Relying on tax incentives in SEZs may breed unhealthy competition: experts

Vietnam’s special economic zones (SEZs) should focus more on developing clear policies, fostering investment-friendly environment and streamlining government approval process instead of relying only on tax incentives, a conference heard Friday.

Hoang The Long, former Deputy Minister of Justice, said the proposed SEZs are offering too many tax incentives, which are not of utmost importance to investors. Instead, clear policies and a business environment conducive for investments are much more attractive, he said during the conference.

Sebastian Eckardt, a chief economist from the World Bank, said too many tax incentives may breed unforeseen risks, including unhealthy competition between SEZs as they are likely to enter into a race of who offers lower taxes. This would harm the business environment in each zone, he said.

Ha Ton Vinh, an investment consultant for the proposed Van Don SEZ in northern Quang Ninh Province, said SEZs’ leaders should have more autonomy instead of always having to seek approvals from the government to complete legal procedures for investors. A long waiting list would deter investors from investing in the first place, he said.

Vietnam has planned to establish three SEZs, which are Van Don in northern Quang Ninh Province, Bac Van Phong in central Khanh Hoa Province, and Phu Quoc in the southern Kien Giang Province.

The Ministry of Planning and Investment estimates that the SEZs will be able to bring a total of $9.5 billion each year to state coffers from tax payments and land related fees. In 2030, the total number of jobs created in the three areas is estimated to be over 760,000, with income per capita up to $13,000, 5.4 times the current level.

The draft law on SEZs is expected to be discussed for the second time at the next National Assembly meeting next Monday.