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Spotlight on Da Nang City in Central Vietnam Large-scale industrial park development speeds influx of Japanese firms | Hirotaka Yamakawa JIJI Research Institute Guest Researcher News Department JIJI Press [Date of Issue: 31/May/2013 No.0219-0890]

Date of Issue: 31/May/2013

Spotlight on Da Nang City in Central Vietnam
Large-scale industrial park development speeds influx of Japanese firms

Hirotaka Yamakawa
Guest Researcher
Jiji Research Institute
News Department
JIJI Press

The biggest city in central Vietnam, Da Nang has recently been attracting attention. It is the eastern end of the East-West Economic Corridor which links Vietnam to Laos, Thailand and Myanmar, and offers infrastructure such as Da Nang International Airport and Da Nang Port. Work is also proceeding on development of the large-scale Da Nang Hi-Tech Park and the Da Nang Information Technology Park, which is Vietnam's answer to Silicon Valley in the US. There are fewer than 60 Japanese firms in Da Nang, which is still a very light presence. However, the city has many universities and abundant human resources. If direct flights begin running between Japan and Da Nang, the influx of Japanese firms should accelerate.

Population of 960,000

Da Nang is located virtually midway between the Vietnamese capital of Hanoi and the commercial hub of Ho Chi Minh, and has a population of around 960,000. It is also one of Vietnam's five centrally controlled municipalities. Da Nang International Airport is among Vietnam's three biggest airports and is located conveniently 10 minutes away from the city center. On the trip into town from the airport, I was surprised at the strong billboard presence of Korean companies Samsung and LG. While there was also the occasional billboard featuring Japanese manufacturers such as Panasonic, Korean firms were far more dominant. Direct flights now enter Da Nang from Korea, Singapore, Taiwan and other Asian countries, but there are none from Japan. Da Nang Port is the third largest in Vietnam after Ho Chi Minh and Hai Phong. Da Nang Port embraces the Tien Sa Sea Port, the Han River Port and the Lien Chieu Port (currently under development), with Tien Sa serving as the main port.

Da Nang Port has a depth of around 11 meters, offering access even to the luxury liner Asuka. There are many Western hotels along the coast, and visitors can enjoy swimming and other forms of marine recreation. I flew in by plane from Ho Chi Minh into Da Nang, and many of my fellow passengers were Westerners planning on visiting the Imperial City of Hue and the Old Town of Hoi An, both of which are UNESCO World Heritage Sites.

Environmental City Declaration

In 2008, Da Nang made an Environmental City Declaration. In April when I was in Da Nang, the city also concluded a memorandum of understanding with Yokohama City on technical cooperation for sustainable urban development. Yokohama's deputy mayor and a mission comprising small and medium enterprises from Yokohama attended the signing ceremony. The backbone of the MOU is for Yokohama City to work with its local firms in providing Da Nang with its environmentally-friendly technologies and knowhow in relation to, for example, waterworks and waste reduction. Yokohama formed a similar partnership with Cebu in the Philippines last year, making the Da Nang MOU its second such venture. As the MOU suggests, Da Nang is also actively addressing environmental issues. The banks of the Han River which flows through Da Nang have been beautifully developed, and from early morning many people were enjoying walking and running there.

Da Nang Hi-Tech Park under development

Da Nang Hi-Tech Park under development

Per capita GDP of US$2,283

Da Nang's per capita gross domestic product (GDP) was US$2,283 in 2011, topping Vietnam's national average of US$1,374 by more than US$900. Main industries include marine products processing, apparel, building material manufacturing and tourism. As at 2011, 352 foreign companies apparently had operations in Da Nang. As at the end of March 2013, 57 Japanese companies had joined the Japan Business Association in Da Nang, including small motor major Mabuchi Motor, instant noodle major Acecook and Foster Electric Company, a specialist manufacturer of audio and car speaker parts and products. As at the end of December 2012, there was a cumulative total of 60 Japanese investments in Da Nang, amounting to a total investment of more than US$315 million. According to the Da Nang Representative Office in Japan, Japan accounts for the greatest number of investments in the city. Many Korean companies have established a local presence, with supermarket major Lotte Mart opening a Da Nang branch in March this year. Lotte Mart already has stores in Ho Chi Minh and Hanoi, but the Da Nang store is its first.

There are five main industrial parks in Da Nang City. Japanese firms have taken up leases in two of these: Hoa Khanh (total area 212 hectares) and Hoa Cam (266 hectares). The Hoa Khanh Industrial Park is conveniently located around 30 minutes by car from central Da Nang. Firms such as Mabuchi Motor and Acecook have set up here. Other companies, including Foster Electric, have established themselves in the Hoa Cam Industrial Park, located around 10 kilometers from Da Nang Airport and around 20 kilometers from Da Nang's main port, Tien Sa Sea Port.

The large-scale Da Nang Hi-Tech Park

In addition to the above five industrial parks, the Da Nang Hi-Tech Park is currently under construction. This new site lies around 22 kilometers to the west of central Da Nang, around 17 from Da Nang International Airport, and around 25 from Tien Sa Sea Port. This will be Vietnam's third high-tech park, with the other two located in Hanoi and Ho Chi Minh. According to the plan, the park will be 1,232 hectares, with around 300 hectares already complete. Of the total area, factories and other buildings will cover 673 hectares, with the rest to comprise waterworks, sewage facilities and green areas, etc. Development will take place in three stages, the first completed by 2015, the second addressed over 2016-18, and the third over 2019-20.

The industries which Vietnam is encouraging to invest in the park comprise six areas, including: (1) biotechnology for agriculture, fisheries and health; (2) microelectronics, mechatronics and optoelectronics technologies; (3) automation technology and precision engineering; (4) new materials and energy technologies; and (5) software, telecommunications and information technology.
Various incentives will be offered to companies setting up in the park, such as: (1) a 10 percent corporate tax rate (against the usual 25 percent) for 15 years and, during that period, no tax for four years as of the point when taxable income is generated, with taxes halved for the subsequent nine years; (2) a 100 percent exemption on land rents for construction investment projects for common infrastructure facilities in the park, as well as in the high-tech enterprise, high-tech incubation training and R&D areas; and (3) a 100 percent exemption on land rents for construction projects for residential facilities in the park.

The first company to sign a lease agreement was Tokyo Keiki, which manufactures and sells products such as ship and port equipment and hydraulic equipment. The company's factory within the park will apparently begin actual operation in 2015. The company's affiliates are also undertaking procedures toward joining Tokyo Keiki in the park.

Da Nang residents walking beside the Han River at dawn

Da Nang residents walking beside the Han River at dawn

A Vietnamese version of Silicon Valley

A further initiative is the Da Nang Information Technology Park (DITP), which will be built in the Hoa Lien commune within Da Nang City's Hoa Vang district as a Vietnamese version of Silicon Valley.
The ground-breaking ceremony for the new park was held on 6 April. The project, which is being spearheaded by US firm Rocky Lai & Associates Inc., will take place over a period of 10 years, developing an area of 341 hectares with a total investment of US$278 million.

Six functional areas will be built within the DITP, including an IT product manufacturing, sales and service area and an R&D area. The project will follow the models of Silicon Valley in the US and Hshinchu Science Park in Taiwan, attracting investment in high-technology areas. Once the DITP is completed, foreign ITC scientists, engineers and investors will be encouraged into the park. The aim is also to attract around 100 companies from the US, Europe, Japan, India, Malaysia and elsewhere, creating approximately 25,000 jobs.

Direct flights from Japan?

As seen above, new industrial parks are being developed in Da Nang City. According to a Da Nang Hi-Tech Park representative, Da Nang's mayor will visit Japan in August this year to advertise the park.
A senior executive from the Da Nang People's Committee revealed that Vietnam Airlines is considering routes between Da Nang and Japan, with direct flights possibly beginning as early as November this year. Da Nang has cheaper personnel costs and land prices than Hanoi and Ho Chi Minh. A Da Nang Hi-Tech Park executive also highlighted Da Nang's merits, including numerous universities, 13 short-term universities and seven technical institutes that are generating an abundance of human resources. As more Japanese firms come to recognize the attractions of Da Nang, and with the launch of direct flights, more Japanese firms seem likely to move into the city's existing industrial parks, the Da Nang Hi-Tech Park and elsewhere.

(original article : Japanese)

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