For many years, inadequate infrastructure network has deterred foreign companies from investing in the central coastal region, but things are changing with progress reported in many infrastructure projects in the region. Report by the Vietnam Investment Review.

Vietnam-Singapore Industrial Park (VSIP), a leading industrial park and township developer in Vietnam, this week will start the construction of an industrial park and township complex in the central province of Quang Ngai. The project, costing 337.8 million USD, comprises a 600-hectare industrial park located within the province’s Dung Quat Economic Zone (EZ)   as well as a 520-hectare commercial and residential area near downtown Quang Ngai city. This is VSIP’s fifth project in Vietnam and its first factory in the central region.

Once completed, the project will contribute notably to improving the infrastructure system not only in Quang Ngai, but also in the broader central region as well, which is expected to attract more foreign investors in the future.

VSIP hopes its infrastructure project will lure foreign manufacturers from the fast moving consumer goods sector as well as electronics producers and service providers.

Industry growth
Inadequate infrastructure is a major concern of many foreign investors in the central coastal region. Since the Vietnamese government opened the economy to foreign investors in 1987, most chose to set up shops in the north and south of the country where the infrastructure system is better.

But as foreign direct investment (FDI) to the central coast started increasing in 2005, the region has emerged as a popular destination for foreign firms in Vietnam. For example, in 2004 there were only 28 FDI projects with a total capital of 112 million USD, including those in Thua Thien-Hue, Da Nang, Quang Nam, Quang Ngai, Binh Dinh, Phu Yen and Khanh Hoa. But one year later, that number hit 60 projects worth 460 million USD, an increase of 400 percent compared to the previous year. Last year, this region lured 54 FDI projects worth 478 million USD.

During the first eight months of this year, foreign investors registered 32 new projects and expanded investments at eight other ongoing projects, with a total registered investment of 1.1 billion USD.

“Better infrastructure is key to drawing more investments in this region,” said Ho Ky Minh, director of the Economic and Social Research Institute in Da Nang.

In 2005, the Vietnamese government decided to develop six EZs in the central coastal region: Chan May-Lang Co in Thua Thien-Hue, Chu Lai in Quang Nam, Dung Quat in Quang Ngai, Nhon Hoi in Binh Dinh, South Phu Yen in Phu Yen and Van Phong in Khanh Hoa. These EZs aim to attract more private investments, especially FDI to boost the regional economic growth.

Investors in these EZs will enjoy tax incentives offered by the central government and the local authorities. In addition, 51 industrial parks (IPs) have been built in Da Nang and eight provinces to offer industrial-use land for manufacturers.

These EZs have positively affected FDI inflows to this region. Some leading international investors like South Korea’s Doosan Group and Canada’s Rio Tinto Alcan have built factories in Thua Thien-Hue and Quang Ngai.

The Doosan Vina plant in Dung Quat EZ, worth 300 million USD, produces major components and equipment for Doosan Heavy Industries & Construction’s flagship power and water businesses, including boilers, heat-recovery steam generators, seawater desalination evaporators, and material handling equipment.

At the nearby Dung Quat EZ, the Vietnamese government is planning to develop the Chu Lai EZ as an automotive industry hub. Truong Hai Auto Corporation last year broke ground on its auto engine manufacturing project in the zone. The project, with a total investment capital of 250 million USD, will manufacture 20,000 engines each year under a technology transfer agreement signed with South Korean’s Hyundai Motor Company.

Korean Aerospace Industries Ltd, South Korea’s airplane builder, is planning to build a manufacturing facility in Vietnam to make equipment and components for Airbus. The facility will be built in Da Nang Hi-Tech Park in Da Nang.

Doan Hung Ngoc Anh, deputy general director of Da Nang Hi-Tech Park Management Authority, said the Korean investor was taking administrative steps to get an investment certificate for this project.

Transport moves along
The Ministry of Transport on May 19 broke ground on a project to build a national expressway from Da Nang to Quang Ngai. The 140-kilometre expressway will boast four lanes designed for vehicles travelling at a maximum speed of 120 kilometres per hour. It extends from the Hoa Vang district of Da Nang to Quang Ngai province with more than 100 bridges and one tunnel along the way.

This is part of the trans-Vietnam expressway and is being built by the Vietnam Expressway Corporation at a total cost of nearly 1.47 billion USD in loans from the World Bank and official development assistance from Japan.

With completion expected within the next four years, it will reduce the travel time between Da Nang, Quang Nam and Quang Ngai. It will also facilitate transport between Laos, Vietnam and Cambodia via the East-West Economic Corridor to seaports in central Vietnam. The expressway will help create investment opportunities in central provinces and ease the traffic overload on National Highway 1A.

Also in May, the ministry kicked off the construction of Phuoc Tuong and Phu Gia tunnels which are the last needed on National Highway 1A, both are in Thua Thien-Hue.

Phuoc Tuong tunnel is 345 metres long plus approach roads measuring 3.4km, while the 497m Phu Gia tunnel has a linking road of 2.4km.

After completion, the two tunnels will shorten travel time, contribute to the socio-economic development of those central provinces, meet the increasing transport demand and reduce traffic congestion and accidents in the region.

“Travelling to the central region from the south and the north has never been better than now. That makes investors feel better about doing business here than in the past,” said Minh from the Economic and Social Research Institute.

Airport projects are also boosting the region as foreign investors will have an easier access. At present, this region is home to six airports. Ninh Thuan, Binh Thuan and Quang Nam are the only provinces to not have their own airport. However, Quang Nam could see residual trade and effect from Da Nang international airport and Chu Lai airport.

In December 2011, a new terminal was put in operation at the Da Nang international airport, easing the overload caused by growing passenger demand.

Just last week, the ministry inaugurated a new terminal at Tuy Hoa airport in Phu Yen and is planning to reopen Phu Bai international airport in Thua Thien-Hue on September 20 after closing it six months ago for renovation.

In addition, there are at least five deep-sea ports in the central region, offering potential for import and export activities.-VNA