, stabilize

the provincial socio-economic development policy And on the other hand, they

will also save urban lands for higher benefit investment projects

- This part focuses on analyzing the general operation of enterprises in

each Industrial Zones located in Dong Nai province, not any specific enterprise

These enterprises belong to 12 Industrial Zones with stable operation: Bien Hoa

1, Bien Hoa 2, Loteco, Amata, Song May, Go Dau, Ho Nai, Nhon Trach 1, Nhon

Trach 2, Nhon Trach 3, Tam Phuoc, Long Thanh Through the above analysis, we

will have an objective viewpoint and compare the effectiveness between

development Industrial Zones in the rural mountainous areas and in the municipal

areas of Dong Nai Province

Turnover criterion Turnover /Investment

Bien Hoa 2 Bien Hoa City 1,822,408,305 1,191,656,366 1.5293 1

Nhon Trach 1 Suburb 235,048,760 265,705,402 0.8846 2

(Source:Dong Nai Industrial Zones Authority)

Go Dau Suburb 358,326,995 128 2,801,837 2

Nhon Trach 1 Suburb 235,048,760 138 1,707,831 3

Nhon Trach 2 Suburb 217,914,220 128 1,704,186 3

(Source:Dong Nai Industrial Zones Authority)