New Regulations on Management of Industrial Parks and Economic Zones in Vietnam

On 28 May 2022, the Government issued Decree No. 35/2022/ND-CP on Management of industrial parks (“IP”) and economic zones (“EZ”), replacing Decree No. 82/2018/ND-CP with some notable changes. Decree No. 35/2022/ND-CP came into effect on 15 July 2022.

In comparison with Decree No. 82/2018/ND-CP, Decree No.35/2022/ND-CP has promptly resolved inadequacies in IP and EZ mechanisms and management policies through the following new highlights:

 

Introducing new IP and EZ models

  1. Decree No. 35/2022/ND-CP introduces two new IP models as follows:
  1. Specialized IP (khu công nghiệp chuyên ngành):
  • Is an IP specializing in the production and provision of services for the manufacture of products of a particular business line;
  • Must have at least 60% of its industrial land used to attract investment projects on such particular business lines.
  1. High-tech IP (khu công nghiệp công nghệ cao):
  • Is an IZ established to attract:
  • high-tech investment project, information technology investment projects under list of business sectors eligible for special investment incentives specified in the investment law;
  • project requiring technology transfer under list of technology encouraged for transfer specified in the law on technology transfer;
  • hi-tech nursery, hi-tech enterprise nursery, or technology nursery in accordance with law on high-technology and law on science and technology;
  • start-up investment projects, innovation projects, projects on research and development, and projects on education and training.
  • Must have at least 30% of its industrial land used to attract the foregoing investment project.
  1. Besides, in addition to two EZ models of Costal EZ and Border-gate EZ as stipulated in Decree No. 82/2018/ND-CP, Decree No. 35/2022/ND-CP now introduces a new model which is Specialized EZ (khu kinh tế chuyên biệt).

Specialized EZ refers to an economic zone established at a key economic region, dynamic development corridor, or a region having similar functions that is specified in the regional planning scheme.

 

Simplifying procedures for construction planning and establishment of IP

  1. Regarding IP construction planning:

Decree No. 35/2022/ND-CP has reference to the regulations of the construction law when classifying construction master plans applicable to IPs. In particular, it classifies IP construction master plans into the following types:

  1. IP general construction master plan (quy hoạch chung xây dựng khu công nghiệp);
  2. IP subzone construction master plan (quy hoạch phân khu xây dựng khu công nghiệp); and
  3. IP detailed construction master plan (quy hoạch chi tiết xây dựng khu công nghiệp) (if necessary).

Additionally, Decree No. 35/2022/ND-CP also stipulates some exceptional circumstances where the Provincial People’s Committee is not required to conduct the tasks of construction planning (nhiệm vụ quy hoạch) during the process for approving the IP construction master plan, particularly as follows: 

  1. Establishing IP subzone construction master plan for an IP having approved general master plan or an EZ having approved general master plan;
  2. Establishing IP detailed construction master plan for an IP having approved subzone master plan; and
  3. Establishing IP subzone construction master plan for (i) IPs with land area scale of 500 hectares or more, or (ii) industrial – urban – service zone, (iii) IPs with multiple owners of infrastructure facilities or investors performing the function of construction and business of infrastructure facilities according to specific industrial subdivisions, which are determined to be located in area having approved urban or EZ general master plan.
  1. Regarding procedures for IP establishment

In order to reduce administrative procedures for investors, Decree No. 35/2022/ND-CP no longer requires investors to obtain an IP establishment decision from the Provincial People’s Committee as previously stipulated under Decree No. 82/2018/ND-CP. Instead, an IP will be deemed as having been established since the date the competent authority:

  1. issues a Decision on investment policy of IP infrastructure project which requires public investment capital in accordance with law on public investment; or
  2. approves both IP investment policy and IP investor; approves IP investor, or issues investment registration certificate on construction and business of IP infrastructure project under the law on investment.

 

Adding new conditions for investment in construction and business of IP infrastructure

Decree 35/2022/ND-CP supplement several new conditions for investor of and criteria for evaluation of investor in bidding for construction and business of IP infrastructure projects, specifically as follows:

  1. Investor must meet the following conditions:
  • Conditions on real estate business under the laws on real estate;
  • Conditions in order to lease, sublease land, and convert land use purpose to implement the IP project under the land law and other relevant laws. This condition also applies to investor being an economic organization established by foreign investors.
  1. For case of applying investor selection bidding, the evaluation criteria for investor selection include:
  • Capacity criteria: Evaluation is based on conditions for investors as listed above;
  • Experience criteria: Evaluation is based on land area scale, implementation process and status of investment project on construction and business of IP infrastructure or other real estate projects of which candidate investors have implemented or contributed capital to implement the project; owners, members, founding shareholders being an institutional entity of the candidate investor that have implemented or contributed capital to implement the project.
  • Technical criteria: Evaluation is based on criteria which are set according to the Decisions on approval of the IP construction master plan, Decisions on approval of investment policies for implementation of investment projects on construction and business of IP infrastructure of competent authorities and other relevant regulatory provisions.
  • Finance – commerce criteria: Evaluation is based on which are set according to the Decisions on approval of investment policies for implementation of investment projects on construction and business of IP infrastructure of competent authorities and other relevant regulatory provisions related to selection of investors qualified for implementation of investment projects using land.

 

Supplementing regulations on investment phasing

Except for IP attracting investment projects that help to create the industrial cluster with total investment in these projects approximately equals at least USD 02 billion or VND 45,000 billion, the IP must be phased in if it falls into one of the following cases:

  1. IP with an area of over 500 hectares must be invested in phases, each phase must not exceed 500 hectares;
  2. IP requires the change of land use purpose for rice cultivation for 02 or more crops with:
  • A land area scale of ​​over 200 hectares in the Red River Delta and the Mekong River Delta, investment project must be invested in phases, each phase does not change the purpose of land use for rice cultivation with 02 or more crops for the area of ​​land for rice cultivation of more than 200 hectares; or
  • A land area scale of ​​over 150 hectares in the North Central, the Central Coast and the Southeast, investment project must be invested in phases, each phase does not change the purpose of land use for rice cultivation with 02 or more crops for the area of ​​land for rice cultivation of more than 150 hectares; or
  • A land area of ​​over 100 hectares in the Northern Midlands and Mountains and the Central Highlands, investment projects must be invested in phases, each phase does not change the purpose of land use for rice cultivation with 02 or more crops for the area of ​​land for rice cultivation of more than 100 hectares.

 

Expansion of subjects entitled to temporarily reside and stay in IPs

Under Decree No. 82/2018/ND-CP, only foreign managers, managing directors and experts are allowed to temporarily reside in the IP to serve the production and business activities of their enterprises. Decree No. 35/2022/ND-CP now expands the subjects of temporary residence to cover all experts and employees (regardless of whether they are foreigners or Vietnamese). 

In force majeure events, experts and employees may even stay within the enterprise area in IP. Accordingly, Decree No. 35/2022/ND-CP clearly allows the construction of accommodation facilities within the service land area of the IP.

 

New regulations on management of export processing enterprises

Pursuant to Decree No. 82/2018/ND-CP, any enterprises operating in export processing zones (“EPZ”) are considered as export processing enterprises (“EPE”), regardless of whether they have export processing activities or not. Now, Decree No. 35/2022/ND-CP, only enterprise specializing in process and export will be regarded as EPE.

In addition, Decree No. 35/2022/ND-CP also allows more flexibility in activities of EPEs, specifically:

  1. EPEs may carry out other business activities apart from export processing activities. Previously, Decree No. 82/2018/ND-CP which restricts EPEs to carry out goods trading activities and other activities directly relating to goods trading only; and
  2. Subject to certain conditions, EPEs can lease warehouses outside EPZs, IP and EZ to store goods, if they do not have sufficient warehouse space for their goods within such zones.

Worthy of note, EPZs now are not limited to including EPEs only. Decree No. 35/2022/ND-CP expressly allows enterprises specializing in manufacturing and providing services for industrial production to be established in the EPZs.

 

Conclusion

Although Decree No. 35/2022/ND-CP still has some shortcomings and has not fully addressed some limitations of Decree No. 82/2018/ND-CP, it has partially opened up a more open legal corridor and initially encouraged the growth of IPs and EZs in Vietnam.

Note: The content presented above is for reference only. The aforementioned content may no longer be relevant depending on the time and audience. For any detailed consultation requests, please contact LMP Lawyers.

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