In order to persuade Nokia, the mobile phone manufacturer giant, to set up a factory in Bac Ninh province, the provincial authorities have to offer special investment incentives to the group, something that they very rarely do.
After signing the investment agreement with the Ministry of Planning and Investment in February 2011, Nokia signed a contract to lease land at VSIP Industrial Zone in Bac Ninh province to prepare for the construction of its factory. The moves have been made even though the official investment license has not been granted yet.
However, the moves show the strong determination of the investor to set up a factory in Vietnam and show that the construction of the factory will be carried out rapidly as per commitments by Esko Aho, deputy President of Nokia Group at the investment agreement signing ceremony.
Thoi bao Kinh te Vietnam (Vietnam Economic Times) has quoted its sources as saying that it is very likely that the official investment license will be granted in April, which will be followed by the factory building kick-off ceremony.
In order to successfully attract Nokia, Bac Ninh’s authorities have to offer special investment incentives to the group. For example, the provincial authorities have released a document on agreeing to prop up the annual land leasing fee for the 17.25 hectares of land Nokia will lease from VSIP.
The land leasing fee prop-up will be carried out through VSIP Bac Ninh, an industrial zone infrastructure developer. Discussing the decision related to the land leasing fee, a leader of VSIP told Thoi bao Kinh te Vietnam that VSIP is now the industrial zone infrastructure developer and it has the duty of paying land leasing fees to the Bac Ninh province, and if the province decides to apply a special incentive for Nokia, it is understood that VSIP will not have to fulfill duties for the land areas to be leased to Nokia.
Besides, the investor has also asked for other preferences that have been put on the discussion table. Especially, sources say these include issues that cannot decided by Bac Ninh authorities themselves, and the provincial authorities need to consult with the government and Ministry of Planning and Investment.
When asked if Bac Ninh has “broken the rules” to lure investments, Nguyen Nhan Chien, deputy Chair of the Bac Ninh People’s Committee said that the province is “trying to take full advantage of the investment incentive frame stipulated by the State” to offer to Nokia. He emphasized that Nokia is a big and important investor, therefore, it will be reasonable to offer special investment incentives.
If everything goes smoothly, the project will kick off at the beginning of the third quarter of 2011, so that the factory can begin operating in the first quarter of 2012 and reach maximum capacity by the second quarter of 2014. Nokia has also started its recruitment plan, under which, the recruitment will begin from the second quarter of 2011. It is expected that Nokia will employ 10,000 workers for the project.
Nokia plans to build a mobile phone factory worth 200 million euro, or 276 million dollar in Bac Ninh, which will be the 11th mobile phone factory of the manufacturer in the world.
More than a normal investment project, Nokia’s project is believed to have much significance, especially when Vietnam has been chosen as a new link of Nokia’s global value chain.
Why does Nokia choose Vietnam? Vietnam has emerged as the country with an advantageous geographical position and strongly developing infrastructure, which is a reasonable choice for Nokia, according to Esko Aho.
Nokia now has a system of factories worldwide, located in Latin America (Brazil and Mexico), Europe (Hungary, Romania, Finland and the UK) and Asia (India, China and South Korea).
The decision by Nokia to set up a factory in Vietnam has caught special attention from international media. Economic Times Magazine comments that the project shows that Vietnam and South East Asia have been emerging as production bases to replace China. The magazine also compares the importance of the Nokia’s project with Intel’s project.
Reuters has quoted Matthias Duhn, Managing director of EuroCham in Vietnam as saying that the project is a big signal from European investors, and that 200 million euros is a considerable investment sum at this moment.