Investing in Hanoi’s Hoa Lac H-tech Park

By Vietnam Briefing

Posted: 15th February 2017 08:09

Established in 1998, Hanoi’s Hoa Lac High-tech Park (HHTP) was Vietnam’s first high-tech park and is currently the country’s largest. While Vietnam has over 190 industrial parks and plans to increase this number to 500 by 2020, HHTP is one of only three national-level high-tech parks, alongside Saigon High-tech Park and Danang High-tech Park. The HHTP was created with the intention to become Vietnam’s leading high-tech industry cluster for manufacturing, research and development, and innovation.

Due to start-up difficulties and incomplete infrastructure, the park initially struggled to attract high profile investors. However, Vietnam has rapidly industrialized since the park’s establishment, becoming a leading recipient of foreign direct investment and an increasingly prominent electronics manufacturer. As a result, the HHTP has become equipped with higher quality infrastructure, and is beginning to fulfill its promise as a tech hub. While Ho Chi Minh City has pulled ahead as Vietnam’s most popular area for investment, Hanoi can be particularly advantageous for operations with supply chains in China due to the city’s proximity to the border.
In 2016, the HHTP attracted nine new projects with a combined registered capital of US$200 million and multinationals, such as Mitsubishi, are making plans to invest and build factories. In total, the park has US$3 billion registered capital across 78 projects. According to the Vietnamese government, about 12,600 people are living and working in the park. With recent plans approved in 2016 for further expansion, it is expected that the HHTP’s permanent and working population will reach 229,000 by 2030.

Features

The park is situated west of the capital city of Hanoi in the Thach That district and the Quoc Oai district. It is well-located; about 30 km from downtown Hanoi, 60 km from Noi Bai International Airport, 20 km from Son Tay Port, and 150 km from Cai Lan Port and Hai Phong Deep-sea Port. Hanoi National University and other education and training institutions are located adjacent to the park, offering research and development capabilities and a stream of skilled labor.

Much of the park is equipped with modern infrastructure, such as a wastewater treatment plant with a capacity of 6,000 m3 per day, water capacity of 3,000 m3 per day, and 22 kV electricity supply. There is also a substantial amount of unused land for investors looking to create a long-term presence and build from the ground-up rather than renting an existing facility.

Incentives

Vietnam’s deep and affordable labor pool has made it one of the main alternatives to China for electronic components manufacturing, attracting investment from tech giants such as Foxconn, Intel, Panasonic, and Samsung. The government hopes that by attracting investment from foreign tech leaders, Vietnam can benefit from knowledge spillover effects and access to advanced technology. Accordingly, the HHTP offers a variety of incentives to attract foreign investment depending on the level and nature of investment.
Preferential corporate income tax rates

The HHTP offers corporate income tax exemptions and preferential rates for new investments. Vietnam’s standard corporate income tax rate is 20 percent. The timeframe for tax incentive eligibility is calculated from the project’s first year of taxable income, or from the fourth year of a project in the event that it has no taxable income within the first three years.

Preferential duty rates

Import duty exemptions

In addition to preferential tax rates and exemptions, the park has streamlined investment procedures, and simplified the process for hiring foreign workers. Moreover, the park’s management will assist in liaising with relevant government authorities and acquiring the requisite documentation and licenses.

Eligibility

To be eligible for the HHTP’s incentives, investments must fulfill certain criteria ensuring that they are high-tech projects, as per 2008’s Hi-tech Law No. 21/2008/QH12 and 2006’s Decision No. 27/2006/QD-BKHCN. The HHTP has four main areas of focus: information technology, biotechnology, new material technology, and automation technology. Additionally, the park’s management has a list of products that are prioritized for investment and those that are eligible for investment. The list is periodically updated and can be found here.

At least five percent of the project’s labor force participating in research and development work must hold a university degree or higher. Total expenses for research and development work in Vietnam, including construction of technical and engineering infrastructure, must constitute at least five percent of annual turnover, or one percent for expenses for research and development activities carried out in Vietnam, such as staffing costs. Further, one third of technology in production lines must be automated. Operations must also comply with Vietnamese sanitation, environmental, and technical standards.
 
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This article was first published on Vietnam Briefing

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