Expanding Investments in Dong Nai

In the last few years, Dong Nai province, in the center of the Southern Key Economic zone, has seen a growing interest from foreign investors. With a gross regional domestic product (GRDP) of eight percent, high per capita income, and growing trade surplus, Dong Nai’s economy will continue to expand in 2018 and be a priority for foreign investors.

Economic growth

2017
Dong Nai’s economy expanded by eight percent in 2017, with the industrial production index growing by 8.6 percent. With the growth in the manufacturing sector, the province generated VND48.7 trillion (US$2.14 billion) as tax revenues, one of the highest in the country. The province’s export revenues reached US$17 billion, growing by 11.8 percent year-on-year and achieved a trade surplus of US$2.2 billion. Items that recorded high export turnover include garment and textile, rubber, cashew, computers, and spare parts.

The annual per capita income in the region stood at VND91 million (US$4,000), almost double than the national average of VND53 million (US$2,300).

2018 forecast
Dong Nai is predicted to continue its growth in 2018 at around 8 to 9 percent, with tax revenues estimated to reach VND53 trillion (US$2.33 billion). Exports are projected to grow by another 9 to 11 percent.

Infrastructure
Dong Nai with its efficient road networks, seaports, railway lines, and proximity to Ho Chi Minh City’s Tan Son Nhat International Airport, makes it a convenient location for foreign investors and businesses.

The province also has the convenience of waterway routes and seaports for international trade because of the Dong Nai river that moves goods from Dong Nai to its neighboring regions such as Binh Duong and Ba Ria-Vung Tau. Its three major seaports, Long Binh Tan on Dong Nai river, and Go Dau A and Go Dau B on Thi Vai river, can handle over 3.5 million tons of annual cargo.

Future infrastructure projects such as the Bien Hoa-Vung Tau railway and expressway, Ben Luc-Long Thanh-Dau Giay Highway, Long Thanh International Airport, and a deep-water port would continue to support the growing economy and increase connectivity with the neighboring regions.

As for industrial zones, the province has 32 zones with major investments from foreign enterprises. In the first 10 months of 2017, firms have invested over VND1,450 billion (US$63.7 million) in the industrial zones to build supporting infrastructure and readymade factories.
 
Foreign direct investment
Dong Nai’s 32 industrial zones have attracted 1,746 FDI projects to date with a total investment of US$31.8 billion. In the last four years, the province has managed to attract investments far exceeding its foreign investment target. The Republic of Korea followed by Taiwan (China) and Japan are the largest investors in the region.
Major companies in the region include 3M, Taiwan’s Want Want Group, Siam City Cement, Bosch, Nestle, POSCO, Fujitsu, and Hyosung.

2017
In 2017, the total newly registered FDI capital and capital increase stood at US$1.82 billion, with disbursements reaching US$1.1 billion. Most of it was directed towards local industrial zones in sectors such as processing, manufacturing, real estate and consultancy services.

2018
The province is trying to move away from traditional industries and prioritize FDI into high-tech, environment-friendly, biotechnology, and information technology projects, by offering industry-specific incentives for foreign investors.

Investment incentives
For high-tech industries, the province has offered numerous incentives for investors. With respect to taxation, a hi-tech investment project will enjoy a corporate income tax rate of 10 percent for 15 years after being entitled to tax exemption for four years and 50 percent tax reduction for nine years. For other projects, the tax exemption is for two years and a 50 percent tax reduction for four years.

Projects involved in the manufacturing of supporting industrial products in An Phuoc, Nhon Trach 6 and Giang Dien Industrial Zones will enjoy a corporate income tax rate of 10 percent for 15 years after being entitled to a tax exemption for four years and 50 percent tax reduction for nine years.

In addition, they can also avail land rental exemption for 11 years after the project starts operations.
Regional competitiveness

According to the Provincial Competitiveness Index 2016 (PCI), Dong Nai ranks the 34th most competitive province in the country amongst 63 regions. However, in the Infrastructure Index Ranking, the province ranked the fourth best province in terms of infrastructure in the country. The index covers:

• industrial zone availability and quality;
• road quality;
• utility costs and stability; and
• availability and quality of information and communications technology.

The region also emerged as the eight most attractive destination for future investors in the PCI Index.
Investment opportunities

In spite of implementing strict investment conditions in 2017, the province continues to see rapid growth in foreign investments. Going forward, the province will continue to prioritize FDI in high-tech and environmentally friendly projects in the agriculture and manufacturing sectors.

In addition, the province also welcomes investments in logistics, infrastructure, automobile, information technology, and manufacturing of materials for clothing and footwear industries.

Other than the manufacturing sector, the province is also inviting FDI in the food processing and biotechnology sectors. 

Dong Nai with its focus on high-tech and environment-friendly projects, will continue to attract foreign investors in 2018. This will further stimulate the development of the domestic sector and increase competition, leading to a sustainable economic growth in the province.

This article was first published on Vietnam Briefing.

Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll, and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India, and ASEAN, we are your reliable partner for business expansion in this region and beyond.

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