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Industrial parks lack needed infrastructure   2012-06-18 - VNS

Industrial parks lack needed infrastructure

Many industrial parks and export processing zones lack sufficient infrastructure due to a shortage of investment capital, making them less attractive to investors.

The Soai Rap Oil and Gas Services Industrial Park in Tien Giang Province's Go Cong District was approved by provincial authorities in late 2008 with a total of 285ha.

It has drawn only one investor to build its workshop that produces steel pipes for the petrol industry.

Another project in Go Cong District, the 220ha Binh Dong IP which was approved three years ago, still exists on paper.

Chairman of the provincial People's Committee Nguyen Van Khang said that a number of events called for investment, but the results were not positive, with most investors citing poor transport infrastructure connecting to HCM City.

An inability to provide clean water to the two IPs was cited as another hindrance.

Meanwhile, in the central region, economic zones such as Nhon Hoi in Binh Dinh Province, Van Phong in Khanh Hoa Province and Chan May-Lang Co in Thua Thien-Hue Province have had similar fates.

From 2006 to 2015, it was estimated that Van Phong EZ would need more than VND10 trillion ($500 million) for infrastructure development.

To date, VND761 billion (US$38 million) of VND630 billion from the central budget and VND131 billlion from the local project have been spent, mostly for land-clearance compensation and mine-clearing work.

Authorities have asked investment-project owners to join hands in building infrastructure in exchange for a lower land rent.

However, the owners' reactions have been tepid, mostly due to their limited financial capacity.

According to the Binh Dinh Economic Zone Management Board, the Nhon Hoi A IP has levelled the ground on 520ha, developed 67 per cent of roads inside the IPs, and leased over 36ha.

The Nhon Hoi B IP has levelled 260ha and leased 27ha. In total, the Nhon Hoi EZ has 36 investment projects with a combined registered capital of VND36 trillion ($1.8 billion), but only eight of them, mostly small-sized, have begun operation.

Thus, the target of attracting projects to create products and services to provide a large number of jobs for local people has not met expectations. This failure was due also to the lack of sufficient capital to invest in infrastructure, which has frightened away investors.

To improve the situation, Man Ngoc Ly, head of the Binh Dinh EZ Management Board, said the province would have to invest in infrastructure, especially in the Nhon Hoi Port. But he noted that finding capital sources would not be an easy task.

Interest rate race looms

With the annual deposit interest-rate cut by 2 per cent to 9 per cent last week and a floating rate for deposits with terms of more than 12 months, a race on interest rates among commercial banks is looming.

Western Bank has been offering an annual deposit interest rate of 13.5 per cent for a 13-month term deposit.

If depositors promise not to withdraw money before the term expires, a 14 per cent rate is offered.

Larger banks like ACB and Eximbank have increased their rates, with 11.5 per cent for the former and 12 per cent for the latter.

According to Nguyen Thanh Toai, ACB's deputy general director, previously depositors chose the short-term deposits because they were afraid the rate would go up, while most loans were medium- and long-term.

Now banks are tapping the floating-rate policy for their capital restructuring.

The chairman of Orient Commercial Bank, Trinh Van Tuan, has a similar opinion, saying that banks can now mobilise long-term capital to ensure sustainability.

However, there are concerns that a few banks will pay high interest rates for long-term deposits, but under the table, enabling their customers to withdraw money at terms shorter than 13 months.

Nguyen Hoang Minh, deputy head of the State Bank's HCM City Branch, said his branch this week would look into the facts to make a report to headquarters in Ha Noi.

A race of long-term interest rates among banks would have a negative impact on the target of reducing lending interest rates, he said.

Experts consider the floating policy a step closer to fully lifting the limitation on deposit interest rates.

Insurance market

Viet Nam's large population, with its high proportion of young people and its growing economy, is a factor that makes the country a market with high potential for general and life insurance, according to foreign investors.

For example, the Insurance Australia Group (IAG) has acquired a strategic stake of 30 per cent of the local AAA Assurance Corporation (AAA) at a cost of about US$16 million.

An IAG official announced that the investment would allow his company to enter Viet Nam's general insurance market, which has been growing at a compound rate of 25 per cent per annum since 2009.

"With a low level of insurance penetration, the market is expected to continue growing at similar levels for another three to five years," he said.

The company, whose total annual premium turnover has reached $8 billion, also plans to increase its stake to 49 per cent.

The Canada-headquartered Sun Life Financial Group recently entered a contract with PetroVietnam Insurance company (PVI) to set up a life insurance institution in Viet Nam, of which the PVI will hold 51 per cent, and its foreign partner, 49 per cent.

PVI's chairman Nguyen Anh Tuan hopes the joint effort will bring in new and distinctive services to the life insurance market in the country.

Last month, a wholly foreign-invested company, Generali Viet Nam Life (GVL) of Italy, officially made its debut with its headquarters based in HCM City.

The Generali Viet Nam general director, Lam Sui Kong, believes Viet Nam's low-insurance density, about $8.6 premium per capita and insurance penetration at 0.7 per cent premium per GDP, provides a large room for business growth.

The development is a key component of the group's expansion strategy in the region, increasing its presence in Asia to eight markets.

With more foreign investors entering the insurance market, either through buying stakes in local companies or establishing their own entities, competitiveness will increase. This will create higher quality in market criteria and services to customers.

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