Vietnam is tightening management over its booming economic zones as success gives way to inefficiency.

The Ministry of Finance has turned down a proposal by the Ministry of Planning and Investment (MPI) to introduce a range of tax priorities on the Chu Lai Open Economic Zone (EZ) in the central province of Quang Nam, saying that they are unsuitable.

Chu Lai Open Economic Zone

Under the proposal, a company operating at Chu Lai EZ would get corporate income tax exemption for four years, paying a tax rate of 5 percent for the next 10 years and 10 percent for the following six years.

The MPI also wants a corporate income tax of 10 percent for another 10-year period for projects which produce finished products such as autos, machinery for ago-forestry-fisheries, or involve capital of more than VND2trn (USD95.2 million) and employ more than 4,000 workers.

But the Ministry of Finance said these recommendations were not in line with the government’s regulations for economic zone priorities.

Businesses with new projects in economic zones already enjoy corporate income tax exemption for the first four years and get a 50 percent over the next nine years.

Only companies which have the minimal capital of VND12trn (USD571.4 million) and annual revenue of more than VND20trn (USD952 million) are eligible for tax concessions for a maximum of 15 years.

The Ministry of Finance said a proposed 70 percent cut in personal income tax in the first five years and a reduction of 50 percent in subsequent years for people working at Chu Lai EZ was inappropriate.

A proposal to exempt from value added tax (VAT) companies making autos and machinery for ago-forestry-fisheries has also been refused. These products are levied a VAT of 10 percent, as specified by the National Assembly.

A report from the Ministry of Construction recently showed a large number of economic zones have been built in many localities nationwide, but they mostly lack investment and care, as the investment source relied on the state budget.

Vietnam has 44 coastal and border-gate economic zones, which cover at least 10,000ha each, but occupancy rates are very low.

Industrial parks are in the same situation. The Ministry of Planning and Investment said that by the end of 2014, the country had 295 industrial parks, with a combined area of nearly 84,000 ha.

Deputy Prime Minister Hoang Trung Hai said the average occupancy rate of Vietnam’s economic zones and industrial parks was just 65 percent, which is not commensurate with their potential.

Hai urged the Ministry of Planning and Investment and localities to close ineffective industrial parks to reduce waste and boost investment promotion to attract projects into zones with good infrastructure.